In 2014, a precipitous drop in oil prices rocked the petroleum industry. Following a period of relative calm in energy markets, the price of oil fell more than 60% in little over a year, wiping out some $60 billion in value. Many industry experts didn’t see it coming. For the chemical industry, which uses oil for energy as well as feedstock, the impact was complicated. Some sectors benefited, others suffered. In both cases, the episode underscored the chemical industry’s inherent volatility, and the need to better manage it.
Of course, market fluctuations aren’t the only source of volatility for chemical makers. Like most process manufacturers, they employ a multitude of expensive industrial equipment that comprises a significant piece of an immensely complex supply chain. Equipment failure or unplanned downtime at any point can lead to diminished production, which results in expensive emergency repairs and in many cases, late or missed orders. That inconsistency not only creates angry customers and potentially unsafe conditions, but also makes long-term forecasting and budgeting next to impossible.