Buyers laud regionals,but want more help
By Kevin R. Fitzgerald -- Purchasing, 5/6/1999
Chemical buyers believe that regional distributors offer better service than nationals, that distributors have increased their technical expertise, and that pricing from distributors is competitive with that of producers. But many buyers still want chemical distributors to provide broader product offerings and more technical support.These are some of the results of a recent survey of chemical buyers conducted by Purchasing. And, despite efforts by distributors to provide more value-added services over the past few years, only a relatively small number of buyers report that they've outsourced value-added work to chemical distributors.
Overall, chemical buyers seem pleased with the performance of distributor suppliers. Many survey respondents laud their distributor suppliers--regional distributors, in most cases. And several indicate that as their buying volumes increase in the future, they will rely even more heavily on distributors for chemical supply needs.
But not all is perfect in chemical distribution. Buyers want distributors to keep advancing their technical knowledge and support, they want them to broaden product offerings, and to help their customers stay abreast of environmental, safety, and health regulations and other responsibilities. Buyers also want distributors to work with them to reduce overall costs and not simply pass through every price increase from manufacturers.
Regionals stand out
A preference for regional over national distributors was clearly indicated in Purchasing's survey results. Regionals continue to be gobbled up in acquisitions by national distributors, but buyers in the trenches believe the guy or gal down the street who has met business needs for many years is a surer bet than the national distributor.
One survey respondent points out that he prefers buying from regional distributors because he receives "better access through local warehouses and better technical support from regional sales engineers." Michael Reed, procurement manager at Twin Brothers Marine in Morgan City, La., notes that "With a regional, our company gets more on-site help and usually faster service." Another purchasing pro adds that regionals "are more likely to stock a chemical specific to our company." These responses were typical of survey respondents who favor regional over national distributors.
At least a couple of buyers highly value the personal relationships they have nurtured with their regional distributors and count on these relationships when the going gets tough. "You know the people if problems arise," points out one survey respondent.
However, some buyers report that national distributors offer better pricing, and that nationals hold far more clout with manufacturers. "They are the ones who make things happen," says one survey respondent who prefers nationals. "They get results and make deliveries on time, on target, and on budget."
Survey results also show that big, multiplant buying organizations continue to consolidate their business with as few distribution sources as possible, usually two or three national distributors. This trend to integrate chemical distribution supplies has spurred regional distributors to form alliances in an attempt to provide national coverage with one point of contact, but it appears that such alliances remain in the development stages.
Where improvement is needed
By and large, chemical buyers would like distributors to become even better at the things they're already good at: local stock, small orders, quick deliveries. But a few buyers point out that distributors still have a long way to go in some areas.
Stuart Williams, purchasing manager at Sequoia Pacific Systems, would like to see distributors improve "cradle-to-grave responsibility education." His comment may reflect that despite the vast time and resources the chemical distribution industry has spent on chemical product stewardship through the Chemical Educational Foundation, there still is a lot of work ahead.
Several buyers note that they would like to see distributors improve follow-up service after the sale. And, despite the fact that chemical prices have been low for some time, a good number of survey respondents note that the main improvement they want is "lower prices."
Big buyers outsource
A strong majority of buyers report that they have not outsourced value-added activities to chemical distributors in recent years. And the handful that have outsourced give distributors mixed reviews on their performance in these areas.
Looking at trends among large, national chemical buying organizations, however, there is no question that major distributors are being asked to perform tasks that traditionally were not considered part of the distributor's domain.
Large distributors now provide a wide variety of value-added services to customers in addition to the "givens" of warehousing and delivery. These services include blending, contract packaging, technical and safety training, hazardous-waste removal, and even custom manufacturing in some cases.
Major buyers also are looking for distributors to handle sophisticated inventory management duties, including remote tank monitoring and automatic tank replenishment.
Global integrated supply
Multinational buying organizations also are taking the concept of "integrated" chemical distribution supplies to the next level. Based on success in North America, Witco Corp., for one, is trying to consolidate European chemical distribution supplies, using the same process it applied here.
The chemical distributor supply base is reacting to this trend. Example: National distributor Chemcentral Corp. has entered into an alliance with Hayes Chemical of the U.K. and Penta, which distributes chemicals throughout continental Europe with 10 distributor partners. Named the Global Chemical Distribution Alliance, the three-member partnership is aimed at coordinating services to global customers.
"The prime reason for this alliance is that it allows members of the alliance to extend service to multinational customers," says Bill Hough, VP and director of marketing at Chemcentral. "We all have similar products and suppliers, so extending coverage to global customers should be relatively simple."
Look for large multinational buyers and major distributors to expand the trend toward global consolidation of chemical distribution supplies in coming years.
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