Univar eyes bigger role in distribution due to economy
Gordon Graff -- Purchasing, 6/3/2004 2:00:00 AM
International chemical distribution giant Univar, N.V. has been pushing aggressively into new territory, with a bevy of new products and services designed to capitalize on long-term shifts in the marketplace. The Rotterdam, Netherlands-based company, which had 2003 revenues of $4.7 billion, is exploring an expansion into China, broadening its product slate to the pharmaceutical industry, enlarging its customer support and technical service capabilities, and setting up a sophisticated IT network for tracking chemical shipments.
Univar, which has a network of 166 distribution centers in the U.S., Canada and 14 European countries, has traditionally packaged and delivered mostly commodity chemicals. But the company, like a lot of its competitors, is trying to exploit new opportunities as chemical production increasingly shifts from North America and Western Europe to lower cost regions like China and Eastern Europe, as chemical producers de-emphasize distribution and customer service, and as the pharma sector continues to grow at a dizzying pace. Univar has already branched into services such as customer inventory and warehouse management, waste management and technical support. But the firm is poised for more ambitious moves, notes John Sammons, Univar's senior vice president and chief administrative officer.
"Right now, we're looking at the most appropriate way to follow our customers" to China and other new manufacturing hot spots, says Sammons. While Univar has long done sourcing in China, he notes, it has not previously operated within that country. He says Univar has just opened an office in China, and Univar Chairman and CEO Gary Pruitt recently went to that country to assess the opportunities there. But Sammons still isn't sure what business model Univar may adopt in China, adding that "our services there won't necessarily be a mirror image" of the company's operations elsewhere.
At present, says Sammons, Univar is considering several possibilities for its China business. One is to import chemicals from elsewhere and sell them in China. Another possibility is to become a representative in China for selected products of large, international chemical firms who are already established in that country. He says Univar might also consider representing Chinese chemical producers who wish to sell in their own country.
Meanwhile, Univar hopes to capitalize on the waning interest of some large chemical producers in providing distribution services. "I think the producers are increasingly focusing more and more on their core manufacturing competencies," says Sammons. Some of these firms have recently laid off large numbers of their sales, marketing and distribution staffs, he observes. As a result, he adds, these companies have been looking to outside firms to take over many of the distribution and customer support functions that used to be done in-house. One of these functions is technical service, an area in which "we've stepped in and picked up our competence," says Sammons.
Univar and other distributors have already benefited from the outsourcing of distribution. In the latest example, Univar and Eastman Chemical Co. announced a deal in April under which Univar will become exclusive distributor for Eastman's methanol in the U.S. The agreement guarantees Univar a U.S. source for methanol that can be traced back to its producer. This is important because many North American producers have discontinued U.S.-based methanol production, a trend that has posed a problem for U.S. pharmaceutical companies, who must be able to trace their methanol and other chemical purchases back to their sources.
The pharmaceutical sector, in fact, is one of several fast-growing areas that Univar is pursuing vigorously. (The others are food and energy.) Univar announced in May that it had named its veteran marketing executive, Tom Nist, to expand the company's offerings to drug companies. Among the initiatives here, Sammons reports, will be to offer for the first time products that require a high level of scientific and technical savvy, to implement product storage, handling and tracking procedures that meet the U.S. FDA requirements, and to invest in IT systems geared specifically to the pharmaceutical and food industries.
Univar is also stressing to its customers its expertise in the latest round of regulations that will impact the chemical industry. These include the European Commission's White Paper procedures for registering and evaluating chemicals, and various new homeland security rules in the U.S. Although these and other new regulations will increase the cost of doing business, says Sammons, "they will ultimately be to our benefit" as chemical makers turn to outside experts to minimize their compliance costs.
Costs in China increase
04/04/2008China's supply chain value
09/28/2009Univar to acquire Chemcentral
03/11/200710 Tips for Business Travel in China
11/03/2008
Now Playing: 