For years, chemical manufacturers and distributors enjoyed a relatively stable industry. However, the last two years have forced chemical companies into a choice: use digital technologies to drive growth or be left with an antiquated, easily disrupted sales process. Yoav Kutner, CEO, Oro Inc., explains why digital B2B commerce is proving to be a significant growth opportunity for the chemical industry and why it will likely gain even more traction in 2022.
After being hit hard by supply chain disruptions and a severe drop in end-market demand over the course of the last year, more than 90% of executives in the chemicals industry expect1 digitalisation to result in evolutionary, revolutionary, or disruptive change.
The German Chemical Industry Association (VCI) stated that “the industry is gradually changing from a supplier of materials to a provider of solutions and services”, and an EY survey shows that digitalisation in chemicals is starting to accelerate.
While the chemical industry has been on the forefront of driving materials innovation, notoriously it has been slower than other industries to move its sales processes online. However, leaders in the chemical industry are now beginning to push the button on digitalisation of business processes. In the boardroom, digital transformation is now viewed as more than a means to improve efficiency or customer experience – it’s the catalyst for innovation and value creation.
Today, a new, more competitive environment is taking shape. The industry is highly diverse in size, geographic reach, business model and customer type; while evolving technology, business practices and customer expectations are quickly raising the bar for B2B practices.
Chemical enterprises are feeling pressure from greater competition, rising commodity prices, changing regulatory requirements and most importantly the push for sustainability. These trends are driving the greater adoption of digital strategies and will continue to be a key investment driver in the years ahead. According to Deloitte2, high-performing chemical companies that derive the most value out of innovation typically utilise digital technologies to create a better customer experience.
Digital transformation is disrupting B2B commerce in the chemicals industry, bringing in efficiencies through better price transparency, reliability of the supply chain, knowledge of the underlying chemistry and regulatory guidelines for targeting end applications. Companies and platforms must be part of these ecosystems if they are to be even remotely relevant across the chemical industry value chain.
One organisation that has embraced digital technologies is Azelis – a specialty chemical and food ingredients distributor operating in 56 countries and serving more than 45,000 business customers, with annual sales of £1.95 billion.
Its customer-oriented digital strategy focuses on growing relationships within its ecosystem and optimising complex supply chains. This allows the company to better understand various market trends, keeping the product portfolio and solution focus customer-centric.
Heli Kilpala, Group Strategy and Digitalisation Director at Azelis, says: “We have seen a twofold efficiency gain with digital tools, both for employees and customers.”
Digital tools such as ERP, CRM, MDM, PIM and eCommerce have enabled data centralisation. Centralising information around data governance and processes has eliminated many duplicated efforts. The result is added freedom from routine tasks, more time for value-added activities, better focus on customers and the agility to quickly react to trends.
A digital-first approach meant that Azelis was well-equipped to pick up market activity, react to new customer needs, and plan production accordingly.
Azelis also took the opportunity to accelerate the deployment of digital platforms such as its e-Lab, a virtual collaboration center to optimise formulations, and a customer portal with both eCommerce capabilities, technical and informational insights.
Traditionally, chemical sales are an in-person activity. Azelis realised that moving some aspects online could improve the journey and experience for suppliers and customers. The process, however, wasn’t easy.
Regulatory and compliance requirements vary between locations and chemical products. Chemical customers must do extensive research and collect documentation about their products, so the discovery process can be long. Its new portal – developed with implementation partner Smile – is the central depository where customers can find high-quality technical information, products, formulation, and samples, and the most up-to-date information for their projects.
The first portal launched in July 2020 with new rollouts every month, and 38 portals currently in operation.
Benefits of digitalisation
Here are just a few of the broad benefits that chemical distributors experience with digitalisation.
The pandemic shattered global supply chains, leading many manufacturers and distributors to think more locally. Companies in the chemical sector need the agility necessary to pivot to new, adjacent markets as they are identified. Data informs insights into processes and production lines to identify where and when retooling future-proofs the company.
Today, everyone from startups to tech giants leverages digital tools to enhance decision-making, introduce new products, and reduce data silos. As competition increases, brands will be pushed to increase efficiencies wherever possible, reduce costs, and preserve value. Digital tools automate processes, centralise data, and allow everyone to work more efficiently.
Enhanced customer experiences
Chemical companies must adopt a broad range of digitally enabled processes and practices to be more effective in marketing and reach customers.
In today’s digitally connected world, chemical companies are no longer measured by their ability to launch new products. Instead, experience leaders enhance customer journeys with greater transparency, shorter buyer cycles, logistics services, and other value-added products.
Covid-19 and beyond
The relative health and diversity of the chemicals market means that the industry will continue to grow through 2022 and beyond. While traditionally the industry has been a late digital adopter, we now have hard evidence that eCommerce sales have been on a growth trajectory in recent years.
Long before the pandemic, the chemical industry was inching towards digital transformation at a glacial pace as a means to supplement offline channels. The impact of Covid-19 accelerated the development and adoption of digital technologies.
Before starting the conversation with your digital commerce vendor, understand how your digitalisation strategy fits your organisation and ecosystem and identify how improved processes will benefit your partners and customers.
1 How long before the digital disruption reaches the chemical industry? https://www.ey.com/en_uk/advanced-manufacturing/how-long-before-the-digital-disruption-reaches-the-chemicals-industry.
2 Innovation in chemicals https://www2.deloitte.com/uk/en/insights/industry/oil-and-gas/chemical-innovation.html