One of the biggest trends today in relationships between chemical distributors and their customers is the growth in partnering arrangements—mutually beneficial relationships that go beyond buying and selling. Examples of such partnering include working together to improve products or processes, expanding product lines into new geographical areas, and storing and transporting chemicals more safely and economically.

Various market dynamics are encouraging this development, observes Robert L. Moser Jr., vice president for national accounts at chemical distributor Brenntag North America in Reading, Pa. Among them, he cites "a reduced headcount in procurement departments due to consolidation within most companies, product allocation and availability problems, and cost containment pressures from customers' corporate management." Even further, issues such as outsourcing of product lines by producers to distributors and the increased technical capabilities of the large distributors are helping buyers rely more on distributors for advanced value-adds.

Because of their reduced staffs, procurement managers typically have to focus on lining up deliveries of key raw materials and have less time to devote to their 'B' and 'C' ingredients, says Moser. Therefore, he adds, it is useful to collaborate with a distributor that has "high levels of interaction" with the multiple suppliers of these secondary but still important ingredients. A large distributor like Brenntag, which purchases chemicals in huge amounts, can also bring economies of scale to its customers, who would normally place much smaller orders of chemicals.

When regional chemical supply shortages crop up, as they have in the wake of Hurricane Katrina, buyers often look to distributors for access to alternative supplies. Moser says that Brenntag, which operates across the globe, is able to shift material from one region, or country, to relieve spot shortages for its long-term customers.

Cost-cutting at corporations has prompted procurement departments to consolidate their spending with fewer suppliers. A large, diversified distributor, which may offer thousands of separate products, enables chemical buyers to bundle their spend, says Moser.

While users of chemical products are increasingly relying on distributors to keep their plants and shelves stocked, they are also enlisting distributors in efforts to improve the quality of their products and the efficiencies of their processes. Chemical distributors are offering such services because they help customers to advance their business, which may lead to more lucrative supply contracts down the road.

More chemical distributors and buying companies are creating quality councils, committees of key managers from a distributor and its customer devoted to improving product quality and process efficiency. According to Phil Scafido, senior vice president for sales and marketing at Chemcentral Corp., based in Bedford Park, Ill., quality councils have become particularly prevalent over the past few years. He says Chemcentral has participated in quality councils with its Tier I and II auto industry customers.

Members of a quality council, says Scafido, typically consist of representatives of the operations, safety and environmental departments of both distributor and customer. Their mission is to find ways to make chemical products with better quality and greater consistency, and especially to take some steps out of the manufacturing process. "In the past, a customer might have had to rely on the distributor to do significant testing of a product on the customer's site," Scafido says. But with a quality council in place, such on-site testing is no longer necessary, resulting in a more efficient process.

Partnering arrangements can help companies to expand into new regions. William R. Brunger, president of importer and distributor ICC Chemical Corp., says his New York-based company has facilitated such a move by arranging local sourcing of raw materials for one of its U.S. customers, a manufacturer of polyester resin products, who wanted to start up operations in Europe, Latin America and Asia.

In another partnering arrangement, also involving polyester resin raw materials, ICC Chemical has helped one of its U.S. customers expand into Eastern Europe by letting the customer market its finished products out of an ICC office in the region and by toll-producing the resin raw materials for the customer at a nearby ICC-owned factory. Typically, such partnerships have evolved from existing customer relationships in the U.S., notes John Liput, international product manager at ICC Chemical. Customers, he says, "feel comfortable working with us, and knowing that we have the [global] infrastructure in place, want to take the relationship to the next level."

Another trend in partnerships is a much closer alignment between the manufacturer and distributor geared to making the supply chain to the end-user more efficient. These sorts of relationships have become more common in the past two years, especially in the paint and coatings industry, Scafido notes. For example, he says, "there are cases where a paint manufacturer has a direct relationship with a large chemical supplier, and we also have our own relationship with that paint company." In the interests of efficiency, says Scafido, "the chemical producer may ask us to handle transportation and inventory for the products it supplies to that paint manufacturer, and maybe do the same thing for its other customers in the same region."

Such relationships benefit all three parties, Scafido points out. The chemical producer no longer needs to maintain distribution terminals in regions where it is unprofitable to do so. The distributor gets a chance to deepen its relationship with its original customer and forge ties with new customers. And the customer can streamline its ordering and deliveries by henceforth dealing with a single supplier—the distributor—for a particular product.

As large primary producers of chemicals have outsourced the sale of some product lines to distributors, these companies have had to beef up their technical and sales staff. Moser says Brenntag has hired a "substantial number of industry specialists" to support the new product lines it handles. Often a technical relationship with a customer progresses into a product development partnership "with strong confidentiality aspects." So the interaction, he says, "becomes a strategic collaboration that provides the customer with very valuable technical resources at little or no cost."

Global chemical giant Solvay is one producer that has been particularly active in seeking collaborative relationships with distributors to service its customers. In fact, the company has announced its search for distributors on its website. That solicitation calls chemical distributors "indispensable partners for supplying specific market segments that Solvay itself is not in a position to serve as economically and efficiently." In its announcement, Solvay promises its collaborators long-term contract relationships, technical support and training, and access to supplies from a worldwide manufacturing network. In return, Solvay asks that its prospective partners be capable of "responsible care" in safety and environmental matters, that they cover selected territories of interest to Solvay, and possess the equipment for storage, handling, diluting, and packaging chemicals.

Partnering also includes many little things that set apart one distributor from another. EMCO Chemical Distributors of North Chicago, Ill., specializes in services such as blending, mixing and packaging, and a variety of technical services. Edward Polen, president and CEO of EMCO, says many other distributors do not provide these extras. "We offer them," he says, "because they add value to what we're doing for our customers." Over time, he adds, these routine interactions "can develop into a greater partnership."

Another example of service-oriented partnerships is Chemcentral's use of the Internet to exchange regulatory information about chemicals with its customers. Customers are given a Web-accessible folder called an "E-binder" in which they can find material safety data sheets, certificates of analysis and other safety and environmental data relating to chemicals they have purchased.

Partnerships, both large and small, "reduce much of the day-to-day buy/sell 'noise' that absorbs so much of the business process," comments Moser. "They allow resources to be applied to functions that return far larger tangible benefits to both the customer and distributor, because the level of trust is much higher."