What do distributors of raw materials and chemicals consider to be the primary challenges facing materials producers and purchasers? How can distributors help companies all along the supply chain understand and navigate the various forces impacting the industry? To find answers to these questions (and others), I reached out to leaders in the distribution industry and asked for their insights.


What are the top three concerns currently faced by your raw materials/chemicals brands?

Bryan A. Huston

Bryan A. Huston, Vice President National Accounts & Inside Sales Business Unit, Acme-Hardesty Co.: Ocean shipping delays, as well as the increased cost of ocean shipping, dray, and trucking freight. Lead times are now four to six months for cargo from Southeast Asia. In addition, commodity prices for oleochemicals and castor oil derivatives are on the increase because of tight supply.


William Nicholas, Vice President of Sales, CASE Eastern Region, Barentz: Any discussion about challenges in the world of specialty chemicals these days has to start with supply instability. Whether it’s driven by raw material shortage, the wild world of shipping, or an ever-changing and increasingly scrutinized regulatory climate, it all adds up to greater difficulty obtaining the raw materials needed to make finished goods.

The COVID effect amplified all of this while bringing some other unforeseen challenges as well. As we all adapted to a world that asked us to stay distant to stay safe, we found new ways to do business using technology to collaborate and work remotely. Embracing this more remote way of working was a huge part of the reason why we were able to push through the COVID recession the way we did. But as employees adapted to this new way of working, they are looking for employers to be equally adaptable coming out of COVID.

Herein is what I would say is concern number two: the changing perspective of the American worker. Many employees are looking for employers to be flexible in offering remote work options in the place of the commute-extended workday. This presents a major challenge in terms of recruitment and retention for teams who have traditionally relied on the tried-and-true, on-site, person-to-person interaction to drive collaboration.

Is this a trend or a blip? I suppose only time will tell, but for those of us managing teams in the here and now, flexibility is the operative word.

Lastly, and somewhat related, is the customer-facing piece of the puzzle. As buyers and sellers of raw materials, we have to decide what the most effective path to market is for all of us. Do we invest in strategies that build out on our ability to compete in a world that is increasingly digital and remote, do we double down on time-tested, on-site, person-to-person strategies that most of us agree help build relationships that are wider and deeper, or do we do some of both?

I don’t think anyone has all of the answers. I think the best thing we can do is listen to the market, talk to our partners, and be open to a rapidly changing world.


Rocky Prior, Senior Vice President of Sales and Marketing, Azelis Americas CASE, LLC: The first concern is supply chain shortages. Unprecedented consumer demand has placed a strain on our global supply chain. The global supply chain was already severely impacted by the COVID-19 pandemic, and inventory levels were at record lows. The virus caused a surge in the purchases of many consumer goods while making it more challenging to produce them under CDC health and safety guidelines. The Texas freeze in February further exacerbated these shortages, as the mass blackouts led to extended chemical plant shutdowns that are still disrupting global supply chains.

Another important issue is transportation and package costs. There is greater demand than the supply of drivers and trucks can adequately service. Continual shifting of demand levels within different industries is causing freight rates to continue to increase and service levels to suffer.

With ongoing pandemic-related delays and closures, increasing demand for ocean freight from Asia to the U.S., and a severe lack of capacity, ocean rates are still very elevated and transit times are extended and volatile. Over 5% of all ocean capacity is currently waiting outside a port. Air cargo rates are also up as importers and exporters seek alternatives to sea freight. Almost every container type (steel, adhesives, laminate structures, plastic) is also rapidly increasing in price as the components of these continue to rise rapidly.

Rapidly rising raw material costs is the third main issue. Almost every feedstock has increased significantly in price due to the supply chain challenges mentioned earlier, as well as the rapidly increasing price of oil. In addition, labor costs are increasing. Companies cannot absorb all these increased costs and have been forced to pass along increases to their customers. Costs are rising so rapidly that it is not uncommon to see multiple price increases on the same products with little to no notice.


Ron Zmich, Vice President, CASE, Palmer Holland: The main concerns are global logistics constraints, visibility to market pricing, and maintaining current market share.

What is today’s biggest challenge for the purchasers of raw materials/chemicals?

