I usually write about logistics and how we can help small- to medium-sized companies improve their international supply chain management, but this week let’s do something different.
This week there was an interesting article in the Wall Street Journal about the Korean petrochemical industry and our company’s number-one product, dioctyl phthalate, also known as DINP. It’s a chemical (plasticizer) used in the production of plastics.
Keep in mind that I’m writing this based on my knowledge of this industry and what I think it needs to do to avoid falling onto hard times.
If you have a subscription to the Wall Street Journal site, the article is here.
If you don’t have a subscription, I can give you a quick summary:
When China was booming, Korean petrochemical companies, concentrated in the industrial port city of Ulsan, invested and expanded. They made a lot of money doing business with China, and for the past few decades it looked like the good times were never going to end. Well, they haven’t exactly ended, but things have slowed down, and now the Korean companies are straddled with a lot of excess capacity.
What should the Korean petrochemical industry do?
Let’s jump back a bit for some context. I have always admired Korean companies for how they overcome problems and sell their products in hard-to-reach places. They manage to sell in places people say they couldn’t.
This is also how we’ve been building 4C Global Logistics. We try to follow the Korean method and find the places that American, European, and Japanese companies are hesitant to go or sometimes just forget to go.
So here’s my solution to the Korean petrochemical industry’s current problem: Do what Korean companies do best.
Up until now, there had been enough opportunity in China to keep everyone happy, but the Korean petrochemical industry needs to find new ways to capitalize on the investments it made into capacity. The easiest and most effective way is to simply look for new customers in new places. It should go first to Mexico before spreading throughout all of South America.
It’s easy to say that the industry should have done this a long time ago. This means more than just selling there, they need to be committed to the market, hire Spanish-speaking employees, learn the cultures, and do things the right way. It’s the same right way they used to develop the Chinese market so successfully.
The most important thing to remember, though, is that it’s not too late.
The same advice applies to Mexican factories. They haven’t put much effort into expanding their international supply chains into Korea. I’m not sure what the reasons were. At some point in the past they were probably both numerous and good, but the companies need to look forward and push into new Asian markets.
Opportunity lies in the unexplored.
Photo Credit: Michael Rael