Special report: In good shape to capture growth

06 June 2014 10:07 Source:ICIS Chemical Business

The resurgence of US manufacturing and a sharpening focus on reducing inventory is opening up further opportunities for chemical distributors in the region. U.S. Chemicals is one player that is adapting to capture the growth in the market

There is no doubt that there is a fundamental shift underway in the US manufacturing economy. Lower energy and raw material costs, improved labour competitiveness and better capital availability are all driving increased investment across many industrial sectors.


Ready to serve – the U.S. Chemicals team, with president and CEO Carol Piccaro (seated centre) and new COO Chuck Irwin (seated right)

But it is not just chemical producers that are eyeing business opportunities. Chemical distributors too are looking at how they can respond, and taking steps to strengthen their business to capture the growth opportunity.

Chuck Irwin, recently appointed to the new role of chief operating officer at family owned distributor U.S. Chemicals, says the fact the US was going to turn into a low-cost manufacturing location has been apparent for several years now, “based on first indications of the huge shale gas opportunity”. But he also points to the rise in environmental and labour costs in emerging markets as an important factor in making the US more competitive again.

And, he adds, “If China really does grow-out a substantial middle class, which would create a customer base as large as that in the Nafta 
region, then it will have to use its huge manufacturing base to meet domestic demand.” Then, asks Irwin, where will products be made for the global market; where will the next tranche of manufacturing capacity be built?

North America, he believes, “is an awfully good choice for capex right now, and we have seen this in practice over the past 2-3 years. Investment is going into the US.” Increased activity will drive increased demand, “with more customers doing more”.

But it is not just the shale stimulus to the manufacturing economy that is driving ­confidence at U.S. Chemicals. Irwin also points to the current emphasis on short-cycle responsiveness and make-to-order as manufacturers seek to reduce inventory levels and free-up capital for growth. This trend plays to the strengths of chemical distributors, who can hold stock for their customers and ensure reliable sourcing and delivery.

“The only way to drive down inventory levels is to push it back upstream – it’s a competitive opportunity for us,” says Irwin. “U.S. Chemicals says ‘we will own it for you’, holding material in our warehouses and delivering when you want it. It’s a cost to producers but it can help free-up capital.”

These days quality and reliability of supply and delivery are a given, says Irwin. But chemicals production is much more closely aligned to demand, as producers have eliminated excess capacity (or gone out of business), and purchasing managers are having to think much more strategically and plan their requirements more precisely for just-in-time or made-to-order operation.

“People need to retool their business. It’s a difficult transition to go from relying on inventory to forecasting but that is the trend and short-cycle responsiveness and faster change-over are being driven by the need to free-up capital and improve the balance sheet,” says Irwin.

Irwin sees one other major trend opening up opportunities for distributors – the continuing emphasis on innovation – to deliver new products and solutions, create competitive differentiation and improved product safety. All the majors, he says, are looking to switch into high value-added specialties, even though at present many are being enticed to build-out their commodity businesses to take advantage of cheap feedstocks.

Distributors have a role to play here advising customers about new materials, regulations and market trends. For example, says Irwin, in the biocides sector the traditionally used parabens materials are falling out if favour and sodium benzoates finding more use.

“Distributors have always helped the market with access to new materials; and conversely, we can also help to get producers’ new products out to the market place.” He also points to big changes in the food sector as offering potential for U.S. Chemicals.

All of which has spurred U.S. Chemicals, owned and managed by Carol Piccaro, to take a series of pragmatic actions to lay the foundations for growth. Piccaro’s recruitment of Irwin is certainly one of those actions, designed to strengthen the team and enhance the sourcing side of the business.

Irwin joined last May from chemical specialty producer Chemtura, where he was strategic sourcing manager in the petroleum additives business unit. Previously, he had gained experience at Unilever, in supply chain, purchasing and transportation roles.

A second important action at the Darien, Connecticut-based company was to create a regional sales force structure last autumn, covering all of the US, and to begin recruiting more sales executives to cover the new regional areas. This structure and increase in sales strength will enable closer customer intimacy and, in Irwin’s words, “release commercial minutes” as the sales team will focus more on sales and not be responsible for as much buying and supply-side activity. “They will be able to spend more time with their existing customers and develop new and potential customers.”

Irwin himself is taking on much of the sourcing operation, notably where there is a high aggregation requirement with multiple suppliers and customers involved. “We are already realising benefits,” he adds, in terms of sales and better relationships. Eventually, he envisages a customer service department developing that will look after product management and buying activities.

In terms of business approach, Irwin explains that: “We are a small, lean and mean distributor and need to focus on what we do and do it well. We are a customer- rather than producer-centric business and like to see ourselves as the extension of our customers’ purchasing departments.” The company regards itself as “feedback-driven, value-focused and in business for the long term on a win-win basis.”

One of the company goals is to improve this customer relationship, which Irwin describes as “warmth” and at the same time increase its performance, or “strength”.

In terms of performance, the key point to focus on, he says, is “getting it right, first time, every time”, which requires process rigour and short-cycle solution development, execution and issue resolution. “You need to plan your work, and then work your plan, and certainly avoid the ‘we never have time to plan, but always have time to fix it later’ approach.”

The third element in U.S. Chemicals’ approach to business, alongside relationships and performance, is business model flexibility. Its activities are driven by customer requirements, so it offers break bulk with warehouse provision; strategic supply relationships; and sourcing, grinding and repacking services.

Looking to the future Irwin confirms U.S. Chemicals will remain customer-centric and driven by customers’ needs. It will also remain flexible and responsive, but there will be a greater emphasis on the extension of its buying organisation and supplier relationship management. It will continue, he says, to build out its dedicated sourcing organisation to ensure a global capability.

Sourcing materials from outside the US is already well established – accounting for about one-third of sales – but opportunities will be sought to increase this further, so that U.S. Chemicals can offer multiple, secure sources for its products. It currently buys from Europe, China, India and so on, to provide an alternative supply source to US materials or to offer chemicals that are not available in the US.

The big challenge, says Irwin, will be to maintain responsiveness to customer and sales pull as these extra departments are created in the business to support the customer-facing sales team as they become even more intimate with their customers and deliver supply solutions as well as just chemicals.

“We have the reputation as the ‘go to’ distributor for many of our customers, who use us as the first port of call if they need something. It’s a great reputation to have but it depends on having the right product and getting it to customers quickly.”
 It’s a reputation Irwin and Piccaro will be keen to maintain as the company grows.

Why choose U.S. Chemicals as your supply partner of choice?

■ Attitude: You first. Our passion is to serve

■ Personalised: We know your business. Dedicated account executive and customer care representative focus on you

■ Knowledge: We know how to get it done, now

■ Timely: Prompt updates keep you in the know. No worries

■ Integrity: Just the facts, no spin

■ Feed-back driven: Your needs focus and drive our effort. We listen and act

■ Value-focused: Our value proposition must be acceptable to you to earn our place in your supply chain

■ Long-term: Your best partner for creating long-term win-win relationships

■ Responsive: Your “go to supplier” when you need it done yesterday

■ Committed: Your needs get met, ­always

■ Quality: No detail is overlooked. RighT first time, everytime

■ Fast: Short-cycle vendor discovery, set-up and delivery.

By John Baker