Huston: The biggest challenge is accepting price increases and then passing on these price increases. Dealing with delays of receiving raw materials is also difficult.

There are ocean freight premiums of more than $10,000 to get your FCL on a ship. This is a pass-through cost if you want your cargo on time. Congress is working on the Ocean Shipping Reform Act of 2021 to help address many of the ocean carriers’ unfair practices, as well as issues at the ports to help alleviate congestion in the future. The National Association of Chemical Distributors (NACD) supports this bill.


William Nicholas

Nicholas: I think if you were to ask any purchaser today (in the second/third quarters of 2021) what the biggest challenge they face is, an overwhelming majority—if not all—of them would point to raw material availability. There are lots of elements that play into it, like inland and overseas freight, a perpetually changing regulatory environment, and the consolidation of sources—so the question becomes, “How do I, in the face of these issues and others, effectively source the products I need to make the goods that my plant produces that my customers are asking for?”

In some cases, these are global issues that we simply have to weather, but in many cases these are regional challenges that a partner with a global reach, proficient sourcing, and technical expertise can help steer customers through. In fact, in the CASE business here at Barentz, a lot of our value-added activity in recent times has been centered around helping link our raw material manufacturing partners with customers who need to identify and qualify alternative sources to overcome scarce or regulatory-restricted incumbent materials.

This isn’t simply an offset game; there is some real creativity required here. Change, while inevitable, can be really disruptive, so the solutions we suggest are thoroughly researched by our in-house technical experts to ensure they match compatibly.

Today, as Barentz, we can even run them through our own in-house lab services programs to expedite the validation and minimize disruption to our partners. Then, of course, we rely on our global sourcing and supply chain experts to ensure that these solutions are scalable, sustainable, and that they fit into the picture economically. Innovation isn’t always about the newest and shiniest stuff—it also needs to be about creativity and adapting to market needs.


Prior: Sourcing material. Supply chain shortages have led to a record number of products being placed on allocation or force majeure. This has created significant challenges in finding enough material to keep plants operational. Most finished goods require multiple raw materials to complete, and so production is limited to the most challenging product to source.


Zmich: Without question, it’s security of supply. Whatever might come second is so far in the rearview mirror, it can barely be seen.

What benefits can working with a distributor provide for both suppliers and purchasers of raw materials and chemicals?

Huston: Distributors offer security of supply, supply chain expertise for imports, and local inventory for non-contract raw materials, as well as regulatory expertise. Acme-Hardesty is a member of the NACD, and we work hard to promote and follow the principles of the association’s Responsible Distribution program. A financially healthy distributor will be a long-term partner.


Nicholas: Simply put, the single greatest benefit that a good distributor provides for both suppliers and purchasers is reliability through flexibility. The prevailing trends in manufacturing over the past couple decades have centered around efficiency. Models like just-in-time (JIT), lean manufacturing, Kanban, and others have taken most waste and a lot of cushion out of the supply chains on both sides of the business that distributors touch.

In a similar way, producers have also sought to streamline operations, focusing more intently on critical operations and doing away with other non-essential functions. This creates, if I can use a mechanical analogy, a very snug-fitting and tightly wound machine. But even the most highly engineered machines need to move smoothly. In this model, distributors are the spring in the chain, the grease in the gears, and the differential between the wheels. A good distributor adapts to the stress points in the market, absorbing them and creating a more efficient overall environment where a chain can flex, gears can turn, and wheels can spin at different speeds.

As producers have shed lab and technical services, cut availability to regulatory support, and reduced available capitol to inventory allocation, many distributors have built out in these areas, making them part of their value add and essentially filling the gaps. In this way, manufacturers, both raw material suppliers and finished good producers, are looking to distributors as critical contributors, not just in the supply chain but also in the innovation pipeline. As distributors continue to grow, as our Barentz North America CEO Terry Hill frequently says, in terms of “adding scale and skill,” so too does our importance to the industrial machine.


Rocky Prior

Prior: The benefits are numerous, but I will share a few. At Azelis, “Innovation through formulation” is more than just a tagline. Our application labs and innovation centers provide additional raw material evaluation and formulation assistance to help drive innovation at the supplier and customer level.

