One Question per Day in Applied Chemistry 8-16

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Leveraging knowledge related to applied chemistry, including (analytical chemistry, physical chemistry, principles of chemical engineering, CAD drawing), we are launching the \"One Question per Day\" campaign; simply reply to get the question. To encourage everyone to keep participating! Get a 5 Wealth reward just for participating! I hope everyone will participate actively, learn together, and make progress together! ! ! I read an article today that I found really good. By reading the reply, one gains 5 points of wealth; thank you, sharing this with everyone. . The most unfortunate people in China’s chemical industry chain: The precarious situation facing chemical traders. Introduction: It is highly likely that the number of chemical traders in China will decrease by 50% or even more over the next five years. Of course, those who are eliminated are surely traders who lack the capabilities and are not adapted to societal development, regardless of whether their business is large or small at present. ”Text by Yang Xianghong, from Zhuochuang Information. The author is the Senior Vice President and Chief Economist at Zhuochuang Information. The predicaments faced by Chinese chemical traders Before writing about “Innovation among Chinese chemical traders”, I believe it’s necessary to discuss the current difficulties that these traders are facing. Today, I spoke with the general manager of the procurement department at a top-ranked Chinese chemical group in Yantai, and he also believes that Chinese traders need to change. None of us believe that China’s chemical industry market does not need traders. On the contrary, upstream and downstream enterprises need traders more than ever before. Let’s first take a look at the current situation in China’s chemical industry market. As upstream manufacturers, despite facing issues such as overcapacity, no one believes that China’s chemical manufacturing companies are currently struggling to operate or failing to make profits. Companies downstream are in an even more comfortable position. For example, in the coatings industry, over the past year the cost of raw materials has dropped by more than 20% on average, while the average selling price of coatings has increased instead of decreasing. Let’s look at plastic products once again. If three years ago you bought a bucket made of polypropylene for storing clothes, compared to buying a bucket of the same specifications today, the retail price has likely more than doubled, while the price of the relevant raw materials has remained virtually unchanged. As the prices of major chemical raw materials have dropped significantly, the products sold by downstream manufacturers are also seeing gradual price reductions. However, the extent and speed of these price cuts are far lower than those of the raw material prices, so these manufacturers are able to operate in fairly comfortable conditions. Chinese chemical traders, on the other hand, are different. If I were to use the word \"difficult\" to describe their current predicament, I believe it would be agreed upon by the vast majority of chemical traders. In a market where prices are becoming increasingly transparent, the good old days for certain traders who used information asymmetry to earn excess profits are over. Facing increasingly stringent requirements for the transportation of chemical hazards, the proportion of transportation costs in the selling price is getting higher and higher. Meanwhile, the relationship between downstream customers and traders is somewhat unfriendly; they dream of doing business directly with manufacturers, but only purchase from traders out of necessity. What does it mean to be \"forced into it\"? For example, if you want to buy benzene produced by Sinopec, you can’t expect Sinopec to offer you credit terms or the services you desire; you can only purchase it through traders. Currently, it’s already quite good if a trader can achieve a profit margin of over 5 percentage points for bulk goods; for bottled products, the margin is 6-7 percentage points. As a trader’s boss, I can’t help but smile at that. You need to know what these 5 points include It includes the shipping cost to deliver the goods to the customer, as well as the funding costs associated with the payment terms requested by the customer. Typically, customers request a payment period of two months, with interest calculated at 6‰ per month; thus the cost associated with this payment period is 1.2%. If we take into account the capital required to stock goods in advance for these major or long-term clients, the cost associated with the payment period is roughly 1.5%. The loss of goods during transit is approximately 2-3‰. If nothing goes wrong, given the profit margin we just discussed, the net profit after a year of hard work will be around 0.5–1%. Even so, your downstream customers keep causing you trouble, thinking that you are making money from it. For example, it has become common practice to delay payment by ten days or half a month when the due date arrives, or to give another three months’ grace period at that time. The bigger the clients, the more they like to bully traders. Many people have experienced