Customer values increasingly vital to the production cycle

Dubai: The petrochemical industry in the Middle East is more detached from end users than in any other region. However, as Middle Eastern producers move up the value chain, and as issues relating to sustainability and innovation become more important, these companies will need to respond to customer values to maintain competitive advantage.

These are some of findings of a global survey conducted by consultancy Accenture to explore the disconnect between chemical suppliers and their customers.

The survey reveals the level of waste and disconnect by examining where customers are willing and not willing to pay a premium. To find out why this is important for regional petrochemical companies, Gulf News caught up with Omar Boulos, Accenture's managing director for the Middle East. Excerpts from an interview:

GULF NEWS: What would you say are the primary challenges facing the oil and gas and petrochemical sectors in the region?

Omar Boulos: From a petrochemicals perspective, everyone is going up the value chain from base and intermediate to speciality type chemicals. Based on an Accenture study, it is critical for producing and exporting entities to also understand what the buyer values are. This helps you make sure you meet those expectations.

Define buyer values.

If you are a buyer of commodities or chemicals, you are looking for different things based on which they make their decisions. It's not always price. Our study shows 28 factors that the suppliers thought were more important than price, whereas the buyers only have 10 that are more important than price. That shows there is a disconnect.

What are some of the values buyers are seeking?

Well, for example, the specifications of a product: the buyer may be looking for a narrower range of specs. In order for the suppliers to know where they need to be spending their money, it's important for them to understand what their buyers are looking for. Logistics, for instance: should I be paying more to ship it faster?

What are the advantages for the sector and the economies of the GCC in moving up the value chain?

For the sector itself, the further up the value chain we go, the more margins we can demand. This allows us to diversify, not be dependent on a certain commodity, add value, expand the base, and get more out of what we originally had. From a regional perspective, expansion leads to growth in GDP, job creation and defining what our education system needs to deliver. For the petrochemicals industry, the supply-chain in the region is very short, it's cheaper to make the chemicals. This would give them a global edge even in speciality chemicals.

Investment in innovation and research and development — is there a return on that investment in real terms?

I believe there is. If there wasn't then the amount of money being spent on it would not be spent. Is the return tomorrow? No. In a few years? Yes. In the region, we need to see innovation in products, their functionality — how can I get it better, faster, cheaper — so that I can take cost out of the supply chain. It's not R and D for the sake of producing new materials or new products.

Is it important for companies in this region to look at molecular R and D at all? Or should they simply licence it as they have been doing?

I think it is important on several fronts. One is competitive advantage. Two is building a core talent of individuals to support the economy of this sector and region. Three, I think the region is well-positioned to exceed even what some parts of the world have; the facilities that can be made available here can quickly get research to par. But developing the best minds — that can be a 20-year journey.

Do you think there is true buy-in amongst the region's crude and chemicals producers to some of the visions that have been propounded by the largest players — in terms of the creation of entrepreneurship hubs and research and education facilities?

I think the only way to know if there is buy-in is to look at the results, the actions that have been taken over the past five years or so. If you look at the progress over the years in the GCC, it's more than a buy-in; it's a belief that this is where they need to be. If you take it one step down, the challenges that face the organisations in the GCC are different, based on their particular situations.

If companies do not see short-term returns on the investments made in sustainability, will they be committed to the concept?

That's the challenge many organisations deal with, not just in the Middle East. What is the cost of sustainability? Do I really need to run a sustainable business? These are the questions that used to be asked. But now, people expect an organisation to implement sustainability practices as a kind of cost of doing business. Can you avoid it? No.

How does Accenture see itself fitting into the Gulf crude and petrochemicals sectors?

We see ourselves as a fabric of the industry. We work with nine of the top 10 oil companies globally, 53 out of the top 100 — so we have much to offer in terms of industry knowledge. From the technology perspective, from the business processes perspective and providing services - that's where we see ourselves - as part of the journey, or the transformation, if you want to call it that. Of our top 100 customers, 91 have been with us for 10 years and 99 have been with us for five years.

Do you agree with the forecast that the petrochemicals sector can double revenues in 10 years? What factors do you see as hurdles to that goal?

What's required is a step change in terms of where you want to be and how to get there. This requires a lot of coordination, not just from the entities themselves but also from a government perspective, because this is not just about what the leading companies want to do, but also about the policies and regulations that are put in place to allow them to achieve the things they want to achieve. They need to stay close to their suppliers and clients and care about what customers are really looking for.

Profile

Omar Boulos is the managing director of Accenture's Middle East practice.

Boulos is responsible for defining and executing Accenture's Middle East strategy, leading the portfolio of client work, and managing the local operations. During his career at Accenture, Boulos has focused primarily on supply-chain and enterprise resource planning.

His client experiences include supply-chain optimisation programmes, manufacturing execution and order fulfilment, scheduling, and sales and operational planning within the energy, chemicals and natural resources industries. Boulos has led engagements in China, India, Luxembourg, Netherlands, Mexico, Belgium, Canada, Kuwait, Saudi Arabia and the United States, besides the UAE.