Conventional supply chain considerations have always defined a vertical hierarchical model with one link supplying products to the other, based on competitive pricing, a certain set of service parameters and to a lesser extent product differentiation. While this has and will continue to work at a basic level, as a tried and tested method, the moot point is whether this format actually helps unlock value and helps our industry (or any other industry for that matter) realise its true potential. The context and gravity of this statement and theory can be better understood in the light of the perennial grouse of eroding profit margins, competition and an ever-increased challenging business scenario.
While costs and competition are a reality of today's market dynamics and cannot be wished away, one way to circumvent this is to enhance one's relevance in the supply or value chain, and become a partner rather than a mere provider. There are multiple paths to this approach, and are already in practice in various spheres. However, there is simply not enough of the same, and more tellingly these existing examples are a result of individualistic initiatives rather than a culture of partnership and innovation that I am alluding to. These partnerships could be between vertical (customer and supplier) or horizontal links (fellow suppliers of a non-competing nature) in the supply chain, or even in the form of out of the ordinary ideas that still add value. Perhaps some examples relevant to our coatings industry could help better illustrate this.
Talking of vertical partnerships, my mind goes back to a few decades ago when a leading pigment manufacturer invented and rolled out a new chemistry of sheer brilliance, though at a significantly justified premium. The cost paradigm did not allow them to sell this commercially. This was when they directly approached the parent automotive user (their customer's customer) to sell the virtues and benefits of the pigment. This up-selling was able to convince the automotive customer to implement this technology, who in turn mandated the same with his immediate supplier (the pigment manufacturer's first line customer who was the coatings formulator) to adopt this technology. The rest is history and this technology continues to proliferate across the globe as one of the most profitable products in the pigment industry. There are also numerous examples of how pigment, additive and resin suppliers have come together for specific projects or applications and pushed the boundaries of performance through joint development work, leading to increased business for our coatings industry in areas where there was no business for the industry, and in doing so deriving ample value for all the stakeholders concerned. The out-of-the-box model is also an interesting one. A supplier of small components to a mobile phone company chanced upon a requirement of theirs to make the phones water-resistant. This little conversation or implicit market requirement set his mind ticking, and he approached one of the leading research set-ups engaged in the manufacture of these niche high-end coatings, and after working upon this together for over 6 months they were able to finally commercialise this product.
This is what our industry must look out for, and look at unlocking the value that surely exists all around. We cannot be consumed by the low-hanging fruit which will always ensure sustenance at best, but never the highest level of success. Taking a cue from this, we would also like to occupy a similarly positive position of influence in our engagement with the Industry, and also increase our stakes and involvement with the industry, even while remaining a humble service arm to the industry.