NEW YORK (ICIS)--The slew of global supply-chain disruptions arising from the dislocation of shipping containers, the US winter storm and the blockage of the Suez Canal are casting a spotlight on the vital role of chemical distributors, a senior executive at Univar Solutions said on Thursday.
These events, on the back of impacts from the Covid-19 pandemic, have come in the midst of widespread economic recovery in many parts of the world that is boosting demand.
“This has probably been the most disruptive period any of us can ever remember in our careers. It’s been a huge challenge but also offers opportunity. A company with the size and scale of Univar has the ability to navigate these difficulties better than most,” said Nick Powell, president of EMEA & Asia Pacific and global specialty chemicals & ingredients at the US-based distributor Univar.
“Clearly we have a very strong international network and we’re able to pull product from places in the world where it may be more available,” he added.
The company’s extensive rail network in the US served suppliers and customers well during the Texas winter storm and big freeze, allowing the company to move product around the country rapidly, he noted.
“We’ve navigated through those stress points very well, and even to the point where we had supplier partners calling upon us and asking us if they can take steel drums or IBCs [intermediate bulk containers] from us. Where we’ve been able to help them out, we’ve done that, and in return that comes back [to us with product] for us to serve our customer base,” said Powell.
Along with global supply and logistics networks, large distributors can also leverage purchasing power and relationships with suppliers – a key advantage in times of supply shortages.
“Because of our scale and the way we perform for major suppliers, we have arguably some of the strongest relationships with major chemical producers. That’s certainly given us a greater share of volume and product availability than many of the smaller regional players, and that’s driven customers to us,” said Powell.
“That puts us first in line when suppliers debate where they might be able to push their product when they simply don’t have enough of it available,” he added.
This has shifted the perception around chemical distributors from - in many cases - second-tier suppliers to essential partners in the supply chain.
“We’ve had a high number of returning customers - those customers are staying with us. That mirrors what we saw through the Covid crisis where we had customers returning to us because essentially they know they can get continuity of supply,” said Powell.
“They know they can lean into our global network which gives them a high level of confidence,’” he added.
Univar has also prioritised essential industries when it comes to product allocation or sales controls from limited supplies. These include water and power producers, pharmaceutical facilities, hospitals and food production facilities.
SUPPLY DISRUPTIONS SLOWLY
Supply constraints overall are easing with US Gulf Coast plants back online and the Suez Canal open, but there’s still a long way to go.
“Clearly the Suez Canal is now open but there are backlogs and supply chain deficiencies that need to be made up as a result of [the closure] – both in terms of product coming out of Asia into the West and the other way. That’s caused a severe bottleneck,” said Powell.
“The shortage or logistical problem around containers being in the wrong place as the economy started to pick up – that’s beginning to ease but is still a challenge,” he added.
The situation is being exacerbated by “extremely strong” market demand, which is exceeding supply.
“As we look through the year, in most of the markets and industries in which we play, and in most economies, we predict an increase in demand and some return to normality,” said Powell.
“Demand will probably outstrip supply in many instances. Steel drums, steel containers, IBCs – that’s still an issue we're dealing with, and I think that’s going to play at out least through early Q3,” he added.
The executive sees a shift towards more localised supply chains from customers, whether it’s localisation within a country or even localisation of supply chains closer to a customer’s plant.
When it comes to globalisation versus localisation, Univar operates at both ends of the spectrum.
“First and foremost, we’re globalising a number of our business units under our industrial and consumer solutions businesses. That allows us to leverage our scale, and for example take some of the great work that we do in one of our solution centers in one part of the world, and deliver that solution to all of our customers in that particular segment,” said Powell.
“That allows us to operate as, for example, a global personal-care company, sharing and leveraging our expertise throughout our customer and supplier base,” he added.
However, chemical distribution is very much a local business with customers caring about a high level of local service, regardless of how global the distributor is, he noted.
Interview article by Joseph Chang