Tune into our latest podcast with David Wright and Hector Williamson from ChemCloud. David and Hector along with our hosts, Florian and Rio, take us on a journey of understanding the impacts of digitalization and eCommerce on the chemical industry.
In this conversation, David and Hector highlight the challenges of the chemical industry and discuss the future possibilities that have opened up due to digital transformation within this sector.
Listen to our brand-new episode here: Spotify, Amazon Music, and Apple Podcast
Hello, everyone. Welcome back to our latest podcast episodes. I'm Florian Brunet, Associate Director at DKSH Performance Materials. Today I'm delighted to co-host this podcast with Rio Chang. Rio is our Digital Manager from Performance Materials (AU and NZ) and broadcasting live from Australia and New Zealand.
Together with us today, we are delighted to receive ChemCloud along with David Wright and Hector Williamson. Hello everyone, and welcome to the Digital Chemical Playbook podcast.
Hello, Florian. We are pleasure. How are you?
I'm doing excellent here today recording the session from France, but you are all of you in the same room in Australia. So just tell me a bit more how he's doing everything in Australia.
Good day, Florian. It's all good here in Melbourne, descending slowly into winter. But I think that's half of the course here in Melbourne.
People say Melbourne four season, one day in four season, right?
Yeah, exactly. That's proving that today.
So we are in the winter season right now. As of now, we are recording.
Exactly.
Excellent. So look, you know the concept of the podcast, we like to receive the actors and the players of the digital transformation in chemical and ingredient industry. And it's been a while since I wanted to to talk to you guys and to conversation about ChemCloud. At DKSH we collaborate with you for a couple of years now and we really find your approach interesting. Just before we start into the question, I'm really happy to get both of you today in the room with us and let's get our audience to know a bit more about ChemCloud. Could you start maybe the two of you, I know you have an interesting story to share. So maybe can you start the two of you introducing yourself and also the platform to our audience.
Thanks Florian. I'm David and ChemCloud is a platform that gives manufacturers a single place to source their raw materials and also a place to connect with both new and existing suppliers. The idea came about, I was managing my family's manufacturing business and to be honest, procurement was always a massive headache for us.Tracking quotes through different formats and finding new sources of supply and also just tracking deliveries was always painful. Hector and I have known each other for for many, many years.We actually went to school together and both ended up as lawyers together for a short period of time.
And while I was kind of deep in the family business, Hector was off with BCG doing some digital transformation projects there and we sold our family business back in 2020. Pretty soon after that I kind of came to Hector with the idea for ChemCloud and nearly three years later here we are and we've got kind of hundreds of active users that are using the platform and had a great relationship as you say with DKSH for the last couple of years as well. It has been a great journey so far.
I think since I know you guys probably in 2021, it's such an impressive journey you guys have built together. I know like back in from school classmate, you could never tell. I know in the future. Working together as the co-founder of ChemCloud is impressive and it's a great journey you guys have been been through together.
It's been fantastic. When we were both lawyers,10 years ago, I don't think we would have thought we'd be trying to transform the the way chemical raw materials are are purchased. But here we are and last three years has been fantastic. A lot of the problems we're focusing on are problems I experienced when I was doing a lot of digital transformation work at BCG and then later working at digital platforms where the transfer of information electronically can speed things up, save a lot of time and that's a lot of the work we're trying to do at ChemCloud.
That's amazing. I think that speaks for all of us in the podcast here.
Yes, exactly.
Think about decades ago, the concept of buying and selling chemicals online is impossible. I think people still think that it's a bit hard or not possible to do that. From your point of view, what's your vision, do you think, in the digitalization in the chemical industry?
Currently, and we see this a lot with all of our customers, the process for procurement is typically pretty manual. It involves a lot of emails, a lot of phone calls. And that makes sense because we're dealing with highly regulated products. We're dealing with complex quoting and payment flows that have a lot of different exchanges of information.
And if you're a manufacturer, you're typically dealing with 10s, if not, you know, hundreds of raw materials across 10s to, you know, even dozens of suppliers. So there's a lot of complexity and so it's natural that there's a bit of a reluctance to move to digital.
Our vision for the future is a lot of those, you know, transfer of information that currently happens over e-mail should be happening on a digital platform. The reason why that's so important is it can save time. It can save time and it can really, it can speed things up. And why that's important is the industry is facing a lot of more existential challenges, like how do we get more lower carbon raw materials into our formulations to meet net zero targets for instance.
