By Ed Antonucci, New Business Development Manager, Palmer Holland
Appeared in the October issue of PCI
Chemical distributors have always played an essential role in the coatings industry. Historically, most distributors represented commodities, solvents and packaging at the local or regional level. While that is still important today, of growing importance is the focus on value-added services from the national specialty chemical distributor. As chemical suppliers choose to reduce headcount in the area of sales and technical support, opportunities continue to reveal themselves for full-service national specialty chemical distributors. What value-added services could a sales team based around the country provide, you might ask? Salespeople not only must be knowledgeable about the product technology of various suppliers but also must be able to provide regulatory information needed by the compliance department, as well as pricing and logistics support for purchasing teams at their customers.
The number of companies producing both aqueous and nonaqueous industrial coatings continues to grow, and many are focused on developing and upgrading their formulations to meet market demands. Many of these companies are smaller in scope and have limited product development resources. The distributor’s salesperson has a responsibility to present formulating tools, new product technology and product suggestions that allow customers to meet and exceed their formulating requirements quickly. A full-service specialty chemical distributor provides this by having a complete product portfolio of pigments, resins and additives. While suppliers continue to produce many of these domestically, an increasing number prefer to optimize production on a global basis. This means that an additive or pigment the supplier produced previously in the United States might now come from Europe, South America or Asia. Regardless of origin, it is the supplier’s responsibility to ensure that the quality is consistent, while it is the distributor’s responsibility to provide the logistics of this revised supply chain in order to meet the customer’s service levels. This role of the distributor impacts not only the technical functions in the customer’s organization but also the compliance and purchasing departments.
Coatings formulators continue to demand new approaches in response to regulatory changes or industry trends to meet contemporary formulating guidelines such as faster cure, lower VOC, improved hiding, better resistance properties and lower film thicknesses. Formulators should seek out a distributor with both a comprehensive and synergistic product portfolio. Partnering with a national specialty chemical distributor that can present multiple products, which work together to achieve these complex solutions and reduce development time, is a notable advantage.
Today, the national specialty chemical distributor has to be committed to focusing a large part of its time in front of its customer’s technical team to allow the formulators to maintain and optimize their product portfolio. Technical managers with hands-on formulating experience are a powerful resource. The distributor’s technical manager assists the formulator in addressing complicated formula issues to provide quick and efficient solutions.
National specialty chemical distributors’ internal compliance departments must maintain up-to-date US GHS SDS and TDS documents on their product offerings and assist in the completion of product forms/procedures that customers require. Providing this service shortens the time it takes to implement a new product into the customer’s compliance system. This is particularly important when sourcing offshore material. The national specialty chemical distributor provides a high level of expertise in ensuring the proper paperwork is in place so the compliance department can confirm that its organization meets all regulatory requirements. This is a critical role in today’s market, as regulatory issues continue to change and noncompliance can prove to be quite expensive.
Supply Chain and Purchasing Support
At their core, distributors of specialty chemicals must be able to provide short lead times, consistent pricing and order consolidation assistance. While additives may only represent a small percentage of the cost of the formulation, those same additives can stop production entirely and delay on-time delivery. Distributors need a commitment to inventory product as determined by forecasts as well as maintaining safety stock to handle any changes in demand. Inventory turns should not be the critical driver as it is with commodities and solvents. Working with a national specialty chemical distributor adds a ‘spring’ in the supply chain that minimizes risk/service failures in light of decreased visibility and forecasting complexities. One example is that national distributors can often ship from another warehouse should a product temporarily be out at their standard warehouse. This is a tremendous advantage, particularly with many lower-volume items, since it can be difficult to forecast usage accurately considering different loading levels depending on batch size and production equipment variability.
The luxury of ordering smaller quantities of products also drives up the value of a distributor by keeping raw material inventory dollars at a minimum while saving the customer’s warehouse space for finished goods. The ability to combine orders of various products into one purchase order has the potential to save on multiple order processing costs and optimize freight costs. Minimizing pricing and invoicing issues also results in cost savings. Working with a distributor’s customer service and sales team allows the procurement department to ensure correct pricing, resulting in minimal payment discrepancies. This improved service contributes to supply simplification, tail-spend consolidation among multi-plant locations and working capital flexibility.
In today’s interconnected world, learning a great deal about the myriad of products offered by a supplier or a distributor from a simple web search is effortless. However, understanding product complexities and how each interacts with other raw materials is more difficult. A distributor focused on selling specialty chemicals has a better understanding of these interactions and can mitigate negative results based on its broad base knowledge of its product offering.
The distributor’s role and responsibility is also to introduce new solutions to its customer base. A distributor who is active in not only the coatings market but also in other markets such as plastics, adhesives, metalworking/lubricants, agriculture, or health and nutrition can use this broad spectrum of knowledge to help provide new tools and solutions. Envision how a surfactant that is an excellent wetter for herbicides in the agricultural market may offer similar properties on a problematic substrate in the coatings market, or how hydrocarbon resins can be used as a way to reduce dry time in alkyds based on their performance in pressure sensitive and hot melt adhesives.
Some of the new solutions are the result of a distributor’s marketing department analyzing various trends and gathering marketing intelligence related to industry regulations, supply needs and global sourcing shifts. The marketing department also monitors information from various social media platforms frequented by members of the coatings industry; this information is then often shared with suppliers and customers.
In addition to their technical competence, national specialty chemical distributors can help facilitate technical support from suppliers as needed to assist customers in selecting the right products. The distributor’s product mix is a valuable asset to both its customers and suppliers. By providing a large selection of product offerings, the distributor can ensure that the customer’s formulation can be optimized, tested, reviewed and tested again if needed until the customer reaches the best solution for that application.
Much like the coatings market, the distribution market continues to consolidate, but there is a light at the end of the tunnel. The national specialty chemical distributor continues to gain importance as suppliers look to minimize their distribution network and as customers with regional or national manufacturing facilities show an increased preference to purchase from a national distributor.
National specialty chemical distributors will continue to serve as one of the vehicles to identify and understand future needs of the coatings industry. The distributor assists the raw material manufacturer in product development, market promotion and sales success through its strong industry knowledge about the requirements of its customer’s technical, compliance and supply chain departments. Distributors with a robust product mix of pigments, resins and additives coupled with active account management, technical and support teams that can adequately address the needs of their customer base are an integral part of the supply chain today and will be even more so in the future.