Pitfalls in outsourcing

Many chemical companies focus on their core businesses. Services are increasingly "given into the hands of others". Specialized providers become partners in the industrial park - for example in logistics. In some cases, these locations are even used by the logistics partner as a "hub" nationwide. In extreme cases, an industrial plant can even be "rededicated" to become a logistics location over time.


Challenges

Even in outsourcing negotiations, different expectations often come together. A lack of understanding of the future partner's motivation and misunderstandings in the dimensioning of contract parameters can even lead to the negotiations being broken off. It is not uncommon for another language to be spoken, as can be seen, for example, from the term "detour".

The mapping of the same logistical process can differ widely in the previous internal department and the external logistician, both in the description and in the implementation. The internal processes of a logistics company are also set up differently than within a chemical company, and this is precisely what should result in cost savings for the future client.

These differences lead to difficulties in “grasping” the needs of the chemical company and the supply of the logistics company and to fix them in such a way that both sides have a common understanding of the offered service portfolio and the parameters that are important for the calculation.

Inflexible regulations in the event of deviations from the contractual quantity structure, agreed deployment and response times, etc. can lead to a significant deterioration in the original calculation. The logistics company's expected result targets are then not achieved, nor are the required savings potential for the client. In logistics, outsourcing partners usually have to invest a lot in the location. This applies in particular to storage facilities, bottling plants and other logistical infrastructure and requires long contract periods for amortization with the logisticians. The "docking" to the internal chemical production logistics is by no means trivial.



Causes

Different negotiation approaches, mentalities, perspectives and language usage paired with a lack of willingness to combine mutual needs in a "win-win concept" are usually barriers to the promising entry into outsourcing.

On the basis of "marketable" outsourcing approaches, the accuracy of which is often inadequate for the specific case due to the complex requirements of the chemical industry, quick contracts are advised, which then suffocate in tough negotiations in detail. Requested logistical services can hardly be described in a standardized way in tenders. Here, too, the complexities of general cargo and bulk goods are different.

Outsourcing creates a permanent “sensitive interface”, the explosiveness and administrative effort of which is mostly underestimated. On the industrial customer side, insufficient resources are used for managing and controlling the subsequent business relationship. On the part of the provider, there is often a lack of effective key account approaches that canalize change requests during the business relationship. Logistical processes in particular are subject to constant adaptation to chemical production processes and their optimization.



Possible solutions

The prospect of a successful business deal and profitable long-term cooperation in outsourcing can be significantly increased by:

• the mutual understanding that an outsourcing concept represents an "exclusive" form of cooperation desired by both sides for a long time,

• the knowledge of developing a solution in an "outsourcing deal" that can hardly be generated from standard service ranges through the usual tendering process,

balancing the entrepreneurial risk on both sides,

• the commitment of the service provider to the industrial customer for a sustainable cost reduction, the basic intention from the industrial customer's point of view,

• Conversely, to a sufficiently long period of time for the optimization of the business process to be taken over from the service provider,

• the imperative to keep a critical level of logistical know-how at the client's premises for the best possible control of the outsourcing relationship,

• a continuous improvement process established on both sides,

• a contractually fixed and measurable bonus and penalty system for good and bad performance as well

• the openness to the specific expertise and experience of the respective partner.

Chemical and industrial parks ready for settlement?

Is there a settlement boom in store for the German chemical and industrial park landscape? Almost 20% of the total parking area in Germany is available for settlement. There are also area expansion projects such as in the industrial center Obernburg (40 ha), at BP in Gelsenkirchen (70 ha) and in the industrial park Marl (40 ha), in the vicinity of which the newpark (136 ha) is being built. There are signals that the number of requests to settle is increasing. But what are the factors that make a chemical or industrial park really suitable for a settlement?



Settlement motivations

Settlements were mostly production-driven. The next stages of refinement of the products produced at the site settled right next to their pre-products and set up new plants. As a result of the increased outsourcing of site services, service companies later moved into the parks. Today, the site (operator) has been commissioned to fill the open spaces in order to dilute fixed infrastructure costs, generate synergies and often offset the remanence costs caused by migration and plant shutdown.



Industrial park models

There are single-user, major-user and multi-user locations. Another distinguishing feature can be the existence of an independent industrial park company. This is usually only established in the case of a multi-user location. In principle, all of these models are suitable for settlement, but have different requirements. Often the larger parks have already been able to gain experience with the settlement. The smaller locations, on the other hand, often wonder why there have been hardly any settlements recently. The following factors give an overview of what is important for a settler in his decision and what a location should consider for successful settlement.


Overarching location factors

There are some factors that a location can only influence in the long term, with difficulty or not at all, such as regionally available subsidies or the level of the trade tax multiplier, the wage level and the availability of staff.


Space availability

Settling an industrial area is not a trivial matter. Open spaces that have already been developed have already been offered, in which insurmountable obstacles in the framework conditions arose in the practical implementation of the settlement - be it due to a lack of willingness to invest on the part of the owner or weaving errors in the settlement concept. It is important for the settler that the interesting areas are free from contaminated sites. Settlement restrictions, e.g. a reservation by the resident companies against certain competitors or industries, should be clarified! Moving the factory boundaries inwards in order to create supposedly more attractive commercial space in the belt area must be done with a sure instinct. Renting, leasing or purchasing land must be traceable.


Service and infrastructure offer

The range of services is sufficient in the majority of the locations and will rarely be the decisive criterion for settlement. Even the philosophy of an industrial park means that there are communal facilities and infrastructures that guarantee cost-effective security of supply and disposal for all resident companies. Usually bundled in so-called mandatory services, the binding acceptance of which is stipulated in location or rental contracts. However, it is precisely these mandatory services that are often a deterrent because of hidden additional costs. Every resident has to accept that the industrial park model only works collectively and that there are certain regulations. But transparency is important here! Are z. B. the canal fees a part of the lease and cold rent or are these calculated separately? How stable are prices, who determines how prices may develop and what is being done to optimize costs? Who bears the investment costs when sewers or systems have to be renovated or renewed? What about remanences, e.g. in the event of a migration?


Industrial park concept

It is important that clear roles and responsibilities are defined in an industrial park, since a settler also expects their specific characteristics. For example, it is very difficult to understand if the role of the manager or industrial park office is not detached from the role of the operator or service provider at the location. The administrator is responsible for the area marketing and ensures that the interests of all resident companies (producers (as users) and service providers) are carefully balanced. The operator or service provider wants to cover his infrastructure costs and is therefore interested in high revenues, the best possible monopoly position and many mandatory services. Often, however, the operator and service company is also responsible for the settlement itself, which creates an interest.

Your industries

Our clients come from the chemical, supply and disposal, industrial parks and aviation industries and are among the leading companies with a global reputation.