the situation where the delivery truck arrives at the supplier’s door at 8 a.m., only to take until 5 or 6 p.m. to finish unloading and leave. It was originally planned that one vehicle could deliver to three customers per day, but only one delivery was made. Over time, if the shipping company stops doing business, your shipping costs will definitely increase. Additionally, after receiving an order from a client, some clients don’t clearly tell you when the delivery should be made. One day at 5 p.m., you are suddenly informed that the goods must be delivered by 9 a.m. the next day, and this 5 p.m. could be either Saturday or Sunday. In their eyes, you are just a servant whom they can call in and out at will, always on standby. A trader complained to me that one of his clients had asked him to deliver goods four times over the past week, with each delivery consisting of at least two barrels and at most 30 packs (each pack weighing 25 kilograms). Of course, when quoting prices, what customers are willing to accept and agree to is a low price for bulk deliveries; in practice, however, delivering the specified goods in the specified quantity to the specified location by the designated time has become the norm, and no customer is willing to pay an extra fee for this type of supply arrangement that involves these three specifications. As a trader, you are also faced with another “war”. That is, the companies founded by your former employees compete with you; after leaving, most of them do the same things as you do, competing for your customer base and your clients. Of course, they rely on lowering prices, leaving you with even less profit. Due to the high costs of road transportation and the extremely low prices that customers are willing to pay, some traders neglect to obtain insurance when transporting hazardous chemicals, or they use non-hazardous material vehicles to transport such goods. In the event of a problem, the fines imposed could potentially cripple a small trading company. In the minds of Chinese manufacturing enterprises and producers, there is basically no concept of distributors. Basically, as long as someone has the money to buy goods, they are sold to that person. A trader owner smiled wryly at me; he sells 20,000 tons per year of a certain product manufactured in China, yet the price he receives is basically the same as that of traders who sell only 10 tons per month or end-users who purchase only 5 tons per month. Some other traders are also frustrated; as a distributor who sells the products of a certain company, they can handle up to 1,000 tons per month, yet the supplier will not grant them credit. And even if the downstream companies take 20 tons per month, the suppliers will still grant credit. Personally, I don’t think some Chinese manufacturing enterprises understand the role of traders. When a company launches a new product, it pleads with traders to help promote it far and wide. However, once the product gains market traction, it’s common for medium- and large-sized clients to take over direct sales themselves. In such cases, no compensation is ever offered to those very traders who had previously done all the hard work of promoting the product on their behalf. Over time, no trader ended up selling only the products of one company, nor did any domestic company rely on just one trader for sales. As we can see from the above, Chinese chemical traders are in an extremely dire situation. Its root lies in alternative overcapacity, that is, there are simply too many traders. If you complain that customers are delaying payments, there will be a whole line of other traders waiting in line to take your business away from you ； If you complain that customers take too long to receive their orders or that it’s too difficult, a group of traders will immediately team up to get rid of you. Chinese chemical traders are at a disadvantage on both ends; you are definitely in a weak position when dealing with customers. They treat you as Tang Seng’s flesh; it’s necessary to inform you about gift-giving on New Year’s Eve in the name of the company, and to give mooncakes during the Mid-Autumn Festival, among other things. An increasing number of Chinese traders are becoming confused, to the point where they “will take anything just to survive”. Organize the necessary supply sources for whatever the customer wants ； It will be delivered whenever the customer needs it. Trading companies are increasingly finding that their employees are unprofessional. Their logistics departments have all become very irritable in order to cope with the growing number of unexpected delivery requests. With an increasingly poor understanding of their clients, companies are now led by those clients instead of leading them themselves, which is making more and more trading companies become more impetuous. The owner of a trading company that generates sales of 500-600 million per year now has to devote more time and effort to helping employees handle orders, even for just one ton of goods. All the chemical trading companies told me it’s very tough and that there’s no profit to be made. The Chinese chemical trading market is a highly competitive one, and I believe that consolidation has already begun. This unprofitable predicament cannot be sustained. It