Over the last decades, value chains have become more complex as companies have expanded their business globally, with the value of intermediates traded globally tripling since 2000. The lubricant industry was no exception to this globalisation trend. As supply chains became more complex, businesses focused on minimization of inventory levels, just-in-time deliveries, and short lead times. Cost efficiency was prioritized over business resilience.
The impact of the COVID pandemic is the most striking evidence of the vulnerabilities of this model. Still, over the last decade our industry had to deal with numerous other supply challenges, with hurricanes and storms disrupting some of the largest US refineries, leading to global shortages of base oils and price surges.
The current base oil and additive availability issues are indeed the combined result of the impact of the COVID pandemic – collateral damage of refineries running at low throughput in response to plunging fuel demand – and exceptional weather events in the US.
The effect on the supply chain of other disruptors such as trade disputes or political events – albeit predictable – should also be factored in, as the impact of political instability on trade has increased over the past decades. Many analysts expect more trade disputes, higher tariffs, and broader geopolitical uncertainty in the near future.
Yet, it is up to us to choose whether our supply chain will be a cause of vulnerability or the cornerstone of a resilient business model. It is up to us to re-think our supply chain model to find a compromise between cost efficiency and resilience. It is up to us to undertake selected measures before an event occurs to mitigate the impact of a supply disruptor or minimize time for recovery.
Resilience and re-imagination of our businesses will the topic of one of the roundtables at UEIL’s Annual Virtual Congress on October 20 and 21. We have designed a program with a high level of interaction, where, with the help of leading sector experts, we will discuss topics ranging from the EU Green Deal to transformational leadership, from the future of sustainable mobility to the importance of diversity and inclusion in organisations.
I am looking forward to seeing you there to contribute together to the growth of our industry!