Going Digital

Chemical Distribution 4.0: a Big Step for a Sector Which Is both Mature and Conservative

  • (c) Monkey Business Images/Shutterstock(c) Monkey Business Images/Shutterstock
  • (c) Monkey Business Images/Shutterstock
  • Dr. Neville Prior, president, European Association of Chemical Distributors (FECC)

In this digital era, in which suppliers, distributors, business partners and customers are each time more interconnected and linked to other networks around the world, the digitalization of the chemical supply chain remains both a challenge and a possibility for the chemical distribution industry.

Rising costs, increased global competition and lack of capacity to attack Millennial talent, mean that Chemical Distribution companies need urgently to look at new ways for profitable growth.

The digitalization of the Chemical Distribution Industry is a big step for a sector which is both mature and conservative, but which looks forward to developing business models that will enable closer interaction with business partners, and hence is increasingly looking to digital technologies as a way to better access customers.

A New Industrial Revolution

We can indeed talk about the beginning of a new industrial revolution which has the power to transform the sector, and enable the creation of new business models, which will lead to the creation of new products and services.

The chemical distribution market is ready for this digital age, and chemical distribution companies are working hard to live up to the challenge. With an extremely mobile work force and hence with a strong reliance on technology, such as smartphones and online tools, there is a great desire to enable convenient services to a portfolio of customers who are changing their purchasing habits. Sellers now have less time to influence their purchase, with customers increasing the time they spend obtaining solutions for themselves, including information on the product and up-to-date-quotes online, and spending less time on the face-to-face negotiation and the actual purchase.

Some customers still do require on-site support, but digitalization offers a model to reach the market with a lower cost, and provides the opportunity to rethink the relationship with customers.

Faced with the new challenges of the market, chemical distribution companies are not only investing heavily in the development of digital tools, but also remain attentive to the legislative developments in the European policy context.

The European Commission considers digital technologies essential to increase European productivity, and estimates that the Digital Single Market could contribute €415 billion per year to Europe's economy, creating opportunities for new start-ups and allow existing companies to grow and profit within a market of over 500 million people.

European Digital Single Market Strategy

The European Digital Single Market Strategy adopted in May 2015 is built on three pillars:

  1. Better access for consumers and businesses to digital goods and services across Europe.

The Commission proposes rules to make cross-border e-commerce easier, enabling consumers to benefit from a wider range of rights and offers, and businesses to sell more easily to other EU countries.

Rules to end unjustified geo-blocking and a reduction of the administrative burden businesses face from different VAT regimes are also under discussion.

  1. Creating the right conditions and a level playing field for digital networks and innovative services to flourish.

The Commission is analyzing the role of online platforms (search engines, social media, app stores, etc.) in the market, including pricing policies, and aims to reinforce trust and security in digital services, notably concerning the handling of personal data.

Building on the new General Data Protection Regulation 2016/679 of 27 April 2016, the Commission will review the e-Privacy Directive 2002/58/EC.

Cybersecurity in the area of technologies and solutions for online network security is being reinforced by the Directive (EU) 2016/1148.

  1. Maximizing the growth potential of the digital economy.

The Commission will launch a European Cloud initiative covering certification of cloud services, and define priorities for standards and interoperability in areas critical to the Digital Single Market, such as e-health, transport planning or energy (smart metering).

A new e-government action plan will also connect business registers across Europe, and ensure businesses only have to communicate their data once to public administrations.

In their analysis of the evolution of the Digital Single Market Strategy two years on (November 2016), the European Commission estimates that 90% of all jobs will soon require digital skills. However, only 59% of Europeans can access 4G networks, and 52% of the cross-border purchases are blocked.

Chemical distribution companies embraced initially the digital transformation as it reduced costs, and are now exploring how it could provide bigger efficiencies in supply chain management which would lead to operational excellence and profitable growth.

FECC Annual Congress 2017

The European Association of Chemical Distributors (FECC) will focus its 2017 Annual Congress, held in Warsaw, Poland, 12-14 June 2017, on this digitalization. The FECC Congress 2017 will be a platform to exchange experiences among the Industry in the digital world, and provide inspiration to those who are considering how they could restructure their business model to face the challenges of today’s competitive global market.

During the congress, consulting services and financial advisory firm Deloitte will analyze how data can be used to generate higher operational excellence and profitable growth. A key aspect in a scenario in which most of the customer time is spent on product search and quoting activities, and an increasingly smaller percentage of customer time is actually spent to negotiating and purchasing.

UK chemical distributor Cornelius will exchange views on how to find value in the social media, which enable companies to reach a wider audience, attract new audiences, and most importantly engage with customers in a different way. For chemical distributors, as for other B2B companies, social media could become a cost-effective means to raise brand awareness, and boost sales.

Cybersecurity remains a challenge in the hyper-connected world when isolated systems and devices become fully integrated, and business should increase the protection measures to face eventual risks.

Strategy consulting firm Accenture will introduce the next generation of e-commerce in chemical distribution, and best practices of existing chemical distribution on-line platforms, corresponding to different business models like Kemgo and GoBuyChem, will be presented to facilitate an exchange of experiences when formulating a digital strategy aligned to the organizational objectives.

US Silicones specialist Dow Corning will explain its Xiameter business model experience which provides an online business model taking advantage of the integrated back-office applications, and standardized processes and services. While German distribution company Biesterfeld will share their experiences and views about the digitalization of the specialty chemicals supply chain.

In addition to digitalization, Circular Economy is another key trend in Chemical Distribution 4.0 and Safechem will explain their chemical leasing business model for a sustainable and innovative use of chemicals. This CEFIC Responsible Care Awards 2016 winning business model has been successfully applied in sectors as different as surface cleaning, textile cleaning and asphalt analytics, and provides a close loop solution in which the chemical distribution industry plays a key role to unlock the potential of circular economy in the chemical supply chain.

The FECC Congress 2017 will deal with all these issues and support companies considering investing in digital tools to develop their business model, and eventually create new ones.

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