Services cut buyers' costs

Susan Avery -- Purchasing, 3/2/2006

Chemicals distributors are doing their part to rid the supply chain of costly inefficiencies by offering services that help customers concentrate on what they do best.

A review of Purchasing's Top 100 Chemical Distributors over the past three years finds 85% provide services beyond delivery and warehousing. The most popular are blending, contract packaging and technical training. (Coincidentally, readership surveys also show these services to be among the most requested by purchasers.) Sixty-five percent of the Top 100 offer blending services, 50% include contract packaging as part of their service offering and 45% provide technical training to customers. The Top 100 also routinely offer safety training, customer product research, hazardous waste removal and solvent reclamation services.

"Service is the essence of distribution," says David Miller, president at LA Chemical in South Gate, Calif. "If we don't bring value to the supply chain, there is no reason for us to be in the middle of the supply chain. The user may as well go directly to the producer." He says that only about 20% of the chemicals his company sells are factory-packaged products.

LA Chemical is one of many distributors that provide blending services for both liquid and dry chemicals. Instead of selling a customer two or three kinds of chemicals separately, the distributor mixes, or blends them together at its facility before shipping. This allows the customer to focus more on what it does best. In many cases, Miller says, it's marketing the finished product.

"There are a lot of redundancies in the chemicals supply chain," he says, explaining that there's no reason for producers, distributors and end users to handle a product as much as many of them do. "There's no longer enough margin for us to do that. The fact that we all now have to get by doing more with less is creating opportunities to provide higher levels of service and take waste out of the supply chain."

Another service that LA Chemical offers that has been popular lately with customers is total inventory management, especially of chemicals purchased from producers located overseas. Often, this can help insulate customers from currency fluctuations.

At Chemcentral, chemicals buyers ask the distributor for help managing documents—from material safety data sheets, to invoices, to certificates of analysis. Chemcentral helps by offering an eBinder service, which is essentially an electronic filing cabinet. While past Purchasing surveys show chemicals buyers reluctant to use the Internet to do business, more are starting to look to the Web for its improved efficiencies and lower cost.

"Purchasing operations are being flooded with documentation that is not readily accessible or easy to retrieve," says Phil Scafido, senior vice president and director of sales and marketing at Chemcentral in Bedford Park, Ill. "They are starting to see the value of using an electronic means to maintain files and access information as opposed to handling a lot of paper." Also, increasing numbers of chemicals buyers are now placing orders through the Internet, he says. They're using the company's online order center or direct business-to-business integration through computer systems.

Scafido agrees with LA Chemical's Miller about distribution's role. "The industry is evolving and there's a lot of optimism, but there's still room for improvement along the entire supply chain," he says, pointing out that Chemcentral's customers too are looking to distribution for more help with inventory management.

As the chemicals industry continues to consolidate, he says that producers are looking to distributors to serve more customers than ever before. "We have to take responsibility of handling inventory and provide value to customers that they may not have been receiving from the producer. Customers see the value of not having to do day-to-day inventory management of the chemicals they purchase. They've come to rely on distributors to remotely control the flow of material in and out of the tanks."

Purchasing professionals who buy through distribution also see value in not having to manage chemicals after their companies are through using them. They reason that experts at environmental services can do a better job at getting rid of hazardous and nonhazardous waste.

Ashland Distribution has been offering such environmental services for 25 years. Customers first turned to the chemicals distributor for help with meeting the federal Resource Conservation and Recovery Act. They figured that since Ashland was also a producer of chemicals that it had developed the necessary expertise to comply with the law. Ashland Distribution's environmental offering includes hazardous and nonhazardous waste collection, recovery, recycling and disposal services.

"Our customers want to focus on their core business whether it's manufacturing automobiles or building ships," says Dan Black, business manager for environmental services, Ashland Distribution, Dublin, Ohio. He describes situations in which the distributor not only delivers chemicals to its customers' locations, but also handles the materials inside the plant and manages their disposal. "We're responsible for the whole lifecycle of the chemical, from the time it's distributed to the end of its useful life when it's ready for recycling or some other type of treatment."

Ashland Distribution also offers chemicals purchasers assistance with regulatory compliance and training. For 2006, the company has scheduled 14 seminars throughout the country. It also provides sessions onsite at customer locations.