But it's really hard to focus on that as a manufacturer. If you're spending all your times deep in emails trying to figure out or you're asking questions like where's my stuff? Because my supplier doesn't have a digital tracking page for my order. So it's real, you know, our vision is removing a lot of those sort of barriers or sort of manual workflows, we can really speed up innovation in the industry.
That's very interesting. I agree. It it reminds me what you were just saying quote I saw somewhere they were saying like in a world where everybody knows where the $10 pizza is when you're ordering it, we don't even know where the 50,000 USD shipments somewhere in the globe, right. So that's a that's quite that's quite funny to think about this type of approach and and to say that we are in the B2B model. And that B2B model is focusing on the human relationship, right? I mean that at DKSH, that's something we see more than ever.
And this digital platform concept is is all the challenge on how to infuse technology so that we can accelerate the journey for and tackle some existing pains. We at DKSH, the very first time we stopped working with ChemCloud.
We really got that feeling that you're part of the few in that industry and the pure player in the industry which are having, and you said it David, this chemical DNA so that you can first understand what's the pain in the industry and how then to bring solutions. That's very interesting.
I mean if you take a look to broader approach, there are chemical industry in the it's a trillion million dollar business. So we can say that this is an industry that has the capacity, right, to invest into digitalizing their business and tackling the e-commerce challenges. You've been working with several and you say more than 100 different customers from your approach and also your BCG background looking after companies. What do you think the chemical industry is one of the slowest one to tackle these challenges?
I think there's probably a few reasons and yeah, Hector might have his own. I think one of the reasons and you know e-commerce to the chemical industry is not something necessarily new. I think it was back in you know the early 2000s where the chemical industry really started flirting with e-commerce. And I think probably then the maturity of digital platforms and transacting particularly B2B online was probably not at a level where people could trust it.
I think certainly in the chemical industry trust. Plays a big part in in transactions both you know as you say Florian the the personal relationships is a really important and remains a really important part of this industry. How you incorporate that level of relationship into a digital platform is is really important and something that I think people were were wanting before before really diving into it. I think part of that has to do with the the demographic that we see there's certainly a shift that's been happening in the last few years as. Both on the supply side but also on the procurement side, you know millennials and and you know Gen Z coming into procurement roles that we kind of consider our more of a digital first type of of customer who their first reaction is not to pick up the phone to ask for a quote, it's to want things at their fingertips to look online. So I think that's been a big driver of I think that shift probably needed to happen before we started to see more adoption in in e-commerce platforms.
I think probably the other thing, and you know Hector mentioned it before, the complexity of the workflow is such that you know naively you might think, oh, chemicals, yeah, buying and selling, you could set up a you know marketplace and you know e-commerce and off you go.
There's both from obviously the trust perspective that I mentioned, but you know regulatory reasons, payment flows, having existing relationships and having approved materials in your formulations, these are allreal considerations that require a nuance to how you actually purchase materials both offline but certainly online is really important.
That's something that we observe as well since we've partnered for a long time we see this chemical approach that we have been changing a lot. I mean the other thing that we see is that a lot of
If you think about the size of the distributors here in Australia and even the manufacturers, they're typically really large and they've got really well-established workflows. It is often hard to digitize large businesses. We see that all the time.
It's an industry where it is harder for smaller, sort of more nimble startups to to enter the scene. So I think that has an impact as well. And then the last thing, which was David's mentioned, was relationships are so important.
And we'll get to this, I suppose, when we talk about the product challenges we have, but trying to create a digital experience that combines really nicely with existing human relationships is complex.
It's really hard. And I think that's the most complex thing I think and this is why we have so many players coming in the room in terms of digitalization in that industry. We see like we're in 2024. This is something that goes around for more than 10 years now and we still struggle to see kind of like key players appearing into that business.
Tt's interesting today to to hear from you and to understand at ChemCloud to explain us what is actually, what is your journey in terms of buyers and in terms of customers, what is the value that you're bringing into the market at ChemCloud?
So we perhaps because of Dave's background as a manufacturer on the buyer side, you know, we really start and you know, a principle part of the focus has been the buyer experience and you know, the, yeah, it maybe helps to talk a little bit about the the major pain point we're solving for buyers. They've got, you know, 10s, if not hundreds of raw materials and then 50 maybe, maybe more different suppliers. You've got all, you need all of those raw materials at your factory. On the day before you have scheduled production, otherwise you can't make that formulation.
