The global chemical industry contributed more than $5.7 trillion to global economy in 2019—more than 7 percent of the world’s GDP.[1] In the U.S. alone, more than 970 million tons of chemical products were transported in 2019, making the chemical sector one of the largest shippers in the nation.[2]
Chemical manufacturers at home and abroad have faced a variety of challenges in recent years, however, including transportation capacity shortages, an international trade war, and a pandemic. These disruptions have exposed weak points in the chemical supply chain and endangered the profitability of chemical manufacturers and suppliers.
These events have shined a spotlight on chemical logistics operations, further demonstrating the value proposition offered by outsourcing logistics to a capable chemical 3PL. Chemical companies are looking to increase profitability through third-party logistics. They want these providers to have the expertise necessary to handle the complex challenges presented by their supply chains.
The right 3PL provides the appropriate personnel, experience, and resources to overcome supply chain obstacles and mitigate the damage from disruptions, ultimately freeing up time and capital for chemical manufacturers to focus on their own core competencies. A skilled chemical 3PL also drives profitability for its clients by streamlining processes and implementing technologies that improve the bottom line.
However, not every chemical logistics provider rests on equal footing. It’s essential that chemical businesses know how to choose a chemical logistics provider to ensure that it has what it takes to handle hazardous chemical products successfully. This eBook will guide chemical manufacturers through the process of vetting a 3PL to ensure it will make a competent and valued logistics partner.
10 THINGS TO LOOK FOR IN A CHEMICAL LOGISTICS PROVIDER
The Request-for-Proposal (RFP) process can be overwhelming for any shipper. This is doubly true for chemical shippers, who must account for an expansive range of regulations and additional capabilities when sourcing vendors.
On the shipper side, the RFP should include any shortcomings and challenges in existing supply chain activities, as well as any essential capabilities that a logistics provider should have. Incorporating as much detail as possible into the RFP should help to mitigate the number of inaccurate quotes and overall responses from unqualified shippers. Once the time comes to start reviewing proposals, pay close attention to the following 10 factors.
1. EXPERIENCE
While it may be tempting to support an inexperienced provider trying to break in or grow a presence in the chemical market, the increased risk for your shipments and your brand isn’t worth it. A seasoned chemical 3PL will understand the compliance issues and appropriate handling practices required to safely store and transport chemical products.
Chemical handling experience is a must, and a background handling your specific chemical class is even better. For example, a business that has solely worked with inert chemicals may not have the appropriate processes and equipment in place to handle flammables or corrosives.
2. LOCATION
As a general rule, chemicals shouldn’t be moved over vast distances whenever possible. The majority of chemical products are hazardous by nature, so every mile they move poses additional risk. The costs associated with chemical transport are also higher, since these activities require specialized equipment, drivers with hazardous materials (HAZMAT) certifications, increased insurance premiums, and more.
As such, it’s best to use a 3PL with locations that are strategic to your operation. If you serve a national client base, for instance, then you should select a 3PL with chemical warehousing facilities in the Midwest. If all of your customers are on the East Coast, however, then a chemical warehouse on the East Coast would be better suited to your needs.
3. CERTIFICATIONS
Industry and government certifications offer significant insight into a company’s culture, priorities, and capabilities. Some of the certifications to look for when vetting a 3PL include:
- OSHA HAZWOPER. The Occupational Safety and Health Administration (OSHA) offers a Hazardous Waste Operations and Emergency Response (HAZWOPER) course that teaches the necessary skills to respond to chemical spills.
- C-TPAT. Voluntary participation in the U.S. Customs and Border Protection’s Customs-Trade Partnership Against Terrorism (C-TPAT) initiative demonstrates a 3PL’s commitment to supply chain safety and security.
- ACC Responsible Care® Partner. The American Chemistry Council’s Responsible Care initiative is dedicated to improving sustainability, health, and safety in chemical operations. This certification is considered somewhat elite, since not many chemical 3PLs possess voluntary Responsible Care Partner certification. Those who do, however, have completed extensive safety and sustainability audits of their chemical operations.
- Mode-specific certifications. There are a variety of hazardous material certifications by transportation mode, including U.S. Department of Transportation HAZMAT certification, International Maritime Dangerous Goods (IMDG), and International Air Transport Association (IATA) HAZMAT certification. It’s important to make sure your 3PL has all of the appropriate certifications for your desired transportation modes.
4. SCALABILITY
Chemical producers require partners that can scale operations to match market trends. The global chemical market tends to post steady growth overall, which means 3PLs must be able to handle consistent growth in storage, distribution, and transportation needs. Agility is a must-have in any chemical logistics provider.
The 2020 pandemic has also demonstrated the value of 3PLs when demand and volume decline. Many chemical manufacturers were forced to suddenly reduce capital and operational spending by as much as 40–60 percent.[3] In unexpected events such as these, shippers who handle logistics in-house must contend with substantial fixed costs such as warehouse lease payments, as well as variable costs like those associated with reduced labor needs at chemical handling facilities. By partnering with the right 3PL, a shipper can outsource these concerns to the logistics partner and focus on driving value through its core business.
5. TECHNOLOGY CAPABILITIES
Visibility and traceability are essential for chemical logistics handling. Regulatory requirements often involve strict documentation and tracking to ensure that chemicals don’t get misplaced, mishandled, or misused.
This means that a chemical logistics 3PL should have comprehensive technology in place, including a warehouse management system (WMS), a transportation management system (TMS), electronic data interchange (EDI), and enterprise resource planning (ERP) capabilities. The 3PL should also be able to integrate these solutions with existing customer technologies to ensure maximum end-to-end visibility.
