The new year is almost upon us, and you know what that means – raw material allocation planning! Chemical industry procurement is uniquely challenging because purchasing agents must be experts in general chemistry, transportation regulations, and storage requirements for hundreds of different items. They must delicately prioritize production-critical tasks while analyzing the best ways to optimize their supply for the future.
An annual or semi-annual bid or Request for Quotation (RFQ) is a tried and true method for assessing the position of all suppliers and an efficient way to determine how business will be rewarded for the new year.
But how can the successful purchasing agent be sure that they are allocating volume to the best supplier? It isn’t as easy as throwing everything you have on the lowest price. Our experienced team has found there are four key drivers of chemical procurement that buyers must consider before finalizing contracts:
Sustainability of Supply
Due to clustered production schedules, unavoidable plant or logistics problems, and constantly evolving market conditions, sourcing a critical RM from a single manufacturer could be disastrous. Well-prepared buyers know to coordinate secondary and tertiary suppliers in the case of emergency. The savviest buyers know that working with a distributor with multiple sources is the easiest way to ensure supplier diversity, without having to personally coordinate with multiple sales reps.
Reliability of Product Quality
Technical specification requirements play a big role in determining cost. Buyers must beware of switching to cheaper grades of materials for existing formulations, since a change in quality can have negative effects on the final product. Different concentrations, forms, or impurity tolerances can all contribute to reduction of cost but could cause handling or formulation challenges. Technically competent suppliers can help advise on which product grades might be interchangeable without reformulation, as well as offering standards of product material such as USP monograph, certified food grade, or ISO 9001.
Shortening of Value Chains
In a perfect world, companies would be able to buy any product they need directly from the manufacturer. Shorter supply chains help minimize spend on extra shipping, layers of distributor margin, and unnecessary warehousing fees. A company’s raw material volume may not always be enough to buy direct, but you can choose to pull from a distributor’s that does. By collating usage volumes across a geographical area, a well-connected distributor can leverage their purchasing power with manufacturers to negotiate rates buyers may not be able to get alone.
Reduction of Cost
What kind of supplier selection guide would this be without addressing the bottom line – reduction of cost? Reducing raw material spend is one of the key functions of a purchasing professional. By keeping a close eye on market trends and streamlining the three challenges above, buyers can be sure that the price they’re getting is competitive and free of expensive hassle down the road.
Where does Silver Fern Chemical come in with all of this? Through our supplier relationships and in-depth product knowledge, we’re able to secure sustainable products of reliable and predictable quality. We’re manufacturer-direct on our key product lines, so we take all the guesswork out of product origin, specifications, and certifications. Since our experienced sales team works with changing market conditions every day, they’re able to provide valuable insight on the best times to buy certain materials for maximum spend reduction.
Move forward with confidence into 2020 with Silver Fern Chemical by your side. Contact us today to learn how our expertise fits your needs.