Digitalization in Chemical Distribution

Producers and customers of chemicals and materials could, and should, use digitalization to radically reduce the costs of procurement, supply chains, marketing, and sales. The role of chemical distributors needs to be digitally reloaded to remain sustainable; it will no longer be sufficient to be the local supply chain partner in bulk commodities, or to provide the marketing and sales front-ends, applications, and regions to businesses and consumers.

However, there is no need to panic, as this disruption will not happen overnight, and it will not affect all chemical distribution businesses equally. Bulk commodity distributors of acids, lyes and solvents, factory-packed specialty chemicals, and individually tailored customer solutions will be less sensitive to disruption, at least compared to standardized, and replicable, distribution businesses. On the other hand, history shows that there will come a tipping point when the disruption accelerates radically, and what we have learned from similar disruptions is that they are irreversible.

Chemical distributors are therefore well advised to prepare in advance by doing three things:

1. Identify and capture digitally enabled cost reduction opportunities in your value chain.
   Automated no-touch order processing, RFID-enabled track-and-trace systems, online commercial and technical sales services, robot process automation to make sales, more reliable, faster, and cheaper general and admin processes are examples of that, and can be utilized not only by principals and customers, but also by chemical distributors.
2. Secure supplier and customer data against cyber-attacks.
   Supplier and customer data are the most valuable and sensitive data a chemical distributor has. It is of vital importance to protect these data against cyber-attacks. The same is true for mixing, blending, and formulating equipment, but these are less critical than sensitive business data.
3. Own and process customer data.
   There are an increasing number of chemical e-commerce platforms that are trying to capture the customer interface. These could be producers (Dow-Xiameter), large distributors (Brenntag’s digi-brenntag, Univar’s Chempoint), established wholesalers and retailers (Alibaba, AmazonBusiness), or new incumbents (Molbase, Kemgo, GoBuyChem), all of whom are attempting to divorce chemical distributors from their customers. Chemical distributors must find ways of meeting these challenges without sacrificing proprietary customer data access and pricing competence. One such response could be a well-defined partnership with one of the intruders, an in-house aggregated business platform, or an alliance with suppliers. The latter has the additional advantage of taking the supplier relationship to a higher level in the newly developing ecosystems, and preventing incumbents from capturing the market space.