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.
A supplier is approved only after a rigorous process that involves verification of the quality of the chemicals supplied, adherence to time commitments, and compliance with regulatory norms.
It is possible for organizations with sizeable procurement budgets to incur the costs that are required for setting up a reliable and complex supply chain. But small and medium-sized companies cannot afford to spend enormous amounts on identifying suppliers and then verifying their reliability.
How can the purchasing department in a medium-sized chemical company meet its goals? The manufacturing process often requires increased quantities of certain raw materials. Failure to meet this demand can lead to missed production targets and non-fulfillment of customer orders.
Importance of flexibility
In addition to being able to ramp up the supply of certain chemicals, the purchasing department should also be able to decrease procurement volumes when the need arises. One way to decrease or increase chemical purchases within a short time frame is to use the spot purchase mechanism.
But again, this method of meeting raw material requirements is usually available only to big chemical consumers. Small companies cannot take the risk of relying on spot purchases to meet their needs.
Despite the handicaps that small chemical firms have, it is still possible for them to get many of the benefits that large companies enjoy. They can do this by using online platforms for their raw material needs.
An online trading platform will have multiple suppliers that can provide the chemicals that a company requires. A buyer can do a quick review of the options that are available and place an order immediately.
The flexibility that an e-commerce platform provides gives a small company the ability to select the most suitable option for its needs.
Building flexibility in the procurement process
If a company is to compete effectively in the marketplace, it has to develop the ability to reconfigure its supply chain in response to changing customer needs. Having a supply chain that responds quickly to changes in demand can aid the manufacturing process and contribute to the company’s bottom line.
On the other hand, if a purchasing department cannot meet the raw material needs of an organization in an adequate manner, the repercussions can be severe.
Large chemical consumers segment their suppliers’ products according to their criticality. They then implement supply chain risk mitigation plans so that they are in a position to meet the company’s requirements, even if a key supplier cannot meet scheduled delivery commitments.
Small and medium-sized firms can implement similar safeguards by using the services of online trading platforms.
Increasing or decreasing order quantities quickly
In addition to giving a purchasing department the ability to identify new suppliers immediately, online platforms offer another great advantage. Buyers need not go through the process of protracted negotiations to arrive at a mutually agreeable set of terms.
Instead, the company placing an order can use standardized documentation with all the suppliers sourced through the online trading platform. Not only does this speed up the process, it also leaves very little scope for ambiguity in the terms and conditions.
As the same standardized documentation is used time and again, both buyer and seller are fully aware of the implications of the agreement that they are entering into.
Online platforms allow access to a verified list of suppliers
The greatest advantage that small and medium-sized companies gain by using an online trading platform is that they can make a judgement about the reliability of a supplier merely by seeing the company’s record on the e-commerce website.
If you’re interested to read more, click here to read the new ebook:
"The future of (petro)chemical procurement"