Coordinating that is really difficult and you're trying to coordinate that across your procurement team, your warehouse team, your supply chain team, your production team. And so what we are, you know the buyer experience that we give our manufacturers is you can upload all of your raw materials, all your supplies into ChemCloud. You can generate the quote requests from a single place to one or many of your suppliers. The quotes come back into the platform. You can see all your quotes sort of next to each other. And then when you proceed to place order, we've got an integration with the ERP of the manufacturer. So all that quote information is automatically inserted into the ERP into the purchase order, which then gets sent to the supplier and through each of those, you know, each of those steps, we're kind of eliminating a lot of work that currently happens either e-mail or manual data entry.
Yeah, right, back and forth,
Exactly.
And then depending on who's involved with the freight, we also provide order tracking. So the supplier can link up with their ERP to our system and provide some milestone tracking to their customer where I don't think we're at the point in the industry yet where we've got sort of the live GPS kind of Uber like tracking. Yeah, we don't have that yet. But I think you know that's probably a little while away. Maybe we need to drop apple air tags into each pallet. But you know, milestone tracking, even just the certainty of knowing that it's been shipped or or where it's coming from helps our customers plan production with certainty. And that's, you know, that's a huge value add. And so the benefit to our customers is that their procurement person can then spend time on more strategic procurement.
So finding alternate sources of supply or lower carbon sources of supply, diversifying their supply chain or forging better relationships with their their account managers.
100% I had to completely agree with you. I think that's one thing that we always explain to our sales team is I think about 10 years ago how we ordered taxi, we order it and we don't know where it's coming then we started to to nervous and sweat and that's the thing what. We all agree that that's what the customer feels like what you mentioned at the moment and that's what we also want to through our digital transformation with the DKSH or with ChemCloud together how we can move towards like you say with Uber like customer they can sit there just relax oh I'm always sure that my goods is coming in the virtual air tag in there that make customer more you know comfortable.
You're right. It's either with the Uber or the pizza example. I mean, this is what customers expect this because they see it in their personal life.And so, you know, they expect information to be, you know, at their finger, at their fingertips and really quickly provided. So it's it's a matter of responding to that in their workplace as well.
In that era, it's all about transform, like transparency of the whole operations.
It's really challenging because as Dave says, every customer you know as soon as they leave the office or their warehouse, they're going home and experiencing everything at their fingertips. The expectations now at work are increasing.
There is a really big challenge for all of the suppliers to be able to expose that information to customers. It's unlikely that one distributor is going to go and integrate with every single one of their buyers because it's not an efficient way of doing things, but by becoming a bit of a central place where those integrations can happen is where we see the future. I think the work we've been doing you with DKSH in terms of automating things like pricing, all of that speed of response is so important. We see that in the data in terms of quote acceptance ratios, for instance customers are far more likely, 1.6 times more likely to convert to an order if they get a quote on the same day than if they get it two days later.
That's super interesting what you're saying. On top of that you're opening a box that what we see at DKSH right real sometimes it's hard to tackle to make people realize that we didn't say OK we're a B2B we operate on B2B space. So we deal on behalf of company and then it's not digital appealing rights and and even people saying that yeah no you know we heard sometimes it's like, well I'm not a digital person, I'm very old fashioned. And like a few minutes later, that same person takes its latest smartphone, showing you how he can track his bike, you know, wherever on earth, thanks to the GPS tracking. And so you're like, okay, so for a non-digital person, you're quite savior, right? And this is always, yeah, say like, okay, as soon as you go into your workspace things that happen in the business to consumer end up happening right on the business to business. You just need to to find the right trigger and the right way to to approach this.
It brings me to my, you know, to my to my next question at ChemCloud, how do you do when you approach suppliers just or distributors such as DKSH to convince them, you know, to find that trigger to convincing them to say, OK, actually if you have excess stock if you have ingredients in your warehouse, you can start listing them as an SKU inside the ChemCloud, what's the trigger you tend to use?
It's a challenge sometimes to, you know, it's a very different way of doing things. We've tried a lot of different approaches. The trigger that works the best is actually when existing customers come to their own suppliers and say, I'd love to, you know, order something from you on ChemCloud. That's where we've got the. The best take up because we can say all we want that we think the future is digital and there's a lot of benefit in making information transparent and we, you know, we firmly believe that that's what the platform we're building. But often it takes a customer to say it or for the, you know, to hear from your own customer to view it in a different light. And I think a lot of the times when when you hear from a customer, they're not saying things like I want to stop having relationship.