is highly likely that the number of chemical traders in China will decrease by 50% or even more over the next five years. Of course, those who are eliminated are surely traders who lack the capabilities and are not adapted to societal development, regardless of whether their business is large or small at present. Innovation among Chinese chemical traders: If an individual or a company wants to make progress, the only thing to do is “you must move away from where you are”. Chinese chemical traders are no exception. Since your current business approach is making it increasingly difficult for you to make money, you need to think about how to change it. Because with your current operating model, even if you and your team work extremely hard, you won’t make much money. I’ve met some formerly very successful chemical traders; their bosses all complained to me that doing business in the chemical trade in China is becoming increasingly difficult. Recently, an increasing number of manufacturing companies have turned to Zhuochuang to find out who their end customers are, whether they dream of selling directly or are dissatisfied with Chinese chemical traders as a whole Personally, I believe that as a trading company serving as a bridge, if you fail to demonstrate your value between buyers and sellers, they will naturally drift away from you, and you certainly won’t be able to make any money. In my opinion, as a Chinese chemical trader, you should make changes in the following areas. First, you must understand what you can do, what is within your capabilities. This is extremely important. There are simply countless things that can be done in this vast world. Everyone and every enterprise must be realistic: they should do what they are capable of doing, what they can accomplish with a certain amount of effort. For example, it’s impossible for me to dream of becoming a world champion in 100-meter sprinting, because I don’t possess the necessary qualifications; no matter how hard I try, it won’t work. By today, you and your team should have accumulated a considerable amount of experience – that is, you have a familiar client base as well as some products that you are well-accustomed to working with. Making the products you’re familiar with even more professional and in-depth, so that clients can see your value, should be a good idea. Recently, I found it incomprehensible that XiangEQing, a very well-known company in the food and beverage industry, made such a drastic transition into e-commerce. XiangEQing has established a strong brand in the catering industry. The Chinese catering sector is definitely not a dying industry. If they make appropriate adjustments within this field, they can stage a comeback. Their reputation built up over the years, their experience, and their team of highly skilled professionals give them the capital needed to succeed. Personally, I don’t believe it’s a good idea for them to abandon the areas they’re familiar with. The same is true for you as a chemical trader; you might see others making big profits in e-commerce or in the medical devices sector, but don’t be envious. It’s also possible to earn substantial money in the chemical industry – it’s just a matter of knowing how to do it. Don’t be like someone who wants what’s in both bowls—always thinking that others’ products make money, while one’s own products don’t. Some traders in the bulk goods business think that selling goods in barrels is profitable; yet when the same team tries to fill barrels for such sales, they end up exhausted and frustrated ； There are also traders who have been very successful in dealing in specialty chemicals. Seeing others handle bulk chemical products, especially liquid chemicals in bulk form, with relative ease, and knowing that the chemicals they deal in are numerous and diverse, they tried to have their employees work with such liquid chemicals, but they simply couldn’t get the hang of it. Over the years, your company has developed its own sense of the market and style; it’s worthwhile to stick to that approach. Of course, as part of business expansion, solvent traders can also enter the fields of additives and resins. However, you must be fully aware that the dynamics in these fields are completely different. You need to provide your team with adequate training—or even assemble an entirely new team. Additionally, you must help your customers gradually recognize the value of your entry into these new areas. Otherwise, as a solvent seller, you’ll remain perceived by customers as someone who only sells solvents. Second, you must understand your customers, truly comprehend them. It’s important to know what you can do and what you’re capable of doing; however, it’s even more important to know and understand your customers. I’ve seen a large trading company whose team members were extremely diligent and hardworking. When visiting clients, they spent the whole day promoting the products they represented. However, those products had very poor compatibility with what the clients were currently using. However, advising customers to adopt the products you represent as a substitute for the chemicals they are currently using is not a very reliable approach; unless the products you recommend offer an excellent cost-performance ratio and