The chemical distribution industry has annual sales of around €168 billion globally, with about €28 billion in Europe. As a crucial link in the supply chain that connects manufacturers of chemicals with their customers in numerous application areas, distributors are an essential partner in the value creation process. The European Association of Chemical Distributors has picked the theme “Inspiring Innovation in a Global Economy” for its annual congress to take place in Istanbul from June 6 to 8, 2016. CHEManager asked Dr. Uta Jensen-Korte, Director General, and Dr. Neville Prior, President of the FECC, about the role innovation plays in the chemical distribution industry, the key trends and the success factors for the future.

CHEManager: Would you agree that innovation is not the first word that comes to the mind of anybody – even industry experts – when talking about the chemical distribution industry? Is the industry struggling with a somewhat shopworn image?

Dr. N. Prior: An industry of €168 billion does not achieve that figure without being innovative. It may be that the message is not communicated well enough, and that is something that industry associations and industry players should pay more attention to. There are many examples of innovative practices within the industry, whether it be within the supply chain, product development with upstream manufacturers and downstream customers, or internal process improvements. We are seeing many distributors looking at their business models, and seeking to develop their businesses to meet and anticipate the needs of their principals on the one hand, and their customers on the other. As our recently appointed Director of Strategic Marketing at Cornelius said to me, “there are so many opportunities to innovate; it is an exciting prospect”.

Not so long ago, distributors were traders responsible only for sourcing and distributing goods. Nowadays, offering added value services for suppliers and customers is a competitive factor in the industry. What has sparked this trend, and will it continue or even expand to other service areas?

Dr. N. Prior: It is true that distributors and traders were simply a conduit to market for their suppliers until quite recently. However, manufacturers are increasingly looking at outsourcing their routes to market, and in order to do so, they need professional partners, who can understand their strategies and fulfil their requirements. This is not just storage and delivery, but increasingly requires break-bulk, specialized packing, blending, dilution and more besides. Customers on the other hand are looking at creating close purchasing relationships with high quality, ethical suppliers, who can deliver on time in full, and who make doing business easy. The principal and customer experience is key to distributors, and ultimately gives competitive advantage to those that “can deliver”.

Many distributors are supporting the need of their suppliers and customers to innovate. Why is innovation crucial for the distribution industry?

Dr. U. Jensen-Korte: Quite simply, if an industry and its members cannot meet the requirements of their customers, then ultimately it has no place in the supply chain. Distributors work closely with suppliers and customers, it is quite a unique relationship, and we see both sets of businesses innovating more and more. Because of that relationship and important position in the supply chain, distributors can make a huge difference. We want our customers to innovate and grow, and we want our principals to do likewise. It creates value and opportunity for all, and helps to provide growth opportunities, which we all want and need.

Particularly in the field of specialties, distributors are required to go further in creating innovative solutions for principals and customers alike. How can chemical distributors contribute to the innovative ability of their partners – or in other words to the innovation across the value chain?

Dr. N. Prior: Distributors are often thought of as a supply chain industry with some sales people! Today that is far too simple a picture. Whilst supply chain innovation is important, and is something distributors are rather good at, they do far more. More and more we see application laboratories being established, and these work closely with principals and customers alike. They help to bring innovative uses for products and ensure that a principal-distributor-customer dialogue around technical issues blossoms. We also see increased use of sophisticated marketing techniques, such as social media, which spans the industry and beyond, again creating more opportunity. Distributors are ever more multi-facetted and able to engage in true innovation.

A question that is constantly being discussed in the chemical distribution industry is “does size matter?” Does it matter – in one or another way – for the capability of distributors to innovate?

Dr. N. Prior: I am not sure that size matters as long as distributors can align their strategic intent with those of their principals and customers. This could mean a number of things, but essentially without a common vision the relationships become fraught and stretched. It is clear that there are certain core requirements surrounding quality, regulation, product stewardship, logistics and customer service, but beyond that each company can find its niche. Some principals may want a global or regional solution, some a national solution; some may wish a pan-sector approach, other want specialists. The industry is large and there is a place for organizations of all sizes, provided they bring value.

Apart from the innovation fields linked to the development and application of chemical products, what other aspects of innovation does the slogan “Inspiring Innovation in a Global Economy” include?

Dr. U. Jensen-Korte: I believe that distributors need to be thinking about what the future will hold, and what part they can play in that. We see a number of emerging trends that will provide potential opportunities, and the industry must consider how it will approach them. For instance, we know the world population is growing and will need feeding. What place could we take in helping to ensure that the world’s mouths are filled? Climate change and sustainable energy is another example where distributors may have a role to play. To consider these things, distributors will have to revise how they think of themselves, but innovation can go far beyond simple product innovation.

When you listen to your member companies and committee groups, what do you learn are the key trends or hot topics in the chemical distribution market these days?

Dr. U. Jensen-Korte: In Europe it is clear that legislation and REACh in particular remains a hot topic, but there are many others. We know that the EU is pushing on the subject of the circular economy, and this in conjunction with sustainability has come to the fore. We also see that there is a strong wish to raise standards in the industry, particularly in developing and fast growing parts of the world. We want a strong industry with a good reputation. Of course the issue of size has been much debated, and we continue to see M&A activity throughout the world.

FECC is the voice of the chemical distribution industry in Europe. But business – and with it regulations, risks and opportunities – is globalizing fast. How is FECC collaborating with national associations outside of Europe or with the International Council of Chemical Trade Associations, ICCTA, in order to benefit its members?

Dr. U. Jensen-Korte: FECC has always had strong relationships with European associations -- both distributor and manufacturer -- and those in North America and Brazil. FECC continues to forge relationships with other associations where they exist. More recently we have been pivotal in changing ICCTA, which has existed for many years as a virtual organization. In February a new organization has been founded called the International Chemical Trade Association, ICTA, to replace ICCTA. This new association has a dedicated staff and is based at the FECC offices in Brussels. It is supported by a number of founding associations and companies, and aims to increase this membership globally. ICTA will act as a voice at world bodies such as the UN and WTO and encourage and support industry best practice globally, ultimately with the aim of helping to establish associations where they do not currently exist. The industry is global and FECC is playing a strong role in ensuring it is a safe and sustainable industry for the future.