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Small and medium-sized chemical consumers often find it difficult to get their suppliers to reduce prices or to offer them other concessions. With relatively low buying power, these firms are at the mercy of the companies from whom they source their raw materials.

The availability of reasonably priced chemicals that meet stipulated quality standards is critical to the success of manufacturing companies. High-quality raw materials will lead to the production of high-quality end-products. Conversely, if compromises are made at the procurement stage, the results can include customer dissatisfaction and lost orders.

The chemical industry is seeing rapid growth and innovation as key end-use markets witness increasing demand. The US chemical industry alone is “an $801 billion enterprise” accounting for 14% of the country’s exports and 15% of the global chemical market. World chemical production grew by 2.8% in 2015. It is expected to expand by a further 3.3% in 2016 and 3.7% in the following year.

Organizations that consume chemicals require their suppliers to provide efficient and proactive customer service. A supplier who takes an inordinate amount of time to respond to a query or fails to respond to a specific request for information is likely to be dropped at the first opportunity.

The global chemical industry is dominated by a few large companies and thousands of smaller firms. The range of products that they produce runs into the tens of thousands. Many products can be manufactured in various grades. 

When an organization is on the lookout for a new chemical supplier, it is essential that it first verifies that the company meets regulatory requirements. In fact, it is important to carry out this check even for purchases from existing sources because of frequent changes in the applicable rules and regulations.

Manufacturing units are often taken by surprise when their production schedules are thrown out of gear because of a shortage of an essential raw material. An organization may use dozens of chemicals in its production process. The non-availability of even one input can halt a production line.

Chemical procurement is becoming increasingly complex with multiple sources being available for each material, a wide variation in quality, and the inability of purchasing companies to conclusively determine the credentials of a new supplier before an order is actually placed. If companies can simplify their purchasing processes, there are tremendous gains to be made.

Identifying the chemical suppliers that can deliver the greatest value to your organization is a challenging task. Long-term agreements for bulk purchases can get you the best rates. But commitments of this type often tie you down and prevent you from taking advantage of changing market conditions.

The success of a manufacturing process is often dependent upon the quality of the chemicals that are used. Purchasing departments face the challenge of buying raw materials that meet required specifications and are priced within the stipulated budget. In many instances, it is not possible to satisfy both these requirements. Consequently, a choice has to be made between one and the other.