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Commodities are usually thought of as something that farmers produce - corn, wheat, or soy beans for example. But the world and its markets have changed; the term commodity can now be used to describe the airline, personal computer, steel and chemicals businesses. The key characteristic of commodity businesses is that products and/or services are not unique and business is conducted primarily on the basis of price. Chemicals are essential to everyday life. They are vital to a broad spectrum of industries such as construction, automotive, paper, electronics, agriculture, and pharmaceuticals. Some chemical manufacturers produce and sell their products directly to consumers. Examples of this might include soap or bleach. Many chemicals however, are used as intermediate products for the production of other goods. This is the case for the primary products Sunoco makes – phenol and polypropylene. Chemicals generally are classified into two groups – specialty chemicals and commodity chemicals. Specialty Chemicals
Commodity chemical manufacturers produce large quantities of basic and relatively inexpensive compounds in large plants, often built specifically to make one type of chemical. Many of these basic chemicals are “building blocks” used to make other products which eventually find use in products that touch our everyday lives. In the case of commodity chemicals, the commodity business model is a basic business strategy that describes how a company chooses to conduct its business. Sunoco has adopted this chemical strategy to approach the way it conducts its own business. It utilizes a business model that focuses on three crucial components:
As always, product quality and customer service are also critical to the success of the business. The model and its emphasis on scale, optimization and cost control has resulted in a higher return to the business unit. This has been accomplished by creating and implementing systems like the Polymers Optimization Planning System (POPS), which optimizes the supply chain, minimizes working capital and enhances service levels to customers. Sunoco's strategy is to focus on customers where there is a mutual fit so we can grow the business. Overall this approach has strengthened Sunoco's customer base. As part of this strategy the Chemicals Research & Development group is working hard to formulate new products for both new and existing customers to help both of our businesses in the long run. Sunoco Chemicals is targeting core customers in its primary growth markets to support their business and will put more focus on the technical resources that align with our commercial objectives. |
HES Glossary
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Summary Report
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