Product Exchanges and Climate Change

Futurist Keynote - Articles and Videos - Manufacturing Industry, Logistics, Supply Chain

Product exchanges are one of thousands of examples of small-scale changes that can save significant amounts of energy.

What are product exchanges

Imagine two retailers selling the same DVD player online.  One is in Berlin, and receives an order from a customer in the London.  On the same day, a retailer in London receives an order for the same product from a customer in Berlin.  There are two ways to deliver:  each could courier the items across Europe, or they could agree to save the customer delivery costs by arranging local delivery – maybe even within a few hours.  Product exchange save time, cost and energy.

How it works

Suppliers place stock on website, buyers source it there, and an integrated transport network delivers it.

Why product exchanges matter

The chemical industry in the EU is a prime example where huge amounts of energy could easily be saved by product exchanges.  Every day many thousands of trucks drive long distances across Europe carrying identical chemicals in opposite directions from different sets of suppliers to factories.  If both companies were part of a Product Exchange, they would swop their identical stock online. Polish polyethylene for example would go direct to a Polish factory, and the same for the French. Over 100 million kilometres of trucking could be saved if chemical suppliers worked more efficiently.  That’s equivalent to 10 million litres less diesel burnt, saving at least EU 20 million in costs.  Setting up and running such a product exchange would cost less than EU 250,000 a year.

1.5 billion tons a year of petrochemicals are carried across Europe, mainly on trucks – 8% of all EU freight movements. The largest haulier has only 2% of the market.  EU transport costs for petrochemicals are EU12 a ton more than the US because of such inefficiencies. Too many bulky, finished plastic products are transported from one country to another. 98% of chemical tonnes moved a year are produced by just 15 out of 4,300 petrochemical companies in the EU.  So we can see that there are huge opportunities for consolidation and centralised distribution.

Challenges

Chemical manufacturers often try to make their products slightly different so that product swops are less easy to arrange.  However these product variations are often relatively insignificant and product substitution could happen quite easily in many cases.  Companies can be resistant to product exchanges because they fear customer relationships may be weakened, especially if their customers realise how much easier it can be to get the same product delivered from a competitor with factory nearby.

Business Potential

Expect product exchanges to develop in many parts of the world for petrochemicals and other commodities.   There will usually only be room for one Product Exchange to serve a particular industry sector in a region.  The first company to build one will probably manage to defend its position from competitors.

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