superior performance, changing the formula for mere petty gains will not arouse much interest among technical personnel. The right approach is to communicate more with the customer, understand his formulation and requirements, and it would be best to obtain his purchase list. First, help the customers resolve the tricky issues involved in their procurement processes, assist them in reducing procurement costs, simplifying those processes, and shortening the procurement cycle. Provide them with services that are more reliable than those offered by their current suppliers – in other words, truly act as an extension of their procurement department. Only then can you introduce the products you want to recommend, and this approach is even more effective when they are developing new products. Third, you must build a highly capable procurement team. You know what you can and are able to do; it’s important to understand your clients, but when faced with their needs, you must be able to meet them. There is a trading company that has very good relationships with its clients. Yet every time it provides a quote, the clients consider it too expensive. Whenever the clients request to purchase certain special materials, the company is unable to find them, or if it does manage to find them, the price is much higher than what the clients can get through their current suppliers. How is it possible to do business like this? So one of our innovations is to pay close attention to procurement, ensuring that customers realize the excellent value for money of the products they purchase from us. When they need help in finding new materials, we are able to locate them promptly. Fourth, procurement integration and outsourcing are things that all downstream customers are interested in doing. Now, an increasing number of downstream customers, especially large ones, are interested in outsourcing the procurement of many materials. Why is this the case? For example, in paint factories, there may be 300–400 different types of raw materials in use, and perhaps 20% of these types account for almost 90% of the total purchasing cost. Almost all procurement teams are reluctant to spend effort on these 300-400 varieties. They are well aware that by controlling these 20% of varieties, cost control can be ensured. However, a shortage of any one of these many varieties will result in pressure from both the production and sales departments. They particularly hope to find reliable traders who can take care of the remaining 80% of products, as these 80% involve hundreds of different items that are scattered and complex; upstream suppliers generally have no interest in selling them directly. The company I used to work for had a large volume of purchases, and it had strategic partnership agreements with many major suppliers such as Dow Chemical and BASF. In theory, all products manufactured by these suppliers should be supplied directly, but in practice, they are only willing to provide direct service for those products for which there is a certain level of demand; for a large number of minor products, they prefer to encourage downstream customers to purchase them from their own distributors. The second innovation: how can you take on the procurement outsourcing for your clients? Even though your client is willing to do it, can you take on the task? To undertake procurement outsourcing, you must bring the following benefits to your clients: a. You need to offer lower prices than those provided by their current suppliers ； b. You need to offer a longer payment period than what his current channels provide ； c. You need to have a shorter delivery cycle than his existing channels. In other words, procurement outsourcing must make your customer feel that his procurement costs have decreased and that his procurement processes have been simplified. Keep in mind: if a customer provides you with up to 200 different products, and those 200 products are meant to serve only that one customer, how can you be expected to help them reduce their costs? It must be a fantasy. You must quickly ask your team to start selling these hundreds of varieties. For example, if your customer needs a certain additive in quantities of 100 kilograms per month, and you are able to sell 2,000 kilograms per month through market sales, then it becomes possible for you to offer a lower cost than his current sourcing channels. Procurement outsourcing is a technical task; in the past it might have been sufficient to sell only 20-30 product varieties, but now, with hundreds of varieties available, it is necessary to develop experts who understand the products. Otherwise, it’s just a simple buy-sell transaction, and the customer may not be satisfied. Fifth, you must go with the trend to make money. Products that have been on the market for many years, and which are sold by many people, make it difficult to make a profit due to their high level of transparency. As society develops, the demands regarding product performance are constantly changing. For example, over the past 20 years, China’s coating industry has grown by more than 10 times, expanding at a rapid pace. For many types of coatings, there is an excessive supply of production capacity; this is the case, for instance, with solvent-based wood finishes. Faced