A common challenge faced by materials companies is highly variable earnings caused by swings in the market’s supply-demand balance. Such pressure increases tendencies towards commoditization that becomes reinforced by the need for lowering costs through high levels of output and standardized offerings. Inevitably, many companies diminish their marketing and innovation efforts. We argue that to escape this trap, more, not less, attention must also be spent on growing new sources of high quality of revenue.
Denton Luke Associates helps clients gain objective insight into drivers of long-term demand, unmet market needs, unexploited profit pools ripe for solutions development, and ways to penetrate business adjacencies for growth and differentiation.
Packaging serves to protect products through the supply chain, contribute to handling efficiency from the filling lines through to the point of sale, inform consumers about its contents, and contribute to brand value. Materials competition is fierce as brand owners seek advantages through weight savings, shape and labeling changes, and the ability of a package to interact with machinery and equipment throughout its lifecycle.
Barge, railroad, and trucking lines are simultaneously competing and collaborating elements of the freight transportation picture. Moreover, within those broad industry classifications are long-haul and short-haul variants as well as specialized sub-sectors conforming to the type of freight being handled. Companies in the surface transportation sector must strike the right balance between collaboration and competition with their peers to achieve the service levels demanded by customers without imposing excessive complexity and cost.
Each sector has its own set of structural challenges. For example, truckers do not have to build or maintain their own roadways, as railroads do, but price competition is intense due to low barriers to entry, and new regulations restricting driver hours exacerbates a driver shortage. Railroads build and maintain expensive right-of-ways, but their fixed locations may not satisfy the full geographic requirements of a shipper’s load. Large swings in demand, such as the permanent decline in coal, driven by a shift to other forms of energy, can result in trackage being in the wrong location, significantly impaired, and a contributor to overall system cost escalation. Shippers are laser-focused on last-mile costs as a driver of total logistical expense, and the onus is on the transportation company to be on the leading edge of solutions development.
Critical factors in the energy sector have evolved beyond access to exploitable reserves to managing the cost of oil and natural gas extraction, processing and delivery to consumers. This requires sound infrastructure, reliable materials and equipment, and effective coordination of a diverse and fragmented supplier base.