Sustainability is also a key benefit. In 2021, Azelis was awarded a Platinum rating from EcoVadis. For the previous two years, Azelis was Gold rated. In addition, Azelis is a member of Together for Sustainability (TiF). We focus on providing sustainable solutions to help connect our suppliers and customers with innovative and sustainable solutions. In addition, our robust Safety, Health, Environment and Quality team fields the majority of customer SHEQ requests and provides timely feedback and completion of customer surveys.

Another important benefit is digitalization. We connect customers with our suppliers’ products how and wherever they are most comfortable. Azelis’ website is focused on helping customers find solutions to their everyday formulation challenges. Our iChat and eLab are also innovations in the digital space that provide customers with another connection point.

And of, course, distributors offer market intelligence. Our experienced team of account managers provides timely market intelligence to our suppliers, as well as market trends and new product information to our customers.


Zmich: Market reach brings both parties together across a segment of the market where it otherwise proves difficult. In addition, distributors are a spring in the supply chain. Even in this unprecedented environment, distributors provide more flexibility than manufacturers themselves to “horse trade” in freeing up inventory.

For our principals, we provide additional/expanded market visibility. Distributors help suppliers gain market traction with innovation and help increase the speed to commercialize with smaller-to-mid sized customers. We also help them in terms of management of credit risk.

For customers, distributors simplify supply and provide easier access to leading-edge technology. We also actively manage risk (e.g., stockouts/service failures, critical/JIT items) and tail spend. Finally, distributors provide our customers with commercial insight (e.g., market trends, feedstock dynamics).

How have the relationships between suppliers, distributors, and purchasers evolved in the past year? Five years?

Huston: Partnerships have continued to improve, and we are seeing more transparency and trust between companies. There is also more reliance on technology for communication. Face-to-face meetings are now conducted by video on Microsoft Teams or Zoom. Nothing will replace face to face, but video conferences save time and money.


Nicholas: The one- and five-year pictures are distinctly different. Chronologically, starting with the past five years, the relationship between producers, distributors, and purchasers has gotten—in one word—deeper. Over that time, producers have channeled more of their products across more market verticals through a smaller number of distributors, who are selling a more complete bundle of products to a decreasing number of customers.

This has all been driven by the rapid pace of consolidation in our industry. If you think back 10-15 years, there were literally dozens of smaller regional specialty firms, the vast majority of which are now part of much larger national and super-regional firms. While this has lessened the number of choices that producers and purchasers have in terms of channels, there are a great many more choices within those channels.

In that way, things have balanced out in a more sustainable way, especially when you consider the one-year view, which was shaped largely by the COVID dynamic. Would separate smaller regional firms have been able to weather the COVID situation as soundly as they did in their consolidated and diversified form? Would the various pivots we all made together as an industry (think sanitizer) to keep plants running and people working have happened as nimbly as they did without the shared expertise of firms touching multiple allied market verticals? Would it have been as possible to absorb the financial impact of the precipitous drop in demand in Q2 2020 or the equally steep uptick that started in Q4 2020/Q1 2021?

Maybe, but it almost certainly would have come with more bumps and bruises. Ultimately, we did come out of the worst recession in recent history, and we’ve come out of it closer and more connected that we’ve ever been in the past.


Prior: The relationship has become closer, more transparent, and seamless between all three. Recent product shortages have underscored the importance of having clear lines of communication between all three market players. There is also greater collaboration on innovation and sustainability efforts.


Ron Zmich

Zmich: In the past five years, we’ve seen accelerated industry consolidation. A lot of that is strategic, with global companies seeking entry into the North American market and manufacturers looking to get downstream.

The last five years have also brought an increased component of business running through channel, increased resources transitioned from direct to distribution (e.g., technical support, laboratory services, etc.), and the development of digitization.

In the past year, there has been more sharing of best practices stemming from the COVID pandemic (e.g., “virtual” selling, hybrid workforces/spaces, etc.), as well as a desire for distributors to carry more inventory. We have also seen a significant emphasis on forecasting that is well beyond what might’ve been the norm heretofore.

For more information, visit www.acme-hardesty.com, www.azelisamericascase.com, www.barentz-na.com, and www.palmerholland.com.