Chemical Distributors Provide Insight into their Relationship-building Strategies
The European Association of Chemical Distributors (FECC) picked the tagline “Shaping successful partnerships for the new market demands” as the theme for this year’s annual congress in Nice, France, June 4-6, 2018. Delegates will approach and discuss this theme from different angles of view. CHEManager Distribution & Logistics asked corporate executives and industry experts to share their views and strategies with our readers including principals and customers of chemical distribution companies. Among the questions we put up for discussion were:
- What factors define a successful partnership in chemical distribution?
- What do partnerships need to survive changing market demands?
- Which opportunities do you see resulting from changing market demands?
The answers may reflect different opinions and strategies, but one thing holds good for all: in chemical distribution, establishing and fostering reliable and trustful partnerships with principals and customers is key.
Find out yourself how key players in the chemical distribution business deal with the changing market environment and how they build successful partnerships. Read here what the opinion leaders have told us
Mutual Trust, Honesty and Long-term Commitment
“A Partnership is more than a mere business exchange to the economic benefit of both parties. For us, a real partnership is rather characterized by mutual trust, honesty and long-term commitment of both partners. As a family-owned company we aim to provide customer-specific products and high-class service solutions, based on the technical knowledge of our highly experienced employees. Therefore, it is important to discuss new ideas, strategies and market potentials with our partners and to be open for business expansion and innovative solutions.
To mutually benefit from a long-term business partnership, we need to rely on each other and continuously work on boosting our relationship. This includes not only to share benefits in times of success but also to work together on the best solutions under challenging market conditions. Facing a rapidly changing business environment caused by current challenges like market consolidation, chemical regulations or digitalization, we closely work together with our partners.
More than ever, it is important to trust all partners in the supply chain – supplier, distributor and customer. We collaborate in close strategic partnerships to successfully meet the external challenges. Thus, we continuously work on our processes, for example, by developing digitalized services to provide enhanced solutions to our customers and to facilitate transparent processes towards our principals. By thinking and adapting quickly in times of changes, I am convinced that we will be able to create sustainable and innovative added value for all parties, always together with our partners.”
Thomas Arnold, CEO, Biesterfeld
Identifying and Managing Opportunities
“Successful partnerships always enjoy growth! Continuous growth requires the ability of distributors to identify and manage opportunities alongside the chemical manufacturing partners. Key is to get access and foothold in new markets arising from megatrends and the ability to follow the globalization of industrial manufacturing structures.
As a specialist distributor we are following consequently the global footprint of the premium automotive OEMs and their tiers. We are supporting this industry with global solutions based on local services and supply to increase market share. The latest foundations to underpin that statement has been in 2017 the establishment of two further local entities in USA and in Mexico.
We complement the globalization strategy by creating access and inroads into new markets and applications, for example, within e-mobility-related application segments. New specific requirements are being served by combining intelligent processing know-how and specialty materials from our chemical manufacturing partners. As a result of our engineering approach we are able to translate manufacturing needs from these future markets reverse to the product creation of our specialty chemicals suppliers. Examples to name are highly efficient e-motors for drive trains, requiring improved dielectric casting resins, or secondly lithium-ion battery modules requiring dielectric thermal management materials, or thirdly crash resistant battery cages, which require bonding and sealing. To accelerate business development we provide unique services towards interested manufacturers.”
Jürgen Rietschle, managing director, Bodo Möller Chemie
Communication, Coordination and Flexibility
“As in each partnership trust is an integral part – this also applies for chemical distribution. For us it is crucial to listen to the individual needs of customers and suppliers in order to be able to offer them the solution they need. It is all about communication, coordination and flexibility. It is a matter of maintaining continuous and constructive dialogue with our partners and proving that they can rely on us. Thanks to our strong global network we can anticipate global and regional requirements and are able to respond to our partners’ needs with maximum flexibility and speed. This brings us back to the important part of partnerships – trust. Many of our partners have known us for a very long time and know that they can rely on us.
