Buying raw materials from overseas suppliers holds many attractions for chemical consumers. The primary benefit, of course, is a lower price. If a company in Europe or the US can establish a low-cost supply chain that sources materials from China or the Middle East, it can gain a tremendous competitive advantage.
Chemical consumers face the challenge of identifying suppliers who can deliver raw materials of the required quality at a fair price. Once they have found a reliable vendor, buyers have a tendency to continue the association even if there is a possibility of finding alternative sources that are more economical.
The price volatility of raw materials can result in rising costs, lower profitability, and a desperate last-minute hunt for new suppliers. But finding alternative sources of supply for chemicals is a time-consuming process involving the verification of the seller’s reputation and its ability to honor its commitments.
Large chemical companies have elaborately designed supply chains that are capable of meeting fluctuations in demand for raw materials. They have several suppliers for each of their requirements.