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.
Chemical buyers often have to perform a careful balancing act in the process of meeting conflicting priorities. Every purchase needs to be made at the lowest possible cost and from the most dependable supplier.
Supply chain management in the chemical industry can be a challenging task. Identifying a reliable supplier of the required raw material could take days if not weeks. Once this task is completed, it would be necessary to negotiate a mutually acceptable set of terms and conditions. By the time an order is placed, the market situation may have changed. The firm that has placed the order may not require the material any longer. It could also be possible that the price at which a particular chemical is finally purchased has increased to such an extent that it makes the entire exercise uneconomical.
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.
To Kemgo’s many faithful members and followers, by now you’ve probably started to witness the power of the network, especially the online network. Even with our successes in helping many of you find better deals in 2016, there is still so much for us to do to help make the work that you do easier, more beneficial and, at the end of the day, fun. Because, that’s what life is all about, isn’t it?
Topics: Kemgo News and Highlights
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.