--- To enhance the value and performance of procurement and SCM practitioners and their organizations worldwide ---

 
Volume 9, Number 4, October 2011
This newsletter is published in cooperation with the ISM Chemical Group.  


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In This Issue ...
  • Chemical Industry News
    • The Hydropower Market 2011-2021: The Hydropower Market 2011-2021 examines this sector critically, with a comprehensive review of recent contracts, news reports, industry publications, market analysis and expert consultation. It provides detailed forecasts for the global market; forecasts and analyses for the seven regional markets; a strengths, weaknesses, opportunities and threats (SWOT) analysis; discussions of the main technologies in the market; profiles of the leading companies involved in the industry; and assessments of market drivers and restraints.  Read more.

    • New Package Development: Tools for Building the Business Case — A new, no-cost ROI calculator and white paper that helps package designers convey the business value of new brand packaging are now available online. Both can be accessed free of charge to help design-innovation champions gain executive support for custom package development projects.  Read more.

    • Worldwide Market for Specialty Chemicals to Reach US$483.7 Billion This Year: According to a new market research report, the global market for specialty chemicals is further projected to reach US$513 billion by 2012.

      "The global chemical industry is facing the prospect of a positive future, given the solid economic growth being witnessed in the emerging economies of the world," researchers assert. "Recovery in the worldwide chemical industry in 2010 is all set to go into higher gear in 2011 and beyond, with comprehensive increase in volume gains all over.

      "An ongoing economic recovery, coupled with tighter supply/demand balances in major products is expected to bolster profitability even further in coming years that has to potential to lead to a 'supercycle' in certain product and geographic areas," they add.  Read more.

  • Feature Article
    • Chemical Management Services: A Change-Friendly Culture Drives Success — The payoffs of implementing a successful chemical management services (CMS) program go beyond simply invoicing and delivering product to optimizing processes. It continuously reduces chemical life-cycle costs and risks, as well as environmental impact.

      While its rewards can be great, not every CMS program implementation is a success; that requires a supply management team to self-assess its corporate culture regarding change beforehand. Read more.  Read more.

  • Market Report
    • 8 Steps to a Successful Pharmaceutical Launch — As dozens of prescription drugs face losing patent protection, and new-drug launch success is hit-or-miss, it's a challenge for companies to create prescription drugs that can meet higher payer standards and differentiate themselves from the crowded marketplace based on areas such as safety, efficacy and pricing.

      To this end, a new report from Best Practices, LLC aims to answer the difficult questions that surround launch success and failures, and offers eight steps consistently used by best-in-class companies.  Read more.

  • Announcements: Scheduled for November 7-8, 2011 in Lake Buena Vista, Florida, the 4th Annual ISM Sustainability and Social Responsibility Conference promises to help attendees stay competitive and move forward. They will discover the benefits of embracing an organizational strategy that counts sustainability and corporate social responsibility among its essential ingredients for success.  Read more.

  • Additional Resources: Check out these links to additional resources from the ISM website.  Read more.

  • Contact Us about ISM eDigest: Chemicals


Chemical Industry News

The Hydropower Market 2011-2021

The Hydropower Market 2011-2021 — a recent report from visiongain — examines this sector critically, with a comprehensive review of recent contracts, news reports, industry publications, market analysis and expert consultation. It provides detailed forecasts for the global market; forecasts and analyses for the seven regional markets; a strengths, weaknesses, opportunities and threats (SWOT) analysis; discussions of the main technologies in the market; profiles of the leading companies involved in the industry; and assessments of market drivers and restraints.

The report draws on a combination of primary and secondary research, interviews, official corporate and governmental announcements, media reports, policy documents, industry statements and an extensive consultation of expert opinion.

"The world is currently facing two potentially contradictory developments: that of increasing global energy supply to meet a growing demand for energy; and that of tackling global warming by lowering emissions of carbon dioxide," it states. "This situation creates an opportunity for hydropower, which is a low-carbon energy source capable of supplying substantial quantities of power throughout the world. [We calculate] the global hydropower market, defined as spending on new hydropower projects plus spending on upgrades and expansions, to be worth $56.51 billion in 2011."

A sample download, as well as the table of contents, is available online.


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New Package Development: Tools for Building the Business Case

A new, no-cost ROI calculator and white paper — both of which assist package designers convey the business value of new brand packaging — are now available online from Berlin Packaging.

