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It is important to identify your suppliers and ensure they are compliant with chemical regulations. The lots need to be fairly sizeable in order to attract the participants since there is little room for negotiation within this market, with the pricing of chemical commodities largely being driven by indexes. Suppliers are facing increasing complexity due to niche product requests. Suppliers must find ways to profitably operate inflexible and asset-heavy production systems. Remember to keep in contact with your suppliers and use the process as a sales opportunity; this can always help to get one more participant on board in a category where there may be resistance to reverse auctions.
This category is relatively easy to define but don’t forget that the quality and grade are of paramount importance. There is often also a minimum volume and delivery requirement. It may be worth considering a careful lot structure in order to leave yourself options for dual sourcing. When there are several operations required, you could split this out into several lots but also create a lot for the combined operations. This will generate more options and improve liquidity for the final event. It is recommended that you obtain lot samples in order to test the quality and grade of chemicals. This can be done either during the process or post-event.
The liquidity here will greatly depend on the size of your spend. Chemical suppliers tend to be very large and often refuse to actively take part in an event unless the spend is attractive to them. Look to break the requirement into several lots as discussed above to get maximum liquidity in each area.
Many companies are nervous about switching suppliers for an important category such as this. This is completely understandable due to the importance of quality and compliance but these risks can be mitigated through careful selection of suppliers and the planning of stock levels and lead times. If you haven’t done so throughout the process, now would be time to test the product to ensure the grade meets expectation. Even though this might be a tough category to obtain the green light to tender online, it has great liquidity (generally) and definitely one that should be considered.
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