Digitization Trends in Chemical Distribution Industry

By November 22, 2017Blog, Distribution

chemical distribution digitization

The recent annual assessment by the National Association of Chemical Distributors (NACD) found that one of the top paths to growth for the chemical distribution industry was digitization. According to Accenture, 91 percent of chemical company leaders report that digital technology is now driving their strategic decision-making processes.

This comes as no surprise! Digital strategies and technology enable distributors to reduce costs, improve pricing and inventory, and profitably scale their businesses. Here’s how digital can drive improvements and transformation across the chemical distribution industry:

Digital Driving Changes to Business Models

Digital can drive improved margins for chemical distributors through improved inventory and distribution efficiencies, superior supply chains, and better detection of demand. These elements can cause a chemical distributor to rethink its margins and typical expenditures to better develop a lean, more profitable business. With better margins and more comprehensive data on demand, business owners are better equipped to plan business expansions.

Beyond profitable growth, data and analytics can also help chemical distributors determine more advantageous pricing models. With improved market data and technology, distributors can now consider switching from annual inflation-based price increases to dynamic peer-based models or performance pay business models to improve margins.

Digital Driven Growth for Distributors

Digital sales channels present a massive opportunity for chemical distributors to capture new business with superior acquisition costs. Most distributors still serve customers primarily through legacy, direct sales forces and distribution partners, so any chemical distributor that embraces online channels will not only open themselves up to new customers, but will also have an “early mover advantage” over their competitors.

Even current customers can be reached better, and more efficiently served, by embracing digital. McKinsey research shows that 85 percent of B2B chemical purchasers would prefer digital channels when reordering a product rather than interacting directly with a salesperson.

Whether garnering new business or improving existing relationships, digital analytics capabilities enable stakeholders at every level to make decisions based on data and superior analysis. This can lower the barrier to entry to growth for companies by decreasing trial by error and dependency on legacy experts. Analytics and online educational resources make expertise accessible to everyone.

In addition to finding new customers and new demand, chemical distributors can use new digital opportunities such as online selling to expand into new markets or industries with less overhead. For example, in 2015, BASF, the second largest producer and marketer of chemicals and related products in North America, wanted to expand to Chinese SMEs. Instead of attempting to begin marketing to customers and building a sales pipeline from scratch, BASF opened an e-store on Alibaba, immediately connecting the company to a large number of prospects while keeping selling costs low and operations simple.

Digital Is Changing the Supply/Demand for Chemicals

Digital is also driving a shift in the demand for chemicals – and some chemical distributors are already leveraging digital to detect and meet those demands. Consumers are increasingly turning to the internet to research their chemical needs and order the products they want from companies all over the world.

With digital analytics, chemical distributors can now detect increases in demand or opportunities for specialty chemical production, then connect with interested customers. Digitally collected data allows chemical creators to craft better products by better understanding their customers’ needs or end uses of the product. Production can now more closely tie to shifts in consumer demand for a more stable business. Increasingly numbers of chemical distributors are also embracing versatile molecule products and molecule-based marketing strategies, thanks to digital-driven shifts in demand and the manner in which customers now seek suppliers and distributors.

Monsanto is a great example of a resourceful chemical company leveraging these shifts in digital capabilities. Monsanto has long been a seller of seeds and agricultural chemicals, but within the last few years, it began using digital capabilities and data to better understand the underlying pain points and product desires of its customers. This led them to developing proprietary recipes for seed breeds and pesticides. Monsanto now sees increased yields as a result of these new product offerings.

Improving Customer Experience

From providing instant quotes through your website or giving customers stage-by-stage updates on their order, digital presents a major opportunity to provide a superior experience for your customers. Websites, product searches and buying guides can make the customers’ path to purchase easy and self-sufficient.

In additon, data allows you to better meet your customers’ preferences and expectations. Mckinsey found that 80 percent of the buyers find it helpful to speak to someone in person when they get a completely new product or service. However, only 15 percent of buyers find this helpful when they order exactly the same product or service they’ve used before. Chemical distributors can use information like this to better allocate their resources and to avoid annoying or hassling customers.

Operational Improvement

Digital capabilities such as cloud computing give chemical distributors the ability to review performance data in real or near real-time. Such rapid turnaround means corrections are made sooner, resulting in less down time and shorter periods of inefficient operation.

The latest digital technology helps businesses improve the efficiency of their inventory management, supply chain and procurement processes. With better data capture and analysis through innovative technology, chemical distributors can achieve higher yields and throughput, lower energy consumption, and more effective maintenance to make a business operate more profitably.

Making Chemical Distribution and Manufacturing Easier

Digitization undoubtedly enables chemical distributors to streamline their business, yet there is always more that can be done. Considering looking into Enterprise Management (formerly known as Sage X3) and how it can help chemical manufacturers and distributors meet the modern challenges of their industry.

Watch this video of a successful implementation of Enterprise Management by SWK Technologies to learn more about how we deliver value to industries which manage sensitive materials.

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SWK Technologies, Inc.