Both the Package Design Benefit Calculator and Unlocking the Power of Package Design: Building a Business Case can be accessed, free of charge, to help design-innovation champions gain executive support for custom package development projects.

The calculator quickly creates a snapshot of the potential business impact of repackaging (or not) a given product. With this tool:

  • Users provide information about the current annual unit volume, pricing and variable costs, as well as assumptions about the effects of pursuing or not pursuing a redesign.

  • The calculator returns a comparison of the net benefits of refreshing the packaging or maintaining the incumbent package over a two-year period.

  • Different assumptions can be entered to determine the break-even points below which custom development might not make sense.

The white paper outlines a strategy for quantifying the business value of a fresh package design to secure authorization for new packaging initiatives. Topics include:

  • Research that shows a link between the use of design and improved business performance across key measures, including share price, profit and market share growth

  • The importance of building a numbers-based business case to justify a package update

  • Metrics for measuring how package design influences brand profitability, including multiple elements related to price, quantity and variable and fixed costs

  • How the new calculator can support these efforts by rapidly providing preliminary ROI projections.

Both tools are available on the Berlin Packaging website.


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Worldwide Market for Specialty Chemicals to Reach US$483.7 Billion This Year

According to a new market research report from Global Information Inc. — Specialty Chemicals — A Global Market Overview — the global market for specialty chemicals is estimated to touch US$483.7 billion by the end of this year, and further projected to reach $513 billion by 2012.

"The global chemical industry is facing the prospect of a positive future, given the solid economic growth being witnessed in the emerging economies of the world," researchers assert. "Recovery in the worldwide chemical industry in 2010 is all set to go into higher gear in 2011 and beyond, with comprehensive increase in volume gains all over. An ongoing economic recovery, coupled with tighter supply/demand balances in major products is expected to bolster profitability even further in coming years that has to potential to lead to a 'supercycle' in certain product and geographic areas."

The next couple of years are forecast to witness fast growth in the emerging nations in Asia-Pacific, Africa and the Middle East, Emerging Europe and Latin America. Though China, India and Brazil are to be the major growth areas, countries such as Korea, Singapore and Taiwan would also offer noteworthy growth prospects.

Major functional areas of specialty chemicals analyzed in this study include:

  • Adhesives and sealants
  • Agrochemicals
  • APIs
  • Construction chemicals
  • Electronic chemicals
  • Food additives
  • Petrochemical catalysts
  • Specialty films
  • Textile chemicals
  • Water treatment.

Other key segments analyzed comprise corrosion inhibitors, cosmetic chemicals enzymes, flame retardants, high-temperature polymers, oil field chemicals, paper additives and plastic additives. The report analyzes the market in terms of U.S. dollars.


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Feature Article

Chemical Management Services: A Change-Friendly Culture Drives Success

Implementing a success chemical management services (CMS) program can be beneficial — but only if your corporate culture is ready to embrace change.

By Preston Stark

A chemical management services (CMS) program is, by definition, a strategic, long-term relationship in which a customer contracts with a CMS provider to supply and manage its chemicals and related services. Under a CMS contract, the provider's compensation is tied primarily to the quantity and quality of services delivered, not chemical volume. CMS goes beyond simply invoicing and delivering product to optimizing processes. It's an effort to continuously reduce chemical life-cycle costs and risk, as well as to reduce environmental impact.

While its payoffs can be great, not every CMS program implementation is a success. Based on experience, positive payoffs require a supply management team to self-assess its corporate culture regarding change beforehand.

Everybody Has Stories

Providers of CMS programs generally agree that a customer's culture — especially as it pertains to change — has the greatest impact and bearing on the relationship's success. In many cases, this knowledge comes after a program fails. All CMS providers have examples of programs that were never implemented, even after significant time and resources were devoted.

In some cases, once-successful programs were terminated in the wake of management changes and corresponding shifts in how the program was measured, or alterations to the customer's supplier relationships. Still other programs, which were implemented on a mutual understanding of key criteria between the CMS provider and customer, failed because these measurements and criteria weren't clearly communicated internally. As a result, they lacked executive support.

By contrast, in meetings with CMS providers and successful customers, it's often difficult to know who works for whom. Typically, these relationships reflect a genuine team approach.

