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.
One option is to look for alternative vendors. But this strategy presents several difficulties. It is expensive and time-consuming to carry out the complete due diligence process for a new supplier. This is especially true if the company is located overseas.
Switching vendors can raise other complications too. How can a buyer be sure that an order will be delivered on time? Or whether it will be of the stipulated quality? What if the new supplier flouts regulatory requirements? A large buyer has the resources to tackle these issues. But smaller companies will find the costs of enforcing a contract or handling a dispute with a firm located thousands of miles away, simply too great to bear.
Online platform for chemicals can offer a solution
Many suppliers depend upon one or two large consumers for a significant percentage of their sales. When these buyers threaten to take their business elsewhere unless they are given better terms, the supplier has little option but to comply. Companies who buy smaller quantities of chemicals do not have this sort of clout. If they shift their business from one seller to another, it would have little impact on the sales of either vendor. In effect, smaller companies have extremely limited bargaining power.
But these consumers can get many of the benefits that are available only to bulk buyers of chemicals if they use online platforms for their purchases. Among its many other advantages, an online platform provides absolute price transparency.
Chemical consumers do not have to go through the trouble of participating in prolonged negotiations to arrive at the optimum price of the chemical that they require. Instead, they can view what is on offer and select a vendor who meets all their required conditions.
Online platforms help to do away with market research costs
Large chemical consumers can afford to spend substantial amounts to identify the suppliers who provide the lowest prices. They can also retain expensive consultants and commission detailed market research reports to keep themselves abreast of the latest developments in the availability of the specific chemicals that they require.
Unfortunately, smaller companies cannot afford these costs. They have to rely on a patchwork of information from various sources, much of which may be outdated or difficult to verify.
But online platforms give every user access to the same set of data. Buyers can view the prices offered by multiple suppliers for the different raw materials that they require. Their decision-making process for making chemical purchases gets greatly simplified.
Vendor due diligence
Small and medium-sized chemical consumers find it difficult to add new suppliers because of the complexities involved in verifying their credentials. This is especially true for suppliers who are located overseas. Verifying details of a supplier located in, say, China, is not easy.
Small companies cannot bear the expense of establishing an office in all the different countries from which they source raw materials. But without a local presence, they will be unable to keep track of important developments which could have a bearing on their purchasing strategy.
Online platforms provide the perfect solution. They have a rigorous pre-approval procedure and a number of checks are carried out before a supplier is allowed to offer raw materials on the website.
A favorite of forward-looking companies
Online platforms serve to level the playing field for small and medium-sized chemical consumers vis-à-vis high-volume buyers. Many companies have used these platforms to save on costs while simultaneously gaining the advantage of streamlining their procurement activities.
As more companies adopt digital processes, the popularity of this method of buying chemicals is sure to increase.
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