Purchasing expenditure comprises a large percentage of sales revenue for players in the chemical industry. Savings in purchasing expense directly affects the final profitability. The complex nature of products in the chemical company makes it more important for a procurement manager to make it the right priority. It’s not only about finding the right chemical supplier at the right price, but also to set optimal contractual term and co-create products.
Procurement managers are presented with a dilemma over choosing long-term contractual relationship to gain bulk discount or choosing multiple suppliers to gain procurement flexibility. Purchasing department needs to consider a variety of factors in order to choose the right chemical supplier and maximize cost savings and increase product quality.
Considerations for Choosing the Right Chemical Supplier
Cost and Quality
Supplier quotation is the most influential factor in chemical purchasing. The prices of the end product will significantly depend on the purchase of input materials. But savings in cost should not come at an expense of compromised quality as it can cause loss to the business in long run. Adherence to quality is not only justified by meeting the product specification, but also on factors such as quality of packaging, labeling accuracy, and efficacy of marketing materials. Purchasing companies are moving towards supplier network, cloud-based catalog buying, and streamlined collaboration process to save on indirect purchases.
Service Level and Flexibility
Supplier fill rates, late orders, the time taken for issue resolution, and time to import invoices are some of the factors that need to be considered while choosing the right chemical supplier. These factors directly affect the supplier scores and customer satisfaction scores. It is essential to stick to those suppliers who can consistently deliver on scheduled date or earlier as it can save the company valuable inventory costs.
For a chemical supplier, constant innovation is a must for survival in a competitive environment. Procurement organizations should look for ways to form a strategic partnership with chemical suppliers. It is essential to secure suppliers with particular expertise for knowledge sharing and co-creation.
Supplier Reputation and Experience
The supply market for the chemical product is a dynamic market and emergence of new players can disrupt the supply chain management. New players can offer increased cost savings, but their experience can lead to certain hiccups in procurement. Established players can provide better after-sales services, offer total compliance, quality certifications, and increased flexibility. Companies can look at several directories such as Business Bureau to identify reputation and experience of the supplier.
To know more about the best procurement practices for the chemicals industry