A New Business Approach
Historically, managers have developed business strategies based on past performance and forecasted trends. In today’s adhesives and sealants industry, however, simply knowing the trends is no longer adequate. Changing performance requirements, regulatory impact, rapid globalization, and material and supplier consolidations are a few of the key trends driving the marketplace and affecting adhesive customers. Suppliers who recognize these trends and are willing to collaborate with customers to proactively (not reactively) develop solutions will continue to have the most success.
Evolving Customer RequirementsThe only constant in today’s marketplace is change. The oil and gas market is a case in point. Drilling companies are operating in environments that not too long ago were considered “off limits.” New technologies to extract petroleum create the need for different types of equipment. At the same time, deeper undersea, well and high-pressure drilling environments put tremendous stress on equipment. Heat and pressure can be extreme, and equipment must perform reliably. Equipment failures can have significant financial and environmental consequences for drilling companies. New high-performance adhesives are critical to safe and successful exploration and drilling in extreme environments.
The oil and gas industry is not alone. The demand for higher performance adhesives and sealants required by new types of elastomers and other materials is a common theme for a wide spectrum of sectors in both the automotive and industrial markets. Customers are looking for breakthrough adhesives and sealants that can meet both design requirements and regulatory standards.
While the traditional means of meeting new design requirements is for suppliers to develop and market new materials, today’s adhesive and sealant companies need a more progressive approach. It is now critical for suppliers to partner with customers.
“It is important to not simply supply a product to meet a described need,” said Todd Wallis, automotive market manager, Americas, for LORD Corp. “Rather, adhesives and sealants suppliers must really help their customers identify the gaps that their customers have and partner with them to develop solutions. This allows you to go beyond merely specifying something that meets the customer requirements and instead enables you to test, qualify, and implement new product solutions.”
A good example involves the evolving adhesive performance needs for automotive noise, vibration and hardness (NVH) components. As cars continue to decrease in size, engine compartments are increasingly smaller, operate at higher temperatures and use more aggressive fluids to deliver improved ride performance at higher temperatures. It is critical that adhesive suppliers work closely with their customers and their customers’ customer to develop products that meet their demanding requirements.
Regulatory ImpactKeeping up with changing environmental regulations is another challenge that customers and suppliers face, and this is especially true for the automotive industry. As auto emission standards become more stringent, they increasingly affect the products auto manufacturers and raw materials suppliers can use. Suppliers must understand these regulations and anticipate customers’ needs.
For example, Corporate Average Fuel Economy (CAFE) regulations are impacting vehicle design. CAFE, first enacted by Congress in 1975, requires auto manufacturers to reduce energy consumption by increasing the fuel economy of cars and light trucks. Significant fines are levied against auto companies that do not meet CAFE standards.
Revised CAFE standards, recently approved by the Obama administration, are driving the need for new and lighter weight composite materials, and shrinking the size of autos. Adhesive and sealant suppliers must develop products with different chemicals and fluid performance that will meet higher performance characteristics. A need also exists for adhesives that will bond these new and different substrates and elastomers.
The industry is also affected by new emissions standards at the state and federal level. Many of the new state regulations limit solvent content in adhesives and coatings, and prohibit the use of specific raw materials. Adhesive suppliers must manage emissions and regulatory guidelines while supplying products for use in customers’ existing application processes. It is therefore important for suppliers to develop adhesives and coatings that meet both current and anticipated regulatory requirements.
“We recognized that it was not enough to wait for customers to understand the implications of these regulations and then try to respond with a product solution,” said Karen Sy-Laughner, industrial market manager, Americas, for LORD. “Rather, we invested heavily and developed aqueous and low-HAPs systems to help customers proactively meet these new and evolving requirements. As an industry, it is imperative that we help our customers not only understand, but meet these regulations in the most efficient manner possible.”
Global MarketAnother major trend our industry faces is globalization, as many customers continue to build manufacturing facilities throughout the world. As part of their expansion efforts, customers expect to have the same products available at all of their manufacturing locations. They want to buy the same products from the same supplier anywhere in the world, because they need to manufacture the same product and ensure consistent quality.
To support global customers, it is critical that companies operate globally; this goes beyond the ability to ship products around the world. True global suppliers invest in local infrastructure to provide technical service, manufacturing and support wherever key customers are located. “Think global and act local” is more than just a slogan; it is a sound business strategy.
Manufacturers must also be aware of legislation and regulations in the countries in which customers use their products. These regulations can cover environmental concerns, packaging, product formulations and disposal methods. Hence, it is important to have local personnel in place in the countries where products are shipped. Local personnel can keep current on changing regulatory standards and communicate critical information back through an organization, allowing for product formulation and design adjustments as necessary.
Raw Materials ConsolidationSince the 2008 recession, raw materials suppliers have gone through significant material consolidation efforts, resulting in raw material stock-outs and eliminations. As the raw materials suppliers work to optimize profitability, their consolidations have put a strain on customers and suppliers alike-sometimes forcing suppliers to make changes when products are no longer available. This is an ongoing challenge in the adhesives and sealants industry, and the trend is likely to continue.
It is important for manufacturers to maintain close relationships with raw materials suppliers in order to ensure the long-term viability of the supply chain, for both the manufacturers’ requirements and the customers’ needs. Building strong relationships with both customers and suppliers allows a company to maintain material consistency and ensure the long-term viability of the supply chain. Therefore, it is crucial to continually monitor suppliers and work with them to understand what products are or may become at risk.
Another challenge is presented by the fact that many companies have had to reduce their staff. Preferred suppliers may use this as an opportunity to help customers optimize their processes and reduce costs by providing access to expert technical teams. Companies can also take advantage of a great opportunity to stay in the forefront of customers’ minds by keeping them educated on industry changes and providing solutions that resolve problems and save money.
Listening to the CustomerTo be successful today, it takes more than just developing and selling new products. A company can help ensure its success by focusing on the success of its customers. Partnering with your customers is important, and this means engaging them at all levels in their organization. From the plant floor to the boardroom, companies need to listen in order to understand customers’ requirements and learn how they want to develop their businesses.
As customers invest in global operations and demand higher performance product requirements, suppliers must contend with a changing world of regulatory requirements while striving to reduce costs. To meet these challenges, suppliers must invest in technology, people and infrastructure to support global customer growth. Developing strategies that align with industry trends and customer needs will create success.