Global customers and suppliers want a seamless global interaction and the actual trends are all about digital offerings. It is now the challenge to transfer this trust into the digital era. By developing digital services that will offer our partners even more added value in terms of speed, simplicity, transparency and information, we are well prepared to master this challenge. Our digital services will reduce the complexity of the value chain and workflows for our partners. Faster exchange of market information, more transparency in business development pipelines and better process efficiency will improve business performance and reduce complexity.”
Karsten Beckmann, member of the management board, Brenntag
Good Relationships Remain the Key to Success
„As simple as it may sound, finding the right partners and nurturing a good relationship with them will remain the crucial ingredients for a successful partnership, no matter what the market demands may be. What is changing for chemical distribution is the types of partnerships we are entering into and the services we are acquiring or offering through partnerships. The key to success remain good relationships; and the behavioral traits that nature and foster these, deeply rooted in the belief system of our societies, will not change because of digitization, regulation or any movement in the markets. The developments mentioned, however, are influencing the speed of doing business, how we communicate in our relationships, and whom we form partnerships with. As the middleman, the distributor or trader will always rely on partnerships and the success will be determined by the success of these. Choosing the right partnerships to answer to cost pressures and demands from the market and building a good relationship with these partners will be the decisive factor.”
Christopher Erbslöh, managing director, C. H. Erbslöh
Our Industry is Going Through Exciting Times
“Chemical Distribution is facing growing markets as well as rising concerns over safety issues. Customers ask for more service and high value addition products. Shortages of certain raw materials as well as shortages in logistic capacities increase the pressure on the market prices. Digitalization accelerates change. This environment may attract new market participants. Thus, it is time to pool resources and concentrate skills in partnerships for the desirable competitive edge. This challenge has sticking points like rising compliance costs that may promote consolidation instead of informal partnerships. Business partners ask for sustainable supply chains to cope with growing responsibilities towards society. More complexity in chemical regulations will raise the bar as well. Process innovation and new business models may be the key to take the opportunities out there. Our industry is going through exciting times.”
Robert Späth, managing director, CSC Jäklechemie
All from a Single Source, One for All
“Again and again, one has to set clear goals, exploit one self’s opportunities and strengths to the fullest, and create the relevant requirements promptly and flexibly. Restructuring and changed "go-to-market" approaches of our principals demand new ideas. Hence, they demand from their distributors more than just a classic distribution function.
The service idea, customized solutions and clear market strategies are more and more in the focus of the distribution and are demanded by both the principals and the customers. The whole supply chain up to contract production is intended to be depicted by the distributor. All from a single source, one for all. This will massively reduce time and work complexity. By REACh, new biocide guidelines and similar European legal chemical regulations, the market is currently strongly consolidated, almost protected. We notice this development in particular in the specialties area.
Despite capacity upgrades, all of our European suppliers are almost sold out. Allocations and sales control are not unusual catchwords in sales anymore. In particular, digitization will give the local commodity distribution business a new face. Many buyers will increasingly cover commodities via platforms to reduce complexity. The fast pace of the digital world will bring further significant changes to our day-to-day work. Recognizing and being prepared for this development will be key to the future of distribution. Despite everything, it remains primarily the task of the distribution to recognize threats and opportunities, to convince through know-how and to be the link for the manufacturer and the customer in the market.”
Tanja Jennrich, procurement manager, GB Chemie
Delivering Highly Specialized Solutions and Value-added Services
“Strategic partnerships have always been a crucial part of our sustainable business development. As a family-owned business with more than 110 years of experience we constantly strive to expand our long-term relationships in alliance with our customers and suppliers.
To succeed in the environment of an increasingly demanding market, distributors need to strengthen their competitive position by delivering to our customers highly specialized solutions and value-added services instead of exchangeable chemical products. Our customers benefit through our comprehensive services – reaching from storing, filling/bottling up and transporting with our own truck fleet to mixing and recycling chemicals and finally the qualified application consultancy services via our highly skilled technical sales team.