with severe overcapacity, manufacturing companies are extremely focused on cost control; it is becoming increasingly difficult to make a profit by selling raw materials for wood paints to downstream enterprises. However, coatings in China are making rapid progress toward \"organic solvent-free\" formulations, with radiation curing, water-based systems, high solid content, and the use of renewable resources becoming the undisputed trends. You should sell raw materials that contribute to this development direction, such as propylene glycol butyl ether, a cosolvent that helps with water-based formulations, and alkyd resins produced from recycled materials, and so on. By selling these fresh raw materials and additives, you will find that the profits they generate for businesses are better than expected. Of course, aiming to replace imported products is also a good option. It’s just that foreign manufacturers have fully realized the importance of the Chinese market; establishing production facilities in China and setting prices tailored to the local market has become the norm for these companies. Therefore, if you want to localize imported products in order to help customers reduce costs significantly, it has become an increasingly difficult task. Sixth, you must be fully aware of the impact that e-commerce has on business operations. E-commerce is the topic that is being discussed the most in the Chinese market these days, with concepts such as B2B, B2C, P2P, and so on. However, it is still difficult to see a \"JD.com\" emerge in China’s chemical industry; HuiCong.com is working hard to achieve this by making bold attempts in this area. Certain commodities have seen extensive online trading take place successfully. An increasing number of companies that trade in bulk chemical products are eliminating their sales teams; instead, they establish strong procurement teams to acquire the necessary materials, which are then handed over to specialized online matching companies. They will help you sell your products to target customers and take care of everything else, and the low fees make it seem like eliminating your sales team is one of the best decisions you can make this century. At present, the number of bulk chemical products that can be traded online is limited. For the large number of special chemicals with diverse varieties, everyone is exploring ways to successfully implement e-commerce for them. Large additive companies have told me that it is not possible for them to use HuiCong as a trading platform at the moment; it has nothing to do with transaction fees. The price difference for the same product when sold to different customers can sometimes be over 50%, and making everything public could significantly undermine their profitability, which is what concerns them the most. However, the electrification of e-commerce for the trading of chemical products is an inevitable trend, and this should also be one of the areas of innovation for Chinese chemical traders. Once all technical barriers and concerns are resolved, we believe that 90% of chemical traders in China will be able to cancel their registrations with the industrial and commercial tax authorities. Seventh, do not overlook the benefits of communicating with your clients and improving logistics management. Many traders have told me that current downstream customers and upstream manufacturers are increasingly distrustful of them and dislike them. What should I do? I told them that if you want your clients to like you, you need to take the initiative to communicate with them. The old approach of waiting for customers to inquire about prices, place orders, and finalize transactions must be completely abandoned. When a customer comes to you for a quote, they are also getting quotes from several other companies at the same time. The problem is that customers usually only use the method of soliciting quotes from several suppliers for those items in large quantities, while for the many small-item varieties, they don’t organize bidding processes; instead, they ask a few familiar suppliers for quotes. If you have the capacity to take on orders and a client happens to call you, then you’ve hit the jackpot. Otherwise, you might find later that the customers for the variety you are selling have already purchased it from someone else, at a price much higher than what you can offer. You might think to yourself that the customer is stupid, but remember: it is your role to develop and guide the customer’s intelligence – this is what we mean by taking the initiative. You need to categorize your clients and visit them regularly; some clients prefer to communicate via email, so the sales representatives in charge must correspond with them by email ； Some customers are accustomed to using QQ, so you should use QQ to meet their preferences. Regularly sending customers information on the products you are selling and those you can sell, along with regular quotes (which can be sent in bulk to similar clients), will definitely help you increase your business volume. If you wait passively for customer notifications before delivering goods, your logistics costs will surely be high. Many of your downstream customers, due to unstable production plans, often give you very short notice before