Distributors Play a Critical Role in the Supply Chain
Distributors Play a Critical Role in the Supply Chain
In the ever-changing coatings industry, distributors play an important role in the supply chain. From just-in-time procurement strategies to risk management, distributors can bring real value to customers. In today’s economic environment, distributors are being relied on heavily as our customers are more likely to order smaller volumes of products on a more frequent basis. Established partnerships with distributors provide for continuity and trust of supply. The following discussion highlights some of the challenges that distributors face, as well as benefits that they can offer to both customers and suppliers.
Challenges
Chemical distributors are facing a wide variety of challenges. First and foremost, similar to most of our customers and manufacturing partners, we are experiencing unprecedented price increases for materials, energy and transportation. Unfortunately we have little control over our number-one cost, which is raw materials. This is driven by our suppliers and their exposure to global market factors, including the price of oil at ~ $120/barrel. We can certainly pull selling and administrative costs out of the system and implement some controls on freight expenses by establishing strong relationships with local carriers, innovative consolidation and the utilization of third-party logistics providers; but we need to get savvier in finding new ways to bring real value to the customer base. Manufacturers are driving increases through and customers are pushing back. As this happens, distributors are faced with reduced profitability or walking away from business.
Fortunately for our sake, most distributors do not have the cost structures that most manufacturers have. This is largely a result of the size and scope of our operations. We are quick to act and more willing to take entrepreneurial risks that manufacturers cannot.
Industry consolidation on both the customer and supplier side greatly
In the ever-changing coatings industry, distributors play an important role in the supply chain. From just-in-time procurement strategies to risk management, distributors can bring real value to customers. In today’s economic environment, distributors are being relied on heavily as our customers are more likely to order smaller volumes of products on a more frequent basis. Established partnerships with distributors provide for continuity and trust of supply. The following discussion highlights some of the challenges that distributors face, as well as benefits that they can offer to both customers and suppliers.
Challenges
Chemical distributors are facing a wide variety of challenges. First and foremost, similar to most of our customers and manufacturing partners, we are experiencing unprecedented price increases for materials, energy and transportation. Unfortunately we have little control over our number-one cost, which is raw materials. This is driven by our suppliers and their exposure to global market factors, including the price of oil at ~ $120/barrel. We can certainly pull selling and administrative costs out of the system and implement some controls on freight expenses by establishing strong relationships with local carriers, innovative consolidation and the utilization of third-party logistics providers; but we need to get savvier in finding new ways to bring real value to the customer base. Manufacturers are driving increases through and customers are pushing back. As this happens, distributors are faced with reduced profitability or walking away from business.
Fortunately for our sake, most distributors do not have the cost structures that most manufacturers have. This is largely a result of the size and scope of our operations. We are quick to act and more willing to take entrepreneurial risks that manufacturers cannot.
Industry consolidation on both the customer and supplier side greatly