MARKETING & INNOVATION
outsourced logistics)
• storage (warehousing with inventory for short-term deliveries)
• filling / packaging / labelling • mixing / blending / formulating as well as giving support on such items as: •
technical
• application •
regulatory, eg REACH.
Other services provided include: • inventory management at the customer (VMI = Vendor Managed Inventory)
• product bundling (a sort of ‘one- stop-shop’)
• sample handling. Distributors often deal with local financing habits and provide payment terms of 90 or 120 days, a level that a large corporate producer might not be willing to entertain.
Distributors’ role in developing international ‘export business’ Depending on the maturity of the distribution market, the role of the distributor and the expectations and requirements with respect to the capabilities will vary in level of sophistication, as the local market needs determine how the customer is served best. Just as the stages of a product in the life-cycle require adjustments to all aspects of the marketing strategy, the stage of the distribution sector (or geography, region, country) has to be taken into account when considering what is needed from a distributor in respect of services like logistics, product offering, application support, finance, market research and safety, health and environmental (SH&E) support. This is less applicable in Europe, where standards have been aligned and have reached a high level, but very relevant in emerging or developing economies, where infrastructure is often lacking. In the latter case, outsourcing is still less of an option, a distributor has to produce more services itself and be prepared to make an investment in logistics infrastructure. The chemical distribution
market relies on local presence and expertise, and can be considered to a large extent as a local business when seen from the customer perspective. For producers to be able to access a broad variety of service needs with low volume goods or to access
Petrochemical industry value-chain
Channel options for chemical producers depend on customer needs and potential
CUSTOMER NEEDS
Relationship focus
Service focus
Transaction focus
Traders Traders Direct sales CUSTOMER NEEDS
Relationship focus
Service focus
Commercial and technical account management
Third party sales Third party sales Distributor
trader agent
Transaction focus
Low
Distributor trader agent
Office-based commercial account
management
Indirect channel Indirect channel Low
Different approaches: specialty vs industrial chemicals
Medium
Commercial and technical account management
Office-based commercial account
Direct channel Medium
Executive and multifunctional
(global) key account management
Executive and multifunctional (global) key account management
Multifunctional key account management
Commercial management account management
Multifunctional key account management
Commercial account management
Direct channel High
SALES AND PROFIT POTENTIAL Purchases Low volumes
Purchases warehouse
Packed goods
Extensive product portfolio Exclusivity/single sourcing Solutions selling
€69bn warehouse
Service samples
Packed goods
Low volumes Extensive product portfolio Exclusivity/single sourcing Solutions selling
Manpower and (technical) know-how intensive Bulk purchases
Nearly 11% of sales although estimates vary, go through third-party distribution channels
Indirect channel options for the chemical producer are mostly defined by the nature of the product and the level of sophistication of the market and application served
Bulk breaking
Bulk purchases Bulk storage formulation
Bulk storage Limited product portfolio Drumming Distribution
Service samples
LONG-TERM PROJECTS
Manpower and (technical) know-how intensive Keys to success: transferring knowledge and providing solutions Keys to success: transferring knowledge and providing solutions Distribution
Multiple sources for competing commodities Sold on price and availability Capital intensive
customers in remote geographies, they are well advised to rely on this partnership with a distributor to bridge between their own strategies and expectations and the customers’ preferences and needs. In this concept, the value
creation lies in the acceptance of the chemical distributor to be a partner to the initial supplier rather than a customer – with all the operational consequences in respect of cooperation and communication (always staying within all applicable
Bulk breaking Limited product portfolio Multiple sources for competing commodities Sold on price and availability Capital intensive
Keys to success: logistic optimisation and competitive pricing ‘TRANSACTIONS’‘TRANSACTIONS’ SHORT-TERM
Keys to success: logistic optimisation and competitive pricing legal and regulatory boundaries).
Types of distributors As mentioned before, distributors fall broadly into two categories: commodity/industrial and specialty chemical distributors. The very large global companies sometimes use the term full line distributor, when they want to show that their business covers the full spectrum from commodity and industrial chemicals to speciality chemicals.
Drumming formulation
Distribution SHORT-TERM Distribution
LONG-TERM PROJECTS
High SALES AND PROFIT POTENTIA
THE EXPANDED VALUE CHAIN
Crude oil (refinery)
chemicals
Pipeline Vessel
Barge
Crude oil (refinery)
Petro-
THE EXPANDED VALUE CHAIN Intermediates Petro- chemicals
Pipeline Vessel
Barge Railcar Truck/FTL (mostly ‘bulk’)
Railcar Truck/FTL (mostly ‘bulk’)
Truck/LTL (mostly ‘packed’)
Distributors Agents
Direct sales
Distributors Agents
Distributors Agents
Direct sales Truck/LTL (mostly ‘packed’)
Distributors Agents
Direct sales
performance chemicals
Intermediates Speciality/ Formulations
Speciality/ performance chemicals
Formulations (OEMs and
Finished products
consumers)
Finished products (OEMs and consumers)
32 10 | 2017
MODE
CHANNEL
MODE
MODE
CHANNEL
CHANNEL
CHEMICALS PRODUCERSCHEMICALS PRODUCERS
INDUSTRIAL CHEMICALS
INDUSTRIAL CHEMICALS
SPECIALITY CHEMICALS
SPECIALITY CHEMICALS
CHEMICALS PRODUCERS
INDUSTRIAL CHEMICALS
SPECIALITY CHEMICALS
PROCESSING INDUSTRIESPROCESSING INDUSTRIES
PROCESSING INDUSTRIES
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