The study reveals new challenges for specialty chemical companies

Infiniti research recently released a report on the main obstacles facing specialty chemical companies, highlighting the major challenges in the industry and explaining how they affect the performance of specialty chemical companies. Infiniti said that although the global specialty chemicals market continues to expand, declining profitability and intensified market competition are affecting the performance of specialty chemicals companies.

The major challenges facing Specialty Chemical Companies in 2019 include:

Changing business mix

In the field of specialty chemicals, product diversification and M & A activities are increasing. The business mix is highly dynamic as producers increase and deprive sectors, engage in new market entry and participate in mergers. In addition, globalization has increased the complexity of the business portfolio of specialty chemicals companies.

Dynamic demand model

Uncertain and unpredictable demand patterns are becoming common in the industry. Companies in the industry also have limited knowledge of future customer orders. Growing customer mix across multiple end use markets and visibility to changing demand represent significant challenges.

Expand product mix

In order to increase differentiation, develop strategies for new market entry, and maximize customer loyalty, product innovation in the field of specialty chemicals is increasing. The introduction of new products and frequent adjustments to existing products lead to a significant increase in the number of products produced, resulting in greater operational complexity.

Regulation and compliance

Manufacturers of specialty chemicals are increasingly facing the problem of conformity of product quality documents and procedures. These issues are largely driven by government regulations, end use market requirements or specific customer requirements.

Increase customer intimacy

One of the main trends to promote the development of the industry is to shorten the distance with customers by providing customized products and service arrangements for specific customers. While this is a source of differentiation for specialty chemicals companies, it also leads to increased complexity in other business operations.

Chemical manufacturer is slowly moving to digital distribution channels

Chemical manufacturer usually focus on operational excellence; in order to meet the growing challenges of the industry, they must strive for business excellence. It's necessary to think out of the box now: what can chemical companies learn from other industries? Our four part series is about experts in other fields sharing their knowledge and how to apply it to the chemical industry. In the last part, we discuss how B2C companies can benefit from the digital market.

Digitization has had an impact on sales for a long time. According to the research, the global online sales in 2018 is close to US $3 trillion, and the proportion of online retail sales in the total retail sales is more than 15%. It would be a fatal mistake to ignore the data: a large number of consumers have changed the way they buy products and services. As a result, companies also have to change the way they sell in order to remain successful.

Many B2C companies have heard a clear call to action to use digital sales channels. The most successful companies to deploy e-commerce are digital companies such as Netflix, Amazon, spotify or Uber. What do they have in common? They are digital by default, operate globally, and focus on B2C. It can be said that this makes their business situation different from that faced by B2B companies. The latter faces challenges that many consumer oriented companies have not experienced.

But B2B companies will certainly benefit from offering their products or services online. After all, 73% of millennials are now involved in B2B buying decisions, and about a third of them are the only decision makers in their sector. Most millennials (56%) said that digital channels such as search engines, supplier websites and social media were the most important channels for researching new products and services. However, they must be set up correctly: in a typical B2B buying process, up to 70% of the time is spent on product search and citation activities. Therefore, in digital markets like Amazon and Alibaba, it is becoming more and more important for these steps to provide users with fast and convenient services. What factors can B2B companies adjust to adapt to the change of purchasing behavior?

What can chemical manufacturers learn from it

Chemical manufacturers are slowly turning to digital sales channels. Often, they still rely on distribution partners to reach smaller customers. The digital market increases access to such customers as Chinese SMEs, while reducing complexity and service costs. Therefore, although we predict from our project experience that personal interaction will continue to play a role in the chemical industry, especially for key customers, the importance of digital sales methods will become more and more important.

Alibaba's example

Most of the time, traditional chemical distributors offer "one stop shop" from "guide to quote" to "order to cash", including inventory, financing, customs clearance and logistics. By contrast, companies like Alibaba provide an ecosystem that connects buyers, sellers and service providers along the supply chain. Alibaba does not have its own procurement, inventory or logistics. Instead, the company focuses on network coordination and data intelligence. All new intermediaries have direct access to customers, provide more choices for communicating the value of products and services, and provide more customer insight. Their business model is based on the fact that the efficiency of matching buyers and sellers using machine learning algorithm is higher than that of traditional intermediary or direct sales. Alibaba has successfully launched its chemical business in Asia.

Optimize service cost and accelerate growth

Digital markets have two benefits for your sales model: they help you optimize service costs and help you accelerate growth. But what kind of digital market can benefit your chemical manufacturers? It depends on the situation: which supplier can best promote your growth? Ecosystem participants like Alibaba have a leading starting point in the competition to become the number one technology platform, but now they are also the focus of a region. Active management of customer relationship requires the participation of suppliers: suppliers can not only transfer business to distributors, they must ensure that they can access customer data, so as to develop their own sales model and improve customer experience.