They're actually saying I want to maintain our relationship, but it's easier for me and it saves me time if we're doing it digitally. And so that's been that's been the most impactful trigger, I would say, Florian.
I have a question for both of you and for Florian as well. Do you also agree that there's no B2B kind of mentality? It's always just B2C because ultimately, we're dealing with human element, like I said at the beginning. No matter what the digital transformation that we're doing, it's all connecting to the human, how we can All the psychology, how we, you know, there's no difference between B to B customer and B to C customers. What's your view on that one?
As I said before like people are so used to you know dealing with platforms as a consumer and you know they expect the same experiences are you know in their work life. And I don't think people distinguish their own personalities based on whether they're operating on a B2B or B2C system so I think you're right that. Whatever the solution looks like for whether it's this industry or others, there is a human relationship there that you need to actually understand.
And fundamentally, I don't know whether the chemical industry particular for this, but as I said, it's a, it is a industry that has historically been dominated by, you know, really strong relationships and that's how people build trust and it's how people understand the things that matter to them from a formulation perspective or the advice that they get from their account managers and how you deal with that in terms of personalities is is equally as important as you know how platforms in a consumer environment operate as well.
Florian, you would see a lot of you know you're in your role, you're across a lot of different ways of interacting digitally with customers. You must see a similar trend or is does that ring true for you the yeah.
What's on our side? what we see is maybe first a generation shift. So when we generate some some digital initiated interactions, there are two type of them, right. Some of them comes from new companies, so new potential customers specifically in cosmetics or in food where you're always have a lot of innovation. So they're looking for innovative ingredients and they started searching from them on the on our platform, on other platforms where we are listing our ingredients.
But also what is interesting, we see more traditional players, family owned companies that are actually hiring new people to to to replace people who just got retired, right. And that new fact, that new human factor, this is what you were saying earlier, right. They come there and they do not really tend to phone, you know, they're like, OK, I'd rather request my sample online because I need, I know what I want and I don't need to get a phone call and to go, you know what I mean in the old fashioned way to to get information. Actually I know what I want.
This is something very interesting because we used to see first in the in the previous times sales people offering a different alternatives and so on for a specific project. Now I have to see that the customer more and more specialized and they know exactly what they want and that's the new way to tackle sales. It's to say that I know what I want, I'm asking for this type of ingredients and the challenge is not on whether yes or not you have something to supply them is how fast are you able to reply to someone looking for something.
You know that's the tenderization of that word means like I'm asking that ingredient to five different suppliers and first to come, first serve now and That's how on our side is not only on marketing but also in operations to make sure that we have our systems quite integrated with our different market and business lines.
So when opportunity comes in, it goes to the right person to to serve it.
About market digital marketing, how curious of how does ChemCloud grow so fast, how do you get all your traffic and then you know to you know platform curious about that.
Yeah, it's ready to taking notes with Rio.
It's it's probably been you know 3 factors I suppose. I mean. There's definitely been some online advertising. And as as we've said, you know when particularly newer, younger procurement people, if there's a sudden shortage at their at the warehouse, they exhaust their existing supply options. It's very hard to know who to reach out to. So it's very natural the first place they look is Google for a specific product, and often they will then find us. So it's been, in the early days in particular, that was a a large source of of inbound leads.
But then as we grew, we also saw that we're seeing kind of clusters of customers in the same industrial zones or or even to say regions. That was actually largely driven by word of mouth. So customers that they weren't necessarily in the same industry, but they were loosely affiliated because they were approximate or or maybe even meeting at the the local coffee cart would actually. They might be talking about not being able to find something or or you know just asking what's new and our name would come up. So we had quite a few inbound leads that way.
I suppose early on as well, through David's relationships, we've got a bit of a head start, but just by knowing a lot of people in the industry, as we said, relationships are so important. And so we've been very lucky with a lot of customers working with us very early on to help us shape the product and similarly with early adopters like DKSH on the supplier sides helping to to you know work with us to improve the user flows and really understand what business model, you know what transaction model made sense. So yeah, I think the nicest thing we see from both sides is there's a lot of enthusiasm from people that can see the time savings that they could make. And so really willing to give a lot of investment of time and effort really to help us build the product, which is great for us, but they can also see that it's in their interests because it it can save them time.
