A forward-looking approach - INTERNATI NAL - Outsourcing as a strategy for success in the specialty chemicals industry - CABB Chemicals

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                                I N T E R N AT I               NAL
June 2019, Wiley-VCH, Weinheim, www.chemanager-online.com/en

   A forward-looking approach
           Outsourcing as a strategy for success in the specialty chemicals industry
A forward-looking approach - INTERNATI NAL - Outsourcing as a strategy for success in the specialty chemicals industry - CABB Chemicals
A forward-looking approach
           Outsourcing as a strategy for success in the specialty chemicals industry

T
         he specialty chemicals industry is currently facing a range of challenges. Firstly, increas­      Interestingly, similar trends have been
                                                                                                        observable in the agrochemicals industry
         ing competition, in particular from Asia, is putting pressure on margins. Secondly,
                                                                                                        for some time. Numerous innovators in
         new technological trends such as electromobility and society‘s demand for innovative           this sector have in recent years begun to
solutions, for instance in relation to sustainability, frequently require very complex molecules.       reassess their core skills. As a result, they
                                                                                                        are increasingly concentrating their own
                                                                                                        resources on research & development at
Against this background, BDU e.V., the                     Outsourcing as a strategy for success        the start of the value chain and on mar-
German Association of Management Con-                               in agrochemicals                    keting the products at the end.
sultants, last year organized a German                                                                     Consequently, the production of individ-
specialty chemicals industry think-tank             A central challenge facing specialty chem-          ual active ingredients and intermediates
under the banner “Fit for the Future?!”             icals companies is thus how to combine              and occasionally also the development of
which identified ”novel, customized                 the highest possible innovation with the            suitable production processes are increas-
products” combined with ”initiatives to             greatest cost-efficiency. The BDU study             ingly being entrusted to strategic partners
boost efficiency” as the foundation for             suggests that one potential solution is to          who have specialized technological and
future profitable growth. In addition,              turn away from the familiar approach of             processing skills and the corresponding
IHS Markit‘s ”Overview of the Specialty             operating in ”closed organizational units”          manufacturing assets.
Chemicals Industry” published in August             and to pivot to ”flexible, rapid, custom-
2018 considers a company‘s capacity for             er-focused value creation structures”.                       Promising opportunities for the
innovation to be ”one of the few remain-                                                                         specialty chemicals industry too
ing sources” of competitive advantage in
a context of increased competition and                     A key challenge                              Given the need to boost the rate of innova-
commoditization of mature products.
                                                        for specialty chemical                          tion and simultaneously increase internal

                                                      ­companies is to achieve
                                                        maximum innovative
                                                     development at maximum
                                                            cost efficiency.

                                                                                                              The selected outsourcing partner must have
                                                                                                              the right analytical laboratory resources.
A forward-looking approach - INTERNATI NAL - Outsourcing as a strategy for success in the specialty chemicals industry - CABB Chemicals
efficiency, strategic outsourcing can be an     oped by the innovator into production?       managing a complex project and reliably
extremely promising, forward-looking ap-        Does the partner have complete mastery       protecting the customer‘s IP?
proach for specialty chemicals companies        of the necessary technologies and synthe-
too.                                            sis methods? Are sufficient specialized      Costs: Does the potential partner‘s exper-
    Experience from the agrochemicals           staff available? Are ongoing increases in    tise and experience mean it can estimate
industry has shown that involving exter-        efficiency guaranteed over the course of     costs reliably? Has the partner demon-
nal partners in the manufacturing chain         the contract?                                strated an ability to stay within an agreed
frequently allows more focused use of                                                        budget elsewhere?
in-house resources. Such partnerships
also help to keep the costs of meeting the                                                   If all these conditions are met, outsourcing
many requirements in terms of efficiency,               The integration                      synthesis processes can be a strategy for
sustainability, safety etc. which are typical         of external partners                   success in the specialty chemicals indus-
of innovation projects within reasonable
bounds.
                                                      into the production                    try as well. Outsourcing accelerates the
                                                                                             time to market for new products and op-
    Particularly in those cases in which              chain often enables                    timizes the use of financial and personnel
production depends on processes which                 a more focused use                     resources.
fall outside in-house technological capa-                                                        This brings the outsourcer closer to
bilities, it makes good sense to outsource             of own resources.                     the central strategic goal of combining a
manufacturing steps. Ultimately, the out-                                                    high level of innovation with maximum
sourcer not only gains direct access to                                                      efficiency.
suitable processes and skilled staff, but is    Process development/scale-up: Can the
also for example relieved of the need to        potential partner take the process, possi-
build or extend in-house assets and estab-      bly on the basis of the laboratory proce-
lish dedicated supply chains.                   dure, from the laboratory scale through
    Taken together, these effects can make      pilot production and onward to commer-
a significant contribution to getting a new     cial production? Are the necessary re-
product on the market more quickly, flex-       sources and skills in process development
ibly and at lower cost.                         and laboratory analysis available?

