Collaboration between chemical distributors and logistic service providers (LSPs) has become increasingly important in recent years as supply chains become more complex and markets more volatile. Distribution companies are present in multiple markets – from bulk commodities to specialty chemicals and pharmaceuticals - each with their own characteristics and special requirements.

Business models differ too, with some, such as market leader Brenntag, having its own warehouse and transport capabilities while others, such as specialty distributor IMCD, choosing to mostly outsource. However, the interface between distributors and LSPs largely follows the same approach, irrespective of markets served, with a strict assessment and selection process, frequent performance appraisals, and a cooperative relationship where information is freely exchanged.

Brenntag’s Business Model

Germany’s Brenntag uses third-party logistics companies to supplement its own network of warehouses and trucks. Gordon Hay, Brenntag’s operations director Europe, Middle East & Africa (EMEA), says the distributor, which handles both hazardous and non-hazardous products, has a range of sources, strategies and tools to select LSPs. For instance, he says, in the life sciences sector, Brenntag continually looks at compliance and GMP guidelines, among other factors, when selecting partners.

Hay explains that Brenntag has a host of fairly stringent performance criteria, including safety (top of its agenda), security, knowledge of the industry, range of equipment, geographic coverage, financial stability, flexibility as well as ease of doing business and how innovative potential suppliers were. These metrics are bundled into an assessment of potential providers on the market.

For transport, the distributor works closely with industry organizations FECC and CEFIC who have established SQAS – Safety Quality Assessment System – a voluntary standard used to assess safety, security, health, environmental quality and corporate social responsibility under Europe’s Responsible Care program. Hay says Brenntag uses SQAS as an indicator in its selection process.

“Expectations of customers and logistics service providers are rising all the time and there is growing demand for higher levels of service and efficiency,” comments Hay, who believes that closer collaboration up and down the supply chain can drive best practise.

For example, the distributor asked one of its suppliers – a major oil company – if it could participate in a safety training program that was being rolled out across its service providers. “Brenntag got involved and we shared the best practices with our LSPs to get an overall increase in standards,” says Hay.

IMCD’s Business Model

Dutch distributor IMCD says its strategy is to outsource all logistics activities to “carefully selected” providers, allowing it to benefit from best-in class operations and dedicated resources. “In addition, we have the flexibility and scalability of third-party operations, the ability to adjust our distribution and warehousing needs based on demand, and we can perfectly manage supplier and strategic business changes quickly with minimal or no capital expense,” explains Stan Bijsterveld, IMCD’s supply chain director.

IMCD currently has about 15 warehouses contracted in Europe and roughly 30 carriers. Functions outsourced include the storage and transportation of packed goods and wet or dry bulk, and value-added services such as labelling, repacking, refilling, bundling, mixing and blending. Bijsterveld adds, however, that IMCD has chosen to invest in its own warehouse operations in emerging markets such as Brazil, Indonesia and Malaysia, to ensure compliance with its higher European standards.

Like Brenntag, IMCD scores across a variety of factors when selecting LSPs, including too any potential constraints such as management directives, government regulations, existing contracts and commitments.

Both companies regularly measure non-conformances and have a range of pre-agreed key performance indicators (KPIs) and ongoing reviews which are followed up, if necessary, with corrective actions and/or process improvements. Price, although one factor in the selection process, is less important than offering a safe, efficient service with a culture of continuous improvement, both Brenntag and IMCD say.

Bertschi’s Logistics Expertise

Representing the other side of the relationship is Swiss logistics and transport company Bertschi. The company is a major partner to the plastics distribution sector, supplying handling, warehousing and transportation services as well as customs operations and, where required, fiscal representation of customers. According to Bertschi, the volatility of products flows has increased in the last few years. “Raw material prices, currencies and demand patterns are changing rapidly,” says CEO Hans-Jörg Bertschi.

The company, which has a fleet of more than 9,000 dry bulk containers and 400 specialized trucks, is present in 16 European countries as well as Russia and Turkey, and claims to operate the most dense intermodal rail and short sea network in Europe. Its network comprises more than 40 operational subsidiaries across Europe which Bertschi says “ensures a high level of supply flexibility in today’s fast-changing business environment.” He adds that as a Responsible Care partner, Bertschi systematically measures safety, efficiency and environmental performance, benchmarking results with a peer group of LSPs.

It too enjoys a close collaboration and information exchange with its distribution customers, including forecasting, regular reporting and KPI-based performance reviews. The company says it can also evaluate distributors’ best cost-to-serve solutions for global plastics import flows on a door-to-door basis with alternative European distribution scenarios. These benchmark exercises, notes Bertschi, often show that it is more cost-effective to import overseas plastics directly into several major regional markets like the UK, Italy or Scandinavia instead of going through one central European storage location, which is typically located in Benelux.

Bertschi has major plastics hubs for both packed and bulk plastics in Middlesbrough, UK; Bologna, Italy; and Wallhamn, Sweden. Additional import handling facilities for bulk plastics are located in Rotterdam, the Netherlands (to serve markets in Benelux/Germany) and Schwarzheide, Germany (for supplying eastern Germany, Poland and Czech Republic).

Distributors and LSPs are working closer together than ever before, ensuring a flexible and dynamic approach to changing market needs. This interface will continue to grow in importance and transparency to foster ongoing improvements in safety, best practise and customer satisfaction – benefitting all up and down the supply chain.