A practical framework for margin impact in raw materials
Why procurement matters
For most chemical producers, raw materials consume 50–70% of total production cost. To minimize volatile and often unpredictable impacts, chemical companies have spent decades perfecting the art of incremental improvement. But small wins squeezed from annual supplier talks or slight market shifts leave the larger opportunity untouched.
In AlixPartners’ work with chemical producers and their investors, we see that no other cost line item moves margins as forcefully as direct materials procurement, yet it still often underperforms its potential. The big opportunity lies in dismantling the structural cost barriers built into how materials are specified, sourced, and supplied. A typical procurement function struggles to deliver 2% in annual savings (and takes close to a year to get there). But what we hear from CFOs is a desire for procurement strategies that deliver higher margin impacts; faster time to