Look at Your Supplier Relationships First

An organization's relationship with its suppliers is a key indicator of its culture regarding change. At one company, the summary slide of a presentation detailing its supplier relationships featured the image of an iceberg. Above the water line were item price and product use; this information was shared with the CMS provider. But, below the water line lay total cost savings. These data were considered the customer's alone and were not to be shared or disclosed to the CMS provider, or to any of the company's suppliers. In public, this same company purported to value its relationships with suppliers very highly.

At another customer company, complaints and critical performance issues with suppliers — unknown to the CMS provider — were presented only in large group meetings instead of in ongoing, meaningful communications.

Neither of these CMS programs is still in place. So, it's not only possible to gain valuable insight when honestly reviewing these relationships with suppliers, but the speed and ease of implementation of a CMS program — as well as its long-term success — can be determined, in large part, by the customer.

Conducting a Corporate Self-Assessment

When examining your own corporate culture prior to implementing a CMS program, it pays to ask several key questions.

  • Do true supplier partnerships exist, or are suppliers kept at arm's length? Are prices mutually developed, justified and reviewed? Or, are forms of adversarial bid packages more common?

  • What is the relationship, not only between your organization and its suppliers, but with your end customers? Is it nurturing, with true and candid communication? Does it aim for win-win outcomes?

  • Is there genuine concern for the profitability of the supply chain? Or, is the focus on item prices?

  • What's the organization's history of acceptance regarding change and change management? Is it slow, or rapid and embraced?

  • Is there a focus on the core competency of the organization? Is the predominant belief that the organization is fully capable and the expert in all areas? Or, is outsourced expertise more recognized?

  • Are tough times met with expertise and ideas? Or, do they tend to necessitate cost reductions?

  • Is a potential supplier viewed as a stakeholder, or simply as a supplier? What's the history of working with suppliers?

  • Likewise, are employees viewed as stakeholders?

  • Has the CMS program being considered been introduced to the company? And, is it supported and understood (including key measurements) by individuals at all levels within the organization?

  • Have the priorities, drivers and measurement of the CMS program been clearly identified? Have they been shared, in detail, with the CMS provider?
Weigh All the Factors

Cost considerations are another part of the overall business case and internal justification for a CMS program. What costs will be used? Will internal total costs be recognized and accepted? What will be considered — just item price and volume? Or, will item prices alone be measured? If item price is the sole or major criterion, the probability of success is very low.

Also ask yourself: Are the expected levels of resources and services to be provided by the program realistic compared with its cost and cost benefit? If not, the long-term probability of success is reduced.

It All Comes Down to Culture

A candid self-assessment of your corporate culture is a key indicator of how rapidly and how easily a CMS program can be implemented. If the culture values an open relationship with the CMS provider, a program can be mutually developed and crafted, with its cost offset by its value. In this scenario, the time of implementation is reduced, as well.

But, if the true culture and relationship is focused on item price bids and an arm's-length bid relationship, a significant shift in thinking would need to occur prior to any CMS program implementation.

Preston Stark is a director at Hisco Chemical Management in Hendersonville, Tennessee. To contact this author, send an e-mail to author@ism.ws.


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Market Report

8 Steps to a Successful Pharmaceutical Launch

A new report aims to answer the difficult questions that surround launch success and failure, and offers a handful of steps consistently used by best-in-class companies.

By J. Cameron Tew

Right now, the pharmaceutical industry finds itself at a crossroads: Dozens of prescription drugs will lose patent protection within the next few years, and new drug launches of late have been hit-or-miss.

Thus, it's a challenge for companies to create prescription drugs that can meet higher payer standards and differentiate themselves from the crowded marketplace based on areas such as safety, efficacy and pricing.

Best Practices, LLC created Success Factors and Failure Points in Biopharmaceutical Product Launches: An Updated Road Map for Strong Market Entry to answer the difficult questions that surround launch success and failure. Forty-four biopharmaceutical executives at 38 companies shared their thoughts on 30 product launches and the pathway to success in the future.

The Stakes Are High: 8 Steps to Consider

While prescription drug launches have always held an air of unpredictability, companies seem to struggle even more with launch execution in today's complex world when failure is more expensive than ever: Developing a new drug now costs about US$1.3 billion.

So, what can companies do to avoid the failures of the past and find new prescription drugs to satisfy a more savvy population? The research focused on eight steps consistently used by best-in-class companies.