          Sounding out the situation            HSEQ and sustainability: How will safe
                                                and sustainable production of the target
Lack of prior experience sometimes still        molecule be ensured? How is consistent
makes it difficult for decision makers in       batch-to-batch quality achieved? Are all
the specialty chemicals industry to make        regulatory and environmental protection
a realistic assessment of the opportunities     requirements met? How are critical sub-      Thomas Eizenhöfer,
and risks or costs and resources involved       stances, residues and waste handled?         Head of Custom Manufacturing
in a specific project and so answer the                                                      Business Unit, CABB Group
question as to whether outsourcing makes        Supply chains: Can the potential partner
sense. Achieving clarity on the following       ensure reliable and cost-effective supply
points can help in creating a solid foun-       of the raw materials required for produc-
dation for decision-making.                     tion, including all logistical aspects?

Production process: Is the potential part-      Project management: Are tried and            ▪▪ thomas.eizenhoefer@cabb-chemicals.com
ner capable of putting a process devel-         trusted processes and tools in place for     ▪▪ www.cabb-chemicals.com
A forward-looking approach - INTERNATI NAL - Outsourcing as a strategy for success in the specialty chemicals industry - CABB Chemicals
KOLUMNE: NACHGEFRAGT

                                 Benefiting from outsourcing

T
         he accompanying article “A forward-looking approach” clarifies the opportunities
         outsourcing can hold for companies in the specialty chemicals industry. Drawing
         on years of custom manufacturing experience in particular for the agricultural
and pharmaceutical industries, CABB has now developed a service for specialty chemicals
companies. Birgit Megges had some questions for the article‘s author, Thomas Eizenhöfer,
who heads the CABB Group’s Custom Manufacturing business unit.

Mr. Eizenhöfer, what conclusions can             optimization is simply part of how we
CABB draw from these market trends?              work. If required, our ChemCreations
                                                 service can also develop a suitable syn-
Thomas Eizenhöfer: For decades, CABB has         thesis process including all safety as-
been an integral part of the manufac-            pects right up to scale-up.
turing process for major agrochemicals              This will provide innovators inter-
manufacturers. We have a close-up view           ested in our services with a transparent      Thomas Eizenhöfer
of the advantages such a partnership             basis for decision-making in terms of
gives these companies, such as greater           processes, resources, timeline and costs.
flexibility and agility and clear priorities
in the use of resources.                         How far does this mean a change in            How do you intend to implement your
   In the light of current market trends,        CABB‘s strategic orientation?                 goals?
we believe that innovators in the special-
ty chemicals industry could enjoy similar                                                      T. Eizenhöfer: First of all, we have brought
benefits from outsourcing. Familiarity                                                         together a dedicated team which will
with this concept is, however, not as well               On the basis of                       handle the needs of the specialty che-
established in this sector. As a result, it is                                                 micals industry. The team includes mem-
not always straightforward for our cus-
                                                         your Tech Pack,                       bers from our affiliate company Jayhawk
tomers‘ decision makers to identify and                 we will establish                      in Kansas, USA, which our investor
evaluate appropriate options. We would                 safe, efficient and                     Permira has very recently acquired.
like to simplify such considerations for                                                       We have quickly been able to develop
them, which is why we have created a                sustainable commercial                     a strong working relationship with our
package which bundles together our                     production of the                       colleagues there who also have conside-
skills in specialty chemistry.                                                                 rable experience with specialty chemi-
                                                        target molecule.                       cals projects. Moreover, the production
So what can a customer expect?                                                                 facility in the United States will also be
                                                                                               of interest to our customers with inter-
T. Eizenhöfer: At the start of the project,      T. Eizenhöfer: There‘s no change at all in    national activities.
a customer will give us their Tech Pack          our strategic orientation, quite the oppo-       This team is actively approaching
and at the end receive the commercially          site: diversifying our customer portfolio     innovators in the specialty chemicals
manufactured molecule for further pro-           is a cornerstone of our growth strategy.      industry with a clear value proposition:
cessing in-house. Working on the basis           We have decades of experience in custom       „On the basis of your Tech Pack, we will
of a clear specification, we handle the          manufacturing, recognized technical skills    establish safe, efficient and sustainable
technological implementation of their            and the necessary manufacturing assets.       commercial production of the target
project in production. This also for ex-         This means we are ideally placed to sup-      molecule.“ An integrated campaign is
ample includes establishing a stable raw         port the specialty chemicals industry as it   now communicating this service to the
materials supply. And continuous process         goes through its current transformation.      market.
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