How do Chemical Buyer’s Buy? Will it ever really change? 24

I am not old enough to have experienced the ‘two martini lunch’ technique of ‘doing business’, nor am I young enough to fully grasp the trends on ‘how buyers will buy’ 10-15 years from now.  However, I do know that the chemical industry has actually regressed in the past 15 years with respect to our use of technology in the conduct of day to day business and transactions.

How are Buyer’s buying differently than in the past, and where could it lead in the future?

Last December, I visited a very progressive chemical marketing/sales company on the East Coast. I was impressed with the sheer volume of computer monitors and the atmosphere of a Wall Street trading floor. The founder graciously took me through their offices and explained how their website gets approximately 1,200 hits/day and 40 solid inquiries for their products.  They literally are ‘fielding calls’ and reacting all day long.  I am not ashamed to admit I was slightly envious, but I have to think this is a unique situation.

I look at my company’s website and while a little outdated in appearance, we provide solid information to customers/suppliers (and apparently headhunters as well) and try to offer a little personality with our company newsletters.  We get nowhere near 1,200 hits/day and are realistically lucky to get 5 solid inquiries per week, if that.

I consider us to be fairly progressive on the technology side; our CRM and ERP systems are reaching the tipping point with our entire staff learning the value of a central repository of information and how profit and value can be generated.   But I constantly wonder; “what are we missing, what is a better way?”

cartoon

When I entered the chemical industry in 1988, only about 30% of companies had fax machines.  We literally had to ask contacts, ‘do you have a fax machine?’.  I contrast this to just this morning when a customer notified me of a purchase order via Facebook message.  Truth!   Back then, salesmen made phone calls and the occasional visit, and customers hopefully called back with purchase orders that were written into notebooks and somehow transcribed into systems that processed the orders and paperwork.

An excellent article written in 2001 by Rajat Agrawal discussed opportunities for chemical companies and specifically customer-related opportunities and supplier opportunities as well utilizing e-commerce.  Based on my recollection, his vision at that time was spot on.  Suppliers on a mass scale would literally link into customers using EDI or an extranet to monitor inventory, and share real time information.  Smaller companies who could not afford such luxury were doomed!  Buyers could use e-commerce for cost containment.  Employees were leaving brick and mortar chemical companies to work for any entity that contained “dot com” in the title.  The labor market to hire recent college graduates was completely turned upside down by the dot-coms as these kids all wanted minimum 6 figures to start as a junior salesperson.

The Dot Com’s and Exchanges…

At the millenium, there were in fact three dozen or so chemical exchanges that were destined to cause the end of the traditional model of chemical selling.  They are ALL now gone… Powerful names like ChemConnect, e-Chemical, and Elemica were going to change the world, and here we are today… still on the phone (and with more – much more! email) making offers and still working for orders.

Perhaps these exchanges came too early, and this model will return again.  I am aware of several new chemical exchanges that are trying to resurrect this model today, but are buyers ready for this yet?  Will the chemical industry change it’s ways? Does it need to?  What value does the exchange provide other than sharing of someone’s inventory and electronically react to a buyer’s eBay style wishes? And how much is that worth to a buyer/seller?

The two martini lunch days are certainly over, and the 5 hour golf rounds are getting fewer and farther between (maybe people just don’t like playing with me and I haven’t caught on yet). Email is getting more ferocious to manage, and business moves at the speed of smartphones… but has anything essentially changed?  Are buyers buying any differently than 20-30 years ago, and more importantly will these habits change in the near future?

Personally, I don’t believe the chemical industry can be served by an Amazon.Com type model.  There are just too many ‘special requirements’ in this business.  Perhaps I am wrong, and I’d welcome any conversation about buying/selling habits.  Thanks for reading.

24 comments

  1. Hi Tony – Nice post. Although I am in the IT industry we face similar concepts and sometimes a gentle push from large IT companies such as Microsoft. “Volume ERP” : why would you spend much time on pre-sales, the prospect could watch video’s, do a conf call and order on line … right? It (still) does not work like that, in probably never will for more complex markets.

