As in every industry, distribution plays an important role in the chemical industry. But what does a distributor do? Distribution companies in the chemical industry can be compared to a buffer solution in the industry. For example, if by a producer’s failure, goods on the market are short, distributors are the best place to go to get chemicals. Even if the desired chemical is not available, the distributors are mostly able to offer an alternative product. Well known and globally active distribution companies in the chemical industry are for example Brenntag, IMCD or Univar. However, there are some local chemical distributors in each country as well. In many cases, the latter can even compete with large corporations. Due to their flexibility, some are even faster in delivery. This makes smaller companies a valuable alternative as well.
Sales offices for manufacturers
The market for chemical distribution companies is still geared to growth. Manufacturing companies benefit from the competencies of distribution companies and assign them an important role in their marketing and sales strategies. Most often, the manufacturer can’t deliver all customers by themselves and provide their chemicals to the larger ones, whereas the distribution companies take care of medium-sized companies. However, the distribution of chemicals is not just a reaction to customer inquiries. The market evolves into a process in which distributors have to understand customers’ problems in order to offer a suitable solution. The anticipation of customer wishes and needs – what does the customer need even if it is not explicitly said – is becoming increasingly important. In recent years, chemical distribution has been shaped by a number of market trends that are still relevant. As already indicated above, the importance of strategic partnerships between producers and their “core distributors” is indispensable and increasing. We can conclude that Distributors can be seen as sales offices for manufacturers. This enables customers to get a higher level of service and a distinct product range and manufacturers to serve even more customers. Although the latter of course in an indirect fashion.
By using distributors, customers can benefit from the advantages of a “one-stop-shop” and realize cost advantages by purchasing many products from the same supplier in the same quality. Today, modern distribution companies even go beyond and offer additional value through added service. Established services are for example the mixing and blending of formulations, labeling as well as automatic reordering. Some companies also offer the development of new formulations. For example, Brenntag has its own Coatings, Cosmetics, and Food laboratory in France. Another option is that they have acquired a manufacturer so that the former distributor is already on the border to become a producer.
However, this diversity of products and services must also keep pace with the requirements of the industry 4.0. This incipient digitalization of the chemical value-added chains is bringing a conversion that entails a considerable need for transformation and investment for both, producers and distributors. Distribution companies in the chemical industry can deliver a competitive advantage for their customers through the digitalization of their business model. For example, online platforms can provide information around the clock. In the beginning, the focus may be on the basics, like for example the harmonization of the ERP system infrastructure across countries and acquired companies. However, digital marketing portals with a product and application-specific information, digital transaction support or innovative business models are just the next step to take. The differences in the content design of digitization are usually derived from the respective business strategy of the distributors.
Internet of things (IoT)
Moreover, the Internet of Things (IoT) is generating new benefits for the entire industry through automation and the constant availability of information. It is becoming increasingly important for the entire chemical industry to process, share and utilize this wealth of data. For example, production facilities can be remotely controlled and further automated by machines, learning to communicate with each other. For example, the truck that has just arrived can be unloaded automatically by autonomous robots, which take the goods to the destination for the next batch. This is made possible by communication among each other and the availability of data in real-time. This idea goes far beyond the information on the processing status. Your order will be processed, your goods will be prepared for shipment, your goods are on their way – this is a minimum that can be offered today. We already know this from our private experiences. We receive notifications on our mobile phone when the parcel arrives in the next hours and we can determine another day or even place for the delivery. This standard will also continue in the industry, although the parcels are slightly larger, the principle remains the same.
Online platforms are key
The information must be available everywhere and at all times. With an intuitive online platform, this provides an ideal point of contact for the customer and distributors can better explore customer needs through interaction on your platform. This trend is a ‘race’ for digital connections with customers. This data and the knowledge gained from it can, in turn, strengthen their own position in negotiations or regular reports with manufacturers and in turn contribute to the optimization of production for the manufacturer, who can better assess the market situation. The combination of these market trends and their interactions will lead to an accelerated change in the market structures of chemical distribution.
The customer and you
With personalized marketing, customers will be addressed more directly, which results in greater customer loyalty. However, simple email campaigns are not enough. Rather, customer solutions must be presented directly to them. This can be done, for example, through after-sales services, which draw attention to the company’s own services. By pointing out their services, the customer is aware of the added value without any additional costs. This, in turn, can bind the customer to the company even more. The importance of value-added services in the chemical distribution has long been undisputed and is likely to increase further due to the market trends described with regard to competitiveness and value creation. The mere “resale” of standard products without value-added services or information will hardly be sufficient for distributors in the future.
Now, we saw that chemical distributors play an important part in this industry for all the companies in this sector. They not only deliver chemicals but also add value through additional services. If you want to know more about companies in the chemical industry, you can check out the following list in our blog post.