Amazing. Just talking about the ingredients and the value we are providing, you know what at DKSH Performance Materials actually one of our prime commercial function is our value added services, right, like the technical supports, our labs also regulatory and so ever even digital we consider is that the value added service for for our customers. On your on your side and can ChemCloud placing yourself between suppliers and customers and talking about R&D, how often are you getting requests for specific applications or formulations guidelines and is it something that you will consider getting interest as a value added or basically are you asking are you looking for more commodities type of chemistry? What's I mean what's your approach on that on that level?
I mean probably driven by the markets that we've been in Florida and and probably my background that seeded it more in the industrial markets certainly the commoditised raw materials has been more common and I think the value or the you know really the value that we're bringing to the transaction process both for buyers but also for suppliers is the speed of the fulfilment, the discovery of new materials, you know there's there's obviously platforms out there that customers go to and I think it's a big part of what you know distributors like DKSH do and the importance of the account manager is that technical selling. We think the digital platform can serve a really important role in the, you know, as we say, speeding up the the transaction itself and giving visibility on that. The need for the technical selling is still there and that's where the human relationship, still comes in and one of these customers still want that relationship.
But interestingly, I mean you know from a discovery point of view, you know over the years that we've been making these transactions, sort of around 30-35% of transactions that happen on ChemCloud are between a buyer and a supplier that already had a relationship, but the buyer didn't know that the supplier had that material. So discoverability of the catalogue is is really important for distributors and Florian, you mentioned that some sometimes customers have a really specific product in mind and you know you could almost get potentially get tunnel vision in terms of what you're looking to find. I think the the advantage of what a digital platform can do is give these customers the the option from their existing suppliers to to have a portfolio that they can draw from as well.
So I think working with you know and certainly it's been a focus of us with DKSH in terms of how we how we can really leverage that that portfolio and and service the customer that way.
Interesting. Just ring a bell on that one of the person that in the senior management in the chemical industry that told me a few years ago that that he he think that e-commerce platform like the digital platform would be like wiping out all the distribution piece, traditional distribution business by you know just completely wiped out by digital platform and like you know for example like Amazon wipe out all the shops like that. What do you think of that statement that made by the same hit that that person that I know.
It's you do hear I mean that I guess that is kind of a a fear sometimes we hear from the supplier side but you know we see I think it's it's market specific and it's industry specific here in Australia because a lot you know 70% of the raw materials are are imported distributors play a really important role in terms of a. Dave just said, helping navigate their specific portfolios and technologies and you know, that could be replaced by technology in the future. But at the end of the day, the R&D scientist is typically going to want some sort of expertise and we think that's still, you know, human expertise.
And then there's a lot of logistical assistance that and expertise really that and economies of scale that distributors have in terms of bringing the stock, storing it, being able to then deliver it in a timely fashion to the manufacturers, you know, in time for production. And so we think and then when something goes wrong, you need someone to call. And so and often you know a lot of the job of the good account managers is is problem solving for customers and that is yeah, that's where trust is built. That's also a really important service and I think that that you know you'll probably find it hard for manufacturers to move away from that because it's yeah, that is really important and valuable
We think there's a lot of scope for digital to improve, you know, flows of information, but we don't see, we don't sort of share that pessimistic view of, you know, this large scale extinction event.
I agree with you on that. I think like what we all just discussed as well is like human is always there and then human, we should always focus on like relationship building and then that technology to focus on information sharing, being the library and then all the inquiry.
When it's about B2B, even Google or Meta or LinkedIn has account managers, right? So that's quite the proof that at some point, as soon as you start dealing with companies, you need someone to to talking to them. I mean, I really connect with with what you were saying, David and Hector, because at some point that was a kind of a fear, maybe around five, six, seven years ago of this Uberization of of the industry and getting this intermediated by few players. I think that as of today, people think beyond and instead of thinking about competitor, we think about ecosystem and we are all of us working on the same duty, which is to to transform digitally the chemical industry. And that's every company has its duty on that on that same ecosystem, right? From the peer players, the suppliers, the distributors, and also even the customers themselves. So yeah, that's true that we are always sharing the same approach.
We don't take a piece of the pizza, right? We want to make a bigger pizza and that's that's what the ecosystem is for!
That's what the Italians say.
All right. So thank you very much, David and Hector, for sharing your insight on KingCloud, on the evolving e-commerce landscape. Actually, today's conversation has been really intriguing andI think in Rio, we have a next episode where we will focus on what will happen next and what's the vision for the future. But for the one of today, we are done. Thank you so much for coming, for joining us, and I really look forward to hearing from you on our next episode. Thank you, everyone, for listening.
Thanks, everyone. See you soon.