    On a sidenote … I wouldbe very interested in reading a post once about KPIs which you expect from CRM/ERP systems in the Chemical Distribution industry. Which KPI’s are crucial to run a successfull/sustainable business. Good topiC?

  2. Great article Tony! Very interesting topic. I still like to think to a hand shake in our business goes a long way over placing an order in a cart. Time will tell but I really enjoyed your article. In the meantime, I better get back to my emails…..

  3. Not to mention how a internet program or B/B site would cope with the trucking issues our industry has been facing last few weeks with the weather in the Mid West and North East!

    • John, I feel this way too – but perhaps we are turning ‘old school’. I’m interested to hear contrary voices. So far, there have not been many.
      Thanks for taking the time to read/comment.

  4. Hey Tony. I know that you are an innovator in the industry and will be one of the guys making the most of the new technologies. You touched on the two areas that I think can really make a difference in how people conduct business specifically mobile and inter-connectivity or tying of systems together.

    As far as mobile, we all use smart phones today and I think at a minimum anyone selling chemicals should be able to easily access to inventory availability and customer order history from their mobile devices when onsite with a customer. In addition to convenience, it also shows a level of professionalism to the customers. With tablet and iPad devices, being able to pull up order history and trends can even blow the customers mind!

    Integration is where it really gets exciting, for back office staff as well as for people in the field. Imagine being able to pull in all supplier product quotes, real time information from shipping companies, stock level alerts from 3rd party warehouses, all directly into your ERP.
    There has traditionally been some hesitation in the industry to share information but with a new generation of Facebook users beginning to start businesses I would not be surprised to see information shared more freely.
    Exciting times.

  5. Fortunately, I came thru the “old School”
    When Men were men and road warriors were road warriors.
    So long as we still have personal contact at any level.
    If every thing is equal, People will always buy from someone they like.
    When we finally no longer make the effort to look someone in the face to try to sell to them, there is no actual program that will take its place. When I go to a web site to pick out a place to buy something, I do not get the warm feeling that what I am getting is what I contracted for. I get the strong feeling that the technology will drive it to this level however, I also feel that any one who continues to make the effort to sit face to face will always out do the internet thingy. I remember a sign on the wall of the waiting room at a mill in International Falls MN.
    “if you call on us in the Winter, we will buy from you in the Summer”

  6. Tony, I agree with your assessment, the fact is the products produced downstream in our industry are too important, and face too much liability and risk to depend on an online amazon/alibaba type of sale. When I buy a cheap can opener from Amazon, I’m only hurting myself!

    We’ve all dealt with customer/supplier portals where the supplier checks in on a daily or weekly basis to see inventory levels to determine when to ship more product. I think these portals will continue to evolve in the future. If I were a programmer, I would be working on how to automate this, in other words continuing to streamline order placement/inventory/shipment of product, this would then help save valuable time from that CSR and order fulfillment folks, who check in on these portals daily.

    I’m super disappointed I missed the two martini lunches by about two decades, and unfortunately I also missed the 6 hour golf rounds (by a decade). But business in this industry will always be done with a handshake in my opinion, which is how it should be, but there are definitely ways to continue to integrate new technology to help save time and money, and maybe even emails.

