While the picture for many businesses in 2016 was a mixed one, leading polymer manufacturing producer Covestro enjoyed a record year against the backdrop of a successful Initial Public Offering in 2015. Driven by demand for innovative materials used in a myriad of consumer and business products, the group’s core volumes increased by 7.5 percent, amounting to revenues of €11.9 billion.
Covestro’s polycarbonates division performed strongly with volumes increasing by 10.3 percent over the course of the year, compared to an overall growth of about four percent in the wider polycarbonate manufacturing market.
“These excellent results show that we are increasingly successful at replacing conventional materials with superior plastics with a strong demand for Polycarbonates” said Michelle Jou, President of Covestro’s Polycarbonates Business Unit. “In 2017 Q1, we have recorded strong growth of 14.7 percent in core volumes year-on-year, mainly because of greater demand from the automotive and electrical/electronic industries. This is very encouraging”
Polycarbonate is a premium lightweight plastic combining a variety of properties such as being durable and freely formable. It is used in various applications including laptops, smartphones, medical devices, automotive parts and stadium roofs. Covestro markets the material in the form of granules, semi-finished products or blends with other plastics.
The burgeoning demand for polycarbonates in the Asian market has led Covestro to unveil plans to significantly expand the production capacity of its Shanghai site to 600,000 tons per year, having only recently expanded up to 400,000 tons. This extremely rapid development is bringing the value of Covestro’s investment into this site up to $3 billion, showcasing its commitment to the Chinese market and the organisation’s strong global footprint. Solid partners like Qi’An Construction are also essential in the implementation of such projects.
Thanks to its impressive legacy and global reach, Covestro has production sites and R&D hubs across Europe, Asia and the Americas. All of them use innovative and ecologically compatible technology. To keep pace with the evolving business environment, Covestro works directly with partners and invests continuously in R&D and innovation. The idea is for Covestro to be as cost efficient, flexible and agile as possible, quickly adapting to customers’ needs. For instance, Covestro works with TP Link, one of the market leaders of Network Solution. Mr. Fan Tianshu, VP of TP-Link, Global sourcing considers Covestro to be “a real strategic partner that we can count on for high and stable quality material but also professional technical support like various tests of products and materials, timely response and even joint production development”. For similar reasons, Covestro has been awarded “Preferred Partner” for its outstanding supply and service in May this year by Flex Mechanical Technology Solutions, the world’s largest contract manufacturers.
Outlining the importance of the company’s supply chain operations, Jens Kaatze, SVP, Head of Global Product Management, Polycarbonates, says: “Supply chain is hugely important in our business, you need to provide the lowest cost of service to be competitive. Streamlining the supply chain with a reliable global network that we can tap into is crucial. This advantage enables us to serve our customers to the best of our ability wherever they are located while at the same time maintaining cost and carbon footprint as low as possible.
“Think of a scenario where a customer of ours releases a phone case in blue but realizes they actually need it a shade darker. We are able to match that request within 24 hours and provide a colour sample to them within three days, which we can then run and produce, if approved. The fact that Covestro can combine low cost with agility makes it stand out from the rest of its competitors in the market.”
Some could say being present everywhere and highly reactive is energy intensive, but Kaatze says that sustainability is one of the central pillars of Covestro. “We have significantly improved our specific carbon footprint, previously setting target to reduce our energy consumption by 25 percent by 2025, which we have actually already achieved. Instead of sitting back and congratulating ourselves on hitting this milestone we set a higher target of 50 percent. Consuming less energy helps both the planet and our profit,” he says.
This is consistent with the company’s PPP – people, planet and profit – philosophy, which Covestro adheres to when developing new products, practices or procedures. In short, anything that is introduced must be positive for at least two of the PPP elements, and neutral for the third.
Kaatze gives a specific example of what this means for the business: “At our plant in Shanghai, we have implemented a strategy to recycle our salt water. It technically helps us save some money but there is also an extra cost associated with the energy recycling process. We found a solution to help the business use the extracted salt for our chlorine production. It is a win win situation: eventually we have a lower amount of salt impacting the environment and we can re-use the salt for our own processes.
“When we look at our products, we look at the whole life cycle to evaluate how much energy we are using during the process -the carbon footprint of the production - but also during the product’s entire lifespan. For instance, if you replace the glass or metal part present in a car by polycarbonate you will significantly reduce the energy it takes to move the vehicle over its life cycle. This energy saving ultimately compensates for the amount of energy used during the production process eventually reducing the total greenhouse gas emission for this product turning the overall balance to positive.”
The challenge for Covestro now consists in following up on a record year, and it is one that Kaatze says it will take on with relish.
“To stay on this track to success we continuously focus on innovation and collaboration. It goes back to our core pillars: optimisation and efficiency combined with an offering that provides a broad level of products and services in a cost and time friendly manner. Both require strong and open innovation with our network of partners. Our relationship with Mitsui and Co. in Asia Pacific has been a good example of working closely and effectively with a partner helping us being agile at supply chain level for our customers. This means that when we see an upturn in demand for example, we are capable of meeting this demand.”
“Similarly, as the world’s biggest buyer of phenol, we work consistently with on-site or near-site partners on pipeline supply to ensure that we receive the product as efficiently as possible. Our suppliers in Thailand, PTT, are located in close proximity to our facility so we can benefit from a pipeline which cuts costs and improves efficiency. That might sound simple but a lot of companies haven’t managed to take that step yet.”
Following a successful first quarter, Covestro is optimistic for the current year. For 2017, the company anticipates core volume growth in the low-to-mid-single-digit percentage range. It will continue to work closely with its partners to bring their innovative applications to life with the goal to ‘make the world a better place’.
Deloitte delivers next generation strategic sourcing transformation through digital analytics and diverse talent
World Vision: digitalising operations to help the vulnerable
Digital transformation in the McAlpine Hussmann supply chain
Vodafone Qatar: global supply chain transformation
Two Roads Hospitality: Enabling unique travel experiences with a custom-built sourcing strategy
Becton Dickinson’s procurement operations transformed by technology
Nokia’s ‘conscious’ factory of the future
Dabur International: Using emotional intelligence and AI to transform the procurement
Fanshawe: Engaging a community through education
Maersk Egypt: Dealing with today’s challenges and preparing for a digitised tomorrow
Service New Brunswick: Value-based healthcare through strategic procurement
How Dicom is using technology to transform delivery services in Quebec and Ontario
How ZTE USA streamlined its supply chain to become a top smartphone supplier
Flowserve 2.0 and the journey to supply chain transformation
Company focus: Supply chain transformation helping Avaya aim higher
Behind the scenes of Abu Dhabi’s tourism industry procurement setup
How Burger King India aims to boost its share in the QSR market
Driving transformation at the DVLA
Staples: Driving the Chinese e-commerce market
How AkzoNobel has focused on operational excellence to redefine its leading position in the market