Apart from digitalization and chemicals regulation one of the biggest challenges facing chemical distributors is the ongoing shortage of qualified drivers. One of the largest issues influencing the driver shortage is the demographic of the current workforce, primarily age. At Häffner we are offering a special training/retraining program, including incentives and benefits to attract and retain new drivers. Furthermore, we successfully mitigate the negative effects of the driver shortage issue by actively collaborating with our partner carriers and forwarders.”
Thomas A. Dassler, managing director, Häffner Group
Coping with Future Challenges in Chemical Distribution
“We see several kinds of partnerships as crucial to success and to coping with future challenges in chemical distribution: Surely most important are the partnerships with our principals and our network to numerous chemical producers worldwide. Our partnerships with other, independent chemical distributors, in associations like Penta as well as Omni-Chem, go into the same direction. All these partnerships together assure that we are able to supply our customers in different countries with products of best quality, required quantities and competitive prices, even in difficult market situations.
In order to make these partnerships successful, it is crucial to support our principals and suppliers with excellent marketing and sales efforts and with as much relevant market information as possible. The latter is needed to jointly adapt product types, qualities, documentation, certificates, registrations, packaging and other related topics, properties and services to changing and differing needs in each market as best as possible.
Also in the area of digitalization, we see advantages of collaboration and partnerships. Besides our own online shop and e-commerce platform based on SAP, we are therefore currently working on a project to establish a joint marketplace platform for chemicals, together with other chemical distributors of our industry. Jointly with our own e-commerce platform, this will offer additional ways and possibilities of communication, information, of offering and ordering, to our customers, even outside regular office hours. Beside those partnerships, we are regularly and actively involved in M&A projects as well as joint ventures, of which we realized several during the last 10 years, to cope with and actively shape the trend for market consolidation.”
Thorsten Harke, president, Harke Group
Digitization as an Opportunity
“Over the past decades, good reasons for cooperation in chemical trade have manifested repeatedly. For example, the amount of warehousing costs suggested warehousing collaborations, while the unfavorable purchasing conditions for smaller enterprises suggested purchasing collaborations – whichever example is examined, collaborations have always been motivated by the attempt to make synergy advantages of individual, greater units accessible for a multitude of smaller and medium-sized companies as well. Collaborations of this nature sometimes remained functional even over decades – however, without causing a tangible shift in market conditions.
The emergence of digital business models in chemical distribution could open up another exciting chapter regarding cooperation. In this context, I consider the idea of a jointly operated platform for the distribution of chemical products to be game-changing. Currently, chemical distributors of various scales are working on an initiative of this kind under the KEMIX label, which is intended to enable participating enterprises to handle digitized distribution of chemical products under their own control in the long term as well.
A cooperation like this among competitors seems to me to be the appropriate answer to the impending break of externally-operated platforms of the “Amazon model” into our market, which would be associated with a loss of data ownership and payment of transaction fees. A “David against Goliath” principle could prove effective in this matter as well, as long as we remain at the helm of action.
The KEMIX project, which we intend to limit to the European market for the time being, is open to all chemical distributors.”
Peter Overlack, managing director, Oqema
Still a lot of Hurdles to Overcome
“There are not only advantages when it comes to digitization. A serious danger lies in the lack of personal communication. Especially in the field of distribution, communication is key. We are the eyes and ears for our customers as well as for our producers. Only a constant exchange of information gives us an overview of market movements and thus allows us to offer attractive and competitive prices.
An online platform could be very attractive for the trade with small and micro containers. The degree of name recognition will also increase and thus open new business fields in the future. Looking at growing generations more closely, a certain communication isolation cannot be denied. This will only increase in the course of digitization, cutting off new opportunities left and right.
Despite the fact that a lot of different platforms are already active in the market, the common problem of them all is the lack of traffic. This shows that there are still a lot of hurdles to overcome. Digitalization will come also to chemical distribution, there is no doubt. The crucial question is whether or not the providers are able to meet the customers´ requirements and at the same time fulfill the legal demands.”