1) Differentiate your product. Differentiated positioning begins with factors established in clinical trials (efficacy, unmet needs, safety and target patient population). Secondary positioning factors are less impactful, but can be useful in a crowded market.

2) Clearly define target-patient population. A clear target-patient population helps with first-use experiences for patients and physicians. This can produce positive word-of-mouth to support market uptake. Unfortunately, it's a launch factor often missed, or poorly executed.

Why? Physicians often require clear identifiers to recognize the target patient. This creates a significant launch opportunity and risk factor. Identifying patient type by diagnostic name is rated highly effective among benchmark participants.

Marketing communication and medical education also prove helpful. Creating content, messaging, programs, disease-state awareness information and education that help physicians accurately identify the patient types best suited for a therapeutic area.

3) Invest in launch and support. Launch leaders stress the importance of proper investment in a new launch in terms of both promotional resources and patient support. Nearly two-thirds of respondents favor spending 101 percent to 150 percent of the market leader's investment level during product launch. Also, patient support and supply chain resources (examples: call centers, samples, ease-of-access and reimbursement) can help launch uptake.

4) Engage thought-leaders. Thought-leader engagement remains key to launch success. Relationship strategies must be tailored to a therapeutic area, as one size does not fit all. Also, Medical Affairs should play a pivotal role in creating effective KOL strategies.

It's imperative that product launch teams craft engagement strategies reflecting therapeutic area needs.

5) Educate key stakeholders: physicians, patients and payers. Educating the marketplace has risen in importance in the face of promotional and access restrictions. Education messages need to reflect the concerns and interests of the key target audiences: physicians, patients and payers.

Know which physician segments to target with specific types of education. Multiple physician and specialist segments might require different product education approaches. Taking the wrong approach can set back the relationship.

Key stakeholder education allocations are changing, with payers and patient advocacy gaining influence. Payers and patient advocacy are crucial for educating the market. A pitfall to avoid: Generalized marketing allocation models are prone to error.

Engage payers on value. Be prepared to speak to their interests on price and reimbursement. Also be able to convert price-based conversations into value-based conversations, illuminating health outcomes, comparative effectiveness and most-valued label attributes.

6) Demonstrate value across multiple fronts. As mentioned above, payers are critical to launch success. The clarity and strength of a product's value message can have as much influence as price. Comparative effectiveness and risk sharing are important considerations that will rise in importance.

Develop health outcomes and pharmacoeconomic models. Create a pharmacoeconomic model to show a new product's value to public and private payers. Developing such a model must be collaborative for the payer to find it credible and insightful. Approach payers early for agreement on what the economics of a disease state are so you can accurately reflect it in the model.

Comparative effectiveness studies are the best route to payers. Head-to-head assessments are very meaningful for payers; they provide a compelling value rationale.

7) Use new technologies to inform. New technologies play a larger role in new products' marketing campaigns. Brand websites, webcasts, social media and video detailing are some technologies that have been refined to offer greater impact on market entry as "brute force" becomes a thing of the past.

8) Avoid common pitfalls and stumbling blocks. The complexity of a new product launch is compounded by the pitfalls dotting the market-entry landscape. The major stumbling blocks include field execution missteps and failure to address safety concerns.

Internal resource missteps and risks — Launch leaders identified sales communication and declining resources as the greatest pitfalls to market entry.

Field execution also registered significant risk. Half of all research participants see the high-risk condition of declining resources growing more intense on the three-year-future horizon.

Safety, side-effects and target patient population — Failure to address safety signals, life-cycle planning and competitive positioning errors are currently high risks for launch mistakes. If there are safety concerns from clinical trials, a creative competitive positioning strategy needs to be developed before coming to market.

Competitive positioning errors will be at higher risk for mistakes in the next three years, according to half of the research participants.

J. Cameron Tew is executive director of research and advisory services at Best Practices, LLC in Chapel Hill, North Carolina. To contact this author, send an e-mail to author@ism.ws.


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Announcements

4th Annual ISM Sustainability and Social Responsibility Conference Just One Month Away

Scheduled for November 7-8, 2011 in Lake Buena Vista, Florida, the 4th Annual ISM Sustainability and Social Responsibility Conference promises to help attendees stay competitive and move forward. They will discover the benefits of embracing an organizational strategy that counts sustainability and corporate social responsibility among its essential ingredients for success.

