Servicizing the Chemical Supply Chain

Abstract

Summary: Servicizing—the transformation from product‐to service‐based enterprise—is a major force in changing how firms manage material input, throughput, and output. Redefinition of the firm as a service provider instead of a product manufacturer means that function, not form, is the source of added value delivered to the customer. To realize the dematerialization benefits of such a transformation requires a fundamental realignment of the supplier‐customer relationship. Instead of the traditional incentives to maximize the volume of physical product sold, servicizing requires a partnership wherein the financial rewards of reduced material consumption are shared between supplier and customer. We illustrate this partnership concept with the example of chemical management services (CMS), an approach that is gaining momentum in the automobile and electronics sector. Compensation and gain‐sharing based on chemical efficiency and chemical use reduction, often tied to fixed price mechanisms, lie at the core of the CMS model. Diffusion of the servicizing model holds much promise for driving dematerialization while reducing the environmental burden of product manufacturers.