requesting deliveries, which keeps all the staff in your logistics department extremely busy. Moreover, the cost of finding vehicles on short notice is very high; you must change this situation. You can build good relationships with the purchasing and warehouse management staff at the other party, so that they inform you of delivery plans as early as possible, and consolidate the items that need to be delivered within a week for you to deliver them (try to specify a time period rather than a specific date for delivery). For some smaller varieties, you can even discuss a consignment model with the customer. Although the payment period you offer to customers seems a bit longer, consignment trading is highly exclusive, and the reduced costs associated with multiple deliveries are sufficient to offset the financing costs resulting from the extended payment period. You will definitely not regret building good relationships with the warehouse managers. If business is conducted properly, you will often find that it’s common for goods delivered to the factory at 8 a.m. to not be unloaded until 5 p.m. But with a good relationship, it’s different: he will tell you when is the best time to deliver the goods based on his production schedule (to avoid peak times), and once the goods arrive, they will help you unload them quickly, thereby reducing your logistics costs indirectly. You won’t regret building good relationships with the relevant technical and quality inspection staff. If your goods fail the inspection upon delivery, they will proactively help you find the cause, rather than simply demanding a return with a stern expression. Based on my past experience, many so-called test failures can be resolved through negotiation between the two parties (sometimes it is indeed due to inaccurate testing equipment). Eighth, the fan economy. There are thousands of traders in the market, and hundreds or even thousands of trading companies like yours; no downstream customer has the time or desire to contact thousands of companies to get quotes. There aren’t many traders with whom they work regularly; if you are fortunate enough to be one of those few, you will have the opportunity to do business with them. Just being part of it means you have the opportunity to do business; it’s like a girl who has a dozen boys pursuing her, but in the end she will only marry one of them. So it’s important to seize the opportunity. You must make him dependent on you, so that he buys from you alone for at least certain products. Traders who manage to do this achieve good profits on the products they deal in with that customer. Remember, one aspect of innovation is to make your customers like you, want to turn to you, and be willing to do business with you. Of course, the same goes for your upstream suppliers – make them like you and be willing to let you serve their target customers instead of selling directly to them; this is probably what constitutes the support those upstream clients offer you. Ninth, confidentiality must also become part of corporate innovation. Can a company that is highly transparent both internally and externally be considered capable of making money? Confidentiality must become part of corporate innovation. How to keep it secret? You must foster a strong sense of loyalty to the company among your team. Although you can’t expect your employees to keep secrets for the company, you should be able to identify which key employees will not and cannot betray the company. It’s reliable to entrust your core products, key customers, and main procurement channels to these trustworthy employees for management. Given the prevalence of data leaks involving computers and USB drives, it is recommended that all employees’ information be stored on the company’s hard drives. Although prohibiting the use of USB drives on all company computers is a rather crude measure, it does prove effective. Tenth, you must allocate the products you sell based on the resources of the clients you’re dealing with. A few days ago, while I was in Yantai, I talked with the local office of a large trading company. I told them that it’s definitely a good strategy to focus on large clients like Yantai Wanhua (in fact, their business volume with Yantai Wanhua this year has doubled compared to last year). Given that there are very few paint manufacturing companies in the Yantai area, and most of them focus on low-end products, it’s certainly not a viable approach to try to promote high-quality raw materials for paints. Since you act as an agent for Dow Chemical’s fungicides, and given the large volume of seafood sold and produced in that region, it would be absolutely unforgivable to ignore the substantial demand for anti-corrosion and fungicidal solutions in this industry. In short, do what you can do; develop and stick to your own style. Cultivate your team so they become more professional. Strive to keep up with industry trends, and work hard to nurture your base of fans, suppliers, and customers. Only by doing all this can you ensure your survival in the next five to ten years. Any methods or means that help you survive during this period can be regarded as innovations on the part of Chinese chemical traders. Because you are leaving your current spot and moving forward with big steps.