Bernd Soyke, managing director, Penta Chemikalien
Creating Value for all Parties Involved
“The essence for successful partnerships is mirrored in our company’s mission statement: creating value for all parties involved. In an increasingly demanding and fast-paced environment partners in distribution are faced with various challenges as well as numerous opportunities:
The ongoing consolidation impacts the competitive landscape and will further challenge distributors to reach critical mass. Critical mass usually allows a company to provide better resources, for example, to invest in digitalization projects or meet growing regulation demands – which in return allows a competitive position in offering advanced services to customers and suppliers alike. The point is to find your value position in the market and drive developments as well as benefit from new achievements outside the chemical industry.
A key factor of digitalization is data management which will greatly decide the development of companies and partnerships. Having centralized points of contact and documentation is inevitable in today’s accelerating world. As a result, we are investing in information exchange capabilities to provide all relevant information and to increase the efficiency of processes between us and our partners. Our aim is to create value for suppliers and customers at the click of a button.
The evolvement of chemical regulations results in further strengthening our relationships. Regardless of the physical and digital development of the industry – quality, safety and compliance are the backbone of everything we do. If we do not invest here, we would be unable to create value for anyone.”
Christian Westphal, CEO, Ter Group
A Focus on Delivering Growth
“Successful partnerships are the driving force for distributors. Being a distributor, our place is in the middle of it all – principals, customers, employees, regulators, and many more. These partnerships are based on trust, first and foremost. The partnerships with principals and customers are most vital for us. They require trust and a joint long-term vision, coupled with a focus on delivering growth. For our principals, we are an indispensable extended arm of their own business. Through transparency, they benefit from our market knowledge and can subsequently develop new and better products.
Our customers are still a vital point of focus for us because we know that if we help them once and we prove that they can rely on us for new solutions and improved processes, the relationship will be there to stay. The same applies for service providers. At the end of the day, it’s all about sustainable ways of doing business and being a good corporate citizen.
The challenge is to continue to deliver value to both our customers and principals by addressing all the issues and opportunities. Markets are continually evolving, the innovation and product cycles are becoming shorter, consumers are becoming increasingly demanding, and the social media and 24-hour media cycle push the reputation management to the top of agenda. The environment in which we operate is increasingly complex and we must be responsive to all of that at any given time.
Opportunities and threats are often intertwined; for example, the digital theme can be a negative disruptor if not addressed well. Another development which can have significant impact on distributors is the constant consolidation in the chemical industry, as a result of which the newly merged companies often need to review their distribution landscape. Although this can create opportunities as well as threats, we also see that it can lead to an inward, organizational focus within the chemical companies.”
Anna Bertona, CEO & president Europe, Middle East, Africa (EMEA), Azelis
Turn Challenges into Opportunities
“When we look at all dimensions of challenges ahead for chemical distribution in general and IMCD’s business model in particular our answer is centered around 3 „C‘s“ – customers, cooperation, creativity – and 1 „P“ – personalities.
„Customers,“ which in our business as chemical distributors are both customers who buy our products including services, as well as principals for whom we act as channel partners are the major focus of all our activities and the basis for all developments with regard to new systems. It is our clear vision to further crosslink the needs and requirements of all „customers“ in a way that our personal involvement as formulatory experts throughout all market segments remains our key success factor. „Cooperation“ remains a major objective and we are not shy to assess any kind of opportunity to cooperate with valuable partners to strengthen our global market position. Openness and transparency as well as a high degree of loyalty and reliability should form the basis of all our activities and will serve to bind and bond our existing partners and attract new ones.
„Creativity“ is often neglected in our quite scientific working environment chemical industry. We encourage all our staff around the world to sharpen this creativity and to question systems and processes in a constructive manner.
As our business model is very much based on strong personal relationships the right „personalities“ are essential. We often hear and read from our principals and customers and we live it ourselves that business growth is important…we will only achieve this growth when we help our people to grow their „personalities“.
Excelling in above „C’s” and „P’s” and superior commitment to global state-of-the-art IT platforms as well as well-defined regulatory and supply chain expertise will turn digitalization, regulation and market consolidation for IMCD from challenges into opportunities.”
Frank Schneider, managing director, IMCD Deutschland