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.
Chemical consumers have evolved various methods to tackle this problem with varying degrees of success.
A common strategy to handle the possibility of a spike in prices is to enter into long-term supply contracts. But this policy has its downsides. A fall in prices could leave the buyer in a position where its cost structure would be inflated, leading to a position where its products are unable to compete in the market.
Another option is to rely on the spot market. This method can work for large companies as it requires the buyer to have substantial resources at its disposal as well as the ability to take a certain degree of financial risk. Small firms would find it difficult to rely on the spot market for their raw material needs.
What is the way out for a small or medium-sized firm that wants to buy a regular supply of chemicals at reasonable prices?
Online trading platforms offer a solution
In the last few years, online trading platforms have emerged as highly reliable sources of chemicals for buyers looking for a way to access the fragmented chemical market in an efficient manner. The large number of suppliers listed on the e-commerce platform’s website leads to intense competition as vendors try to attract business.
Consequently, buyers can expect lower prices and enhanced service levels. Suppliers also go to great lengths to ensure that a buyer does not find any reason to be dissatisfied with the online purchase experience as this could lead to a negative rating for them on the platform.
A seller who attracts negative comments could also be questioned by the e-commerce platform and asked to explain the reason for the buyer’s complaint.
Pre-approval of suppliers
One of the primary reasons for the success of online trading platforms specializing in chemicals is that they list only verified suppliers. Before a seller can offer chemicals on the e-commerce website, it will need to go through a process that confirms its antecedents. The following attributes are usually verified:
- Financial strength – will the seller be able to supply the quantities that it has promised?
- Adherence to regulatory norms – are the required government approvals in place? Does the seller comply with accepted industry practices?
- Quality – buyers would have the assurance of knowing that they are purchasing raw materials from a pre-verified supplier.
Establishing business relationships with new vendors
Ideally, the process of appointing a new supplier should not be hurried. It is necessary to carry out a thorough due diligence exercise and assure yourself that the seller can meet your requirements.
But in many instances, purchasing departments of chemical companies do not have the luxury of taking an extended period of time to verify a new seller. They may need to comply with a strict time schedule and the stock of a certain chemical may need to be replenished quickly.
In circumstances such as these, online trading platforms offer the perfect solution. Buyers can complete the process of agreeing to the terms of supply by using a standard set of documents.
The use of a common agreement template offers the opportunity to complete documentation formalities quickly and without the need to go back and forth between the buyer and seller.
As small and medium-sized chemical buyers realize the advantages of online e-commerce platforms, increasing numbers are switching over to this mode of purchasing raw materials.
If you’re interested to read more, click here to read the new ebook:
"The future of (petro)chemical procurement"