  7. I use to call on a company that used a portal run by corporate buyer that way way over ordered and since it was specialty the company incurred a 20% restocking charge plus freight. There is no perfect inventory control trigger without a human involved as end consumption is rarely consistent. Tank telemetry was about as good as I ever saw it get but that’s a bigger volume and somewhat easier to manage. The customer who uses a 5 gallon pail every 3 month with a 6 month shelf-life should buy 2 cans and when 1 is empty order another. Operative word is “should.” As long as a human factor is involved it’s a case by case situation, or even product by product. The person who puts things out on bid will typically gets what they pay for. Even if they don’t what’s the motivation to bid if you know you were the lowest bidder last go round and it stayed with the incumbent. I can ramble on but the salesperson who makes regular face to face calls and brings product innovation and has a purpose for his call other than a “maintenance” call adds value to the customer. That’s what everyone and smart customers look for. Whether logistical or introducing a new product or how to improve a product or efficiency things will not change because the market and businesses change.The company that makes the same widget for 100 years at some point will loose to competition or innovation. The “two-martini” lunch should be dead with lawyers and liability are what they are these days but as far as golf a buyer would be smart to spend 5-6 hours a year with a good supplier to interject thoughts and trends. I know that if I had a limited product and two people called and needed it the guy I had spent 5 hours of his valuable time usually got consideration over the guy who wouldn’t see or share information with me or used a computer generated order placement portal. Everything I need or want I can buy over the internet but guess what? I like to go to the retailer and feel and touch what I am buying and see what else is out on the market. It’s often the same way with a chemical buyer. Invite them in for a plant visit and review quality processes and show them you facility and equipment but most importantly let them meet your people “behind the scenes.” Saying chemical buying will all go automated or computer generated is a kin to saying retailers will one day ship only direct from a warehouse. Good luck to USPS and UPS in keeping up with that market trend and returns.

  8. Thanks Tony for writing, the sign of a good blog is even better comments. I think we are still far away from really being able to use auction type sites to make purchases and it is all based on trust. It’s too much money to spend without 100% trust. Like someone mentioned before, a broken toaster only harms me, bad product harms our whole company. Nothing will ever beat a handshake but to be players in the international market that’s not always an option unfortunatley. Some of our best customers we have never even spoken on the phone. We are in the middle still.

    Again repeating what someone else said, this is a bit of an upside down industry and often the suppliers have more power than the customers. They care more about thier schedule than everybody else’s and make it impossible for distributors to set up the perfect automatic program for our customers.

    I hope that makes sense :s

  9. Having been around for the martini lunches, I can say that they didn’t fundamentally provide a different way of doing business. They were economically inefficient but did provide good customer service, which is what good distribution still does. Unfortunately, many principals jumped on the savings of more cost-efficient business models while kidding themselves that they had provided sufficient customer service, in particular product knowledge delivery. 30 years ago, most distributors – all following similar business models – were adequate to great. Now there are still some very good ones, but there is a growing trend to use distributors that are only competent at taking an order. It works pretty well if you’re selling xylene, but if the principal sees itself as providing a product that is not totally commoditized, but uses a human communication channel that can’t explain differentiation, there’s inconsistency. And the human communication will still be key as long as the principal’s website is written around their shareholders and self-perception rather than their customers’need-to-know.

  10. Tony,
    Great blog and I hope to read more in the future. I think that the answer lies within the company around you. There are plenty of people that I deal with that should be automated…and then there is Rich Mac. I can tell you that I have been surrounded by family and good people over the last 5 years of my life working as a buyer in this industry, and I would not continue doing what I do without that human interaction. The only time I get to drink beer or play golf, is when I am working! From my perspective, relationships can and will take you a lot farther than any software can. I should add that I don’t have Face space or My book either.

    P.S. Lets book a tee time.

    • Great post Chris, thank-you. I will golf with you… and as one of my former golf buddies used to say to me when we would occasionally gamble’…”Make sure you bring cash, TR. I don’t take checks”.

  11. I may be more old school but I agree with many here that relationships still matter. The business of buying and selling should be more like a partnership where the two parties integrate with enough information sharing to help both companies efficiently do their parts. Technical service, vendor managed inventory, electronic payments, and good old face to face meetings between the appropriate personnel from each company help to keep business, grow new business and help both companies perform optimally.

  12. Excellente topic, and comments replied. Joe (Massidda), I totally agree with your point. Personally I think that integration with technology should not meaning lack of personal (human) interaction. It matters when someone (at least) pick-up the phone and send greetings, and congratulations because our consumptions are higher !! This detrimental in social skills became from the wrong idea of taken shortcuts always is better……..

  13. I am old enough to remember the martini lunches! And a lot of business was done through lunches, dinners, golf & other entertainment. Bottom line, while you might be likable, price drove the deal! I believe PRICE still drives deal today. That’s what buyers, PAs, directors of purchasing, etc are judged, how much did you save & don’t let the plant run out!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s