
Looxent supported a petrochemical company specializing in synthetic rubber and resins in optimizing its Make-or-Buy strategy for key raw materials. Given the nature of the industry, profitability is highly sensitive to fluctuations in product and raw material prices. Styrene and Butadiene were identified as critical inputs requiring cost optimization to enhance competitiveness. While the client procured all Styrene externally, it maintained an internal process to produce 50% of its Butadiene requirements using C4 feedstock supplied by a nearby NCC*, with the remaining sourced from external suppliers.
Raw Material Procurement: Addressing Supply Shortages and Dependency Risks
The project focused on mitigating risks stemming from anticipated supply shortages and over-reliance on a limited number of suppliers. To stabilize supply and pricing, Looxent analyzed global market conditions, capacity, and supply-demand dynamics across regions, including the Middle East, Southeast Asia, and Japan, identifying new sourcing opportunities to diversify the client’s supplier base.
Comprehensive Strategies: From Long-Term JVs to Short-Term Swap Agreements
Given the logistical challenges and low value-add of C4, a competitive strategy emerged involving partnerships or joint ventures (JVs) with Southeast Asian NCCs lacking Butadiene facilities. This approach offered stable long-term supply while significantly reducing dependency on existing suppliers and balancing market power.
For Butadiene, the project recommended revising contract volumes with current suppliers, identifying potential new suppliers in regions with surplus supply, and securing additional volumes through regional swap agreements to reduce logistics costs. The strategy also accounted for potential investments in Butadiene plants by overseas NCCs, proposing operational plans to mitigate reliance on C4 and enhance domestic Butadiene supply stability.
Developing Scenarios to Balance Power in a Supplier-Dominated Market
- Reducing Supplier Dependency: The client formulated scenarios to lower reliance on key suppliers while preparing for worsening supply structures.
- Building Procurement Resilience: By systematically consolidating market intelligence and strengthening procurement strategies, the client improved its ability to navigate supplier-dominated markets.
- Transforming Work Practices: The project prompted a shift in the client’s approach from experience-driven practices to structured problem-solving, with employees acknowledging the value of systematic strategy development.
The project’s results not only enhanced raw material cost competitiveness but also laid the foundation for a robust procurement strategy. By balancing supplier power, diversifying sourcing options, and instilling structured approaches, the client is better equipped to navigate future market challenges.
*Note: NCC (Naphtha Cracking Center).
Looxent supported a petrochemical company specializing in synthetic rubber and resins in optimizing its Make-or-Buy strategy for key raw materials. Given the nature of the industry, profitability is highly sensitive to fluctuations in product and raw material prices. Styrene and Butadiene were identified as critical inputs requiring cost optimization to enhance competitiveness. While the client procured all Styrene externally, it maintained an internal process to produce 50% of its Butadiene requirements using C4 feedstock supplied by a nearby NCC*, with the remaining sourced from external suppliers.
Raw Material Procurement: Addressing Supply Shortages and Dependency Risks
The project focused on mitigating risks stemming from anticipated supply shortages and over-reliance on a limited number of suppliers. To stabilize supply and pricing, Looxent analyzed global market conditions, capacity, and supply-demand dynamics across regions, including the Middle East, Southeast Asia, and Japan, identifying new sourcing opportunities to diversify the client’s supplier base.
Comprehensive Strategies: From Long-Term JVs to Short-Term Swap Agreements
Given the logistical challenges and low value-add of C4, a competitive strategy emerged involving partnerships or joint ventures (JVs) with Southeast Asian NCCs lacking Butadiene facilities. This approach offered stable long-term supply while significantly reducing dependency on existing suppliers and balancing market power.
For Butadiene, the project recommended revising contract volumes with current suppliers, identifying potential new suppliers in regions with surplus supply, and securing additional volumes through regional swap agreements to reduce logistics costs. The strategy also accounted for potential investments in Butadiene plants by overseas NCCs, proposing operational plans to mitigate reliance on C4 and enhance domestic Butadiene supply stability.
Developing Scenarios to Balance Power in a Supplier-Dominated Market
The project’s results not only enhanced raw material cost competitiveness but also laid the foundation for a robust procurement strategy. By balancing supplier power, diversifying sourcing options, and instilling structured approaches, the client is better equipped to navigate future market challenges.
*Note: NCC (Naphtha Cracking Center).