Digitalization in the chemical industry

In contrast to the wide-ranging digitization opportunities offered by Industry 4.0 (for example, in the areas of production or logistics) the investment and effort required to digitize sales processes are relatively modest. The potential benefits, however, are enormous. Find out how this works in this article.

China has now emerged as a major player in the global chemical industry. The increasing environmental regulations in Western Europe and the associated costs will likely further strengthen China’s position in the future. However, Chinese companies, as well as other Asian producers, have long been securing key market shares and tapping into growth potential. And they are doing so not only in the emerging markets of Asia, but also in the Middle East, Africa and Central and South America. Even in Western Europe, this growing market presence is becoming evident. This is particularly problematic, as the market there is growing only moderately. As a result, it is becoming increasingly difficult for the European chemical industry to meet its revenue and profit targets.

While many German chemical companies are countering competitive pressure by continuously improving their products, Asian suppliers, unknown in this country, are offering similar products online at low prices. Many market leaders and “hidden champions” are often completely unaware of this. As a result, online-savvy shoppers are not only turning to new market entrants but also to other European competitors that offer corresponding online services.

Many manufacturers fall into the trap of assuming that their customers value face-to-face interactions with sales and field representatives or rely on traditional print catalogs. In doing so, they often overlook how many customers and prospects prefer to quickly find information and place orders online at any time. Innovative competitors are capturing valuable market share with their online offerings.

A latent threat to a company's future. However, having your own online store can strategically eliminate this dependency.

Many companies in the chemical industry supply their products to original equipment manufacturers (OEMs) (e.g., the automotive industry), sell their product lines through distributors (wholesalers), or operate as contract manufacturers. These companies have one thing in common: despite having market-leading products and excellent expertise, they lack direct market access.

Numerous economic experts agree: The shortage of skilled workers will be the biggest problem facing the German and European economies in the future. Companies are already desperately seeking qualified sales personnel. What is surprising, however, is that so many human resources are still being allocated to routine tasks and standard processes, such as creating orders or providing information on customer prices and delivery dates. Here, too, a shift in thinking is warranted: Almost all standard sales processes can be digitized. Existing employees can do what machines cannot (yet) do: build and maintain customer relationships, for example, through sales calls, professional consulting, or application engineering support.

Despite disruptive market developments, many companies cling to supposedly tried-and-true sales processes. This so-called “legacy” manifests itself in outdated sales methods (e.g., distributing print catalogs, field sales visits) or numerous special rules that result in manual processes and high sales costs.

Instead of producing expensive print catalogs that no longer reach the majority of contacts, digital catalogs help customers quickly find products and are always up to date.

With online self-service portals, customers have access at any time to all documents such as invoices, delivery slips, credit memos, backorders, or shipment tracking. Customers are delighted, and the sales team is relieved of some of the workload.

The use of IoT devices also offers new possibilities. These enable fully automated reordering, e.g., for liquids, bulk goods, and general cargo. This saves both customers and the supplier the costs associated with procurement processes.

Many companies wonder whether a marketplace (e.g., Amazon Business, Wucato, Alibaba, etc.) is a better fit than their own B2B online store. The following overview compares the pros and cons of these sales channels.

As the table shows, having your own online store offers more advantages than using a marketplace. Marketplaces, on the other hand, can certainly serve as a cost-effective alternative for short-term goals or as a starting point. Having your own B2B online store ensures long-term market access and the company’s autonomy.

Many decision-makers are unaware of the possibilities offered by modern technologies. Perceived obstacles are hindering the necessary realignments required for scaling through digitalization. Here are a few examples:

“Our products are too specialized for online sales”

Customized product lines, various container types, hazardous material warnings, export controls, batch information: These are just a few examples of supposed deal-breakers for an online store in the chemical industry. There are now B2B e-commerce solutions that have been tailored to the requirements of the chemical industry and already include precisely these features as standard.

“Our customers value personal service”

An online store cannot replace personal support. On the contrary, e-commerce ensures that personal contact will continue into the future. In times of a growing shortage of skilled workers, sales staff are still being deployed for routine tasks such as order entry, retrieving documents, providing delivery date information, and so on. The manpower freed up by digitization can be used for higher-value activities, such as consulting, technical support, and customer relationship management.

“Our processes are difficult to digitize”

In today’s disruptive world, business models with highly customized processes no longer have a future. Therefore, there is no way around standardization and automation. Only in this way can companies scale and remain competitive. For this reason, the standardization of processes within the company should be driven forward independently of digitization.

“Our IT department isn’t familiar with e-commerce technology”

Modern e-commerce solutions are often offered as SaaS (Software as a Service) solutions. With this approach, the company no longer needs to maintain technical ownership in-house. There is no need to build up and maintain specialized IT expertise. With integrated shop systems, the online store is largely managed and controlled through the company’s own ERP/merchandise management system. This allows existing data (e.g., customer and product data) and existing processes to be utilized. As a result, sales staff do not require any additional training.

“The costs of running our own online store are far too high”

Compared to other areas of the business (e.g., production, logistics), the digitization of sales is very cost-effective and, at the same time, highly efficient. The cost of implementing a professional B2B e-commerce solution, including the necessary integration into the company’s existing IT infrastructure, starts at approximately €75,000. The cost of ongoing operation of the solution starts at approximately €30,000 per year. Compared to the salary of a good sales representative, that’s not exactly a lot, especially when you consider that the online store operates 24 hours a day, 365 days a year.

The digitization of sales presents a real opportunity for the chemical industry to quickly and efficiently overcome current challenges. If the decision is made to launch an in-house online store, it is advisable to start looking for suitable B2B e-commerce platforms right away. Many of the available e-commerce solutions are designed solely for the consumer market and do not address the specific requirements of B2B sales.