Highlights of this year's program include:

  • Core values in a global marketplace
  • Ratings and rankings
  • Corporate environmental scorecards
  • Economy, energy and environment
  • Procurement's influence for sustainable success
  • Revenue streams
  • Seven keys to safety at your organization
  • LEED Certification: the inside story
  • Driving sustainability initiatives

Supply management professionals engaged in developing and supporting corporate social responsibility and sustainability initiatives should consider attending, as well as inviting those outside of supply management. Doing so can foster buy-in and build the foundation for organizational success.

Complete conference information, agenda, brochure, registration and registration information is available now on the ISM website.

No-Cost Web Seminar — "New Supplier Identification — Reinventing the Process" — Scheduled for October 26, 2011

Date: Wednesday, October 26, 2011
Time: 11 a.m. PDT /2 p.m. EDT
Format: Streaming-only
Length: 60 minutes
Price: No cost
Sponsor: Ariba
Host: ISM

Identifying new suppliers directly impacts your purchasing efficacy. Sourcing, unplanned purchases, spot buys, supplier diversity initiatives and supplier risk management often require new-supplier input. And, these situations mandate a quick response to ensure streamlined processes.

Internet searches, tradeshows and cold calling continue to be the typical methods of identifying new suppliers, but new approaches now exist. Attend this web seminar on October 26, 2011 and discover them, including intelligent matching tools that accurately identify suppliers that meet your needs.

Attendees will learn how to:

  • Reduce the time and cost of traditional supplier identification and qualification methods by up to 90 percent
  • Efficiently manage online business postings, sourcing, bidding and awarding of contracts
  • Use rich supplier information for more informed decision-making
  • Reduce sourcing cycle cost consumed by supplier discovery and qualification, which makes up 30 percent to 50 percent of the overall cost.

Featured Speakers:

  • Brett Mauser
    Director, Strategic Sourcing
    Winn-Dixie Stores, Inc.

  • Bruce Eaves
    Sr. Manager, Purchasing
    Pilot Travel Centers

  • Chris Wang
    Director of Marketing, Ariba Discovery
    Ariba, Inc.

Attendance of the live session of this web seminar qualifies for 1 Continuing Education Hour (CEH) credit at ISM. Register online.

Plan Ahead to Attend the ISM Chemical Group Winter Conference in March 2012

Mark your calendars for the ISM Chemical Group Winter Conference, scheduled for March 1-2, 2012 in Las Vegas. The cost for members to attend is US$549 for members and nonmembers. For more information, contact Paul Kane at +1 317/277-7310.


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Additional Resources

A Wealth of Information at www.ism.ws

Visit ISM's website, www.ism.ws, for more supply management resources. The site provides published articles, conference presentations and reference materials that pertain to supply managers in all industries. Here are some items that might be of interest:

  • Software Sourcing Complexities — This June 2011 Inside Supply Management® article by attorney Henry W. (Hank) Jones III tackles the daunting task of choosing the appropriate software and integrating it into existing systems. Which supplier should you contract with, and what software package/modifications do you need for systems to communicate?

  • Make Me an Offer! Writing Detailed, Effectives Scopes of Work — This September/October 2011 eSide Supply Management article by Jim Haining, CPSM, CPSD, C.P.M., A.P.P., MBA, outlines how writing a detailed, effective scope of work (SOW) lays the groundwork for stellar supplier performance — not to mention greater competition and better pricing.

  • Spotting Talent Before You Need It — This September 2011 Personal Connections column from Inside Supply Management® makes the case for always being on the lookout for top talent — and then keeping that talent in mind for future openings and positions. According to author Troy Harrison, president of SalesForce Solutions in Kansas City, Kansas, the best managers understand the value of "people banks" — a database of people they have encountered and who might make good additions to the company when the opportunity arises.

  • Change Agents Wanted — This Research & Surveys article from the September/October 2011 edition of eSide Supply Management shows most organizations are overlooking a major resource for easing employees' pain during an M&A: their front-line managers. The Towers Watson report on which it's based — Using the Power of Managers In an M&A — compiled the input of more than 700 managers worldwide who seem to believe, overall, that their roles are insufficiently defined or focused to meet employees' needs in the event of an M&A.

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