6. SAFETY RECORD
Hazardous materials such as chemicals require special attention to safety. Chemical manufacturers must ensure that any 3PL they work with has the appropriate equipment and processes in place to safely handle chemical cargo at all touch points. Make sure to ask for an accident history and inquire about the specific safety practices in place at the 3PL’s facilities.
Of note in this regard, companies that participate in the ACC’s Responsible Care program have reduced safety incidents by nearly 50 percent, distribution incidents by more than 60 percent, and have a worker safety rate almost five times higher than other manufacturing sectors.[4]
7. CARRIER NETWORK
It’s important to make sure the 3PL only works with reliable transportation providers. Ask about the logistics provider’s carrier standards, including minimum requirements for insurance, Federal Motor Carrier Safety Administration (FMCSA) carrier safety ratings, accident records, and standard contract terms. In addition, find out how often the 3PL performs compliance reviews on its carrier partners.
8. TRAINING
A chemical 3PL should conduct regular training that goes above and beyond what is required for the various industry and government certifications. A commitment to continuous improvement is paramount in any chemical operation, which means that the 3PL should also run regular drills to reinforce the skills of their workforce.
Regular scheduled and unscheduled drills are essential to ensuring that teams can respond appropriately in an emergency. These drills should include practical skills demonstrations and testing, inspection and verification of personal protective equipment, and after-action analysis of each drill to identify areas for improvement. Drills of this nature also ensure that the 3PL’s emergency response plans and team assignments are kept up to date.
9. SUSTAINABILITY
With 58 percent of chemical CEOs identifying sustainability as a priority in 2020 and beyond,[5] it’s important that logistics partners line up with those goals. Any 3PL that handles hazardous materials should have a demonstrated commitment to ethical environmental stewardship. The risk potential that most chemical cargo poses to the environment must be accounted for in all processes and procedures.
While certifications such as Responsible Care or EPA SmartWay® are a good indicator of environmental responsibility, a closer examination of the 3PL’s facility practices can signify its level of commitment to sustainability. Look for comprehensive recycling programs, Lean methodologies, sustainable or energy-efficient equipment, optimized green spaces, and more. These extra steps show that the 3PL has gone above and beyond in its commitment to the environment.
10. VALUE-ADDED SERVICES
To provide maximum value, a chemical logistics provider should be able to offer a convenient portfolio of additional services. This minimizes the need for additional vendors and facilitates better control of chemical cargo. Some examples of value-added services may include:
- Logistics technology
- Import/export support
- Packaging and repackaging
- Labor management
- Freight brokerage
RED FLAGS TO LOOK FOR IN A CHEMICAL 3PL
As you analyze the above factors, keep an eye out for warning signs that the logistics provider may not be all that it claims to be. Here are some common red flags to watch for:
- The 3PL has no other chemical customers. The global chemical industry is lucrative for logistics providers—in the U.S. alone, the chemistry sector is worth more than $550 billion annually,[6] while the global chemistry sector is expected to post 14 percent growth by 2022.[7] Ambitious 3PLs looking to expand their capabilities and tap into this valuable market may be looking for any customer that will help them break into the chemical market. Becoming a 3PL’s inaugural chemical customer comes with significant risks, and any mistakes made by the 3PL due to inexperience will reflect badly on the shipper customer as well.
- The 3PL hasn’t worked with your chemical class. While a 3PL may appear to have chemical experience on the surface, that expertise may be limited to niche chemicals. Handling requirements can vary widely between chemical classes, so it’s critical that the 3PL has the appropriate equipment, expertise, and transportation network to handle your specific product type.
- The 3PL can’t provide references. A successful chemical 3PL should be able to provide multiple customer references. Given that shippers and logistics providers share success, it’s unusual that a customer wouldn’t be willing to give a reference. If the 3PL offers excuses as to why it can’t provide references, this is a good sign that it has very few chemical customers—if any at all.
- The 3PL’s capabilities can’t be verified through independent sources. You should be able to find information about the 3PL in sources besides the various references it provides. Look at trade magazines, newspapers, and conduct internet searches to see what information is out there about the company, its history, and its capabilities in the chemical sector.
- The 3PL only offers one segment of a solution. Since chemicals are a hazardous material, supply chain transfers should be minimized wherever possible. Try to avoid hiring a logistics provider that only handles warehousing or only brokers freight. Your chemical logistics provider should be able to provide an expansive, end-to-end chemical supply chain solution. This offers the most value for your chemical business.
- The 3PL has poor supply chain visibility capabilities. If the 3PL relies heavily on manual processes and can’t offer good supply chain visibility for your chemical products, this suggests that it isn’t capable of effectively and safely monitoring your inventory.
These red flags only represent some of the issues you may encounter when sourcing a chemical logistics provider. Trust your instincts. If something doesn’t seem right, dig deeper to see if your apprehension is justified or simply move on to another potential provider. To build a true partnership, it’s important that you find a vendor you can trust from the start of the relationship.
CHEMICAL LOGISTICS SERVICES FROM WSI
Material Logistics & Services, LLC and Warehouse Specialists, LLC are divisions of the WSI Family of Companies. We offer extensive chemical supply chain management capabilities to help our customers reduce their overhead, streamline chemical logistics processes, and refocus resources on their own core competencies. Our facilities have specialty rooms (including flam, warm, and cold rooms) to service a wide array of product needs. Our full range of hazardous material storage and distribution solutions for chemical products includes:
- Acids
- Corrosives
- Flammables
- Oxidizers
- Paints
- Poisons
- Solvents
- And more
Each of our chemical facilities is Responsible Care Partner certified by the American Chemistry Council. WSI is an EPA SmartWay Partner and a member of Operation Clean Sweep, demonstrating our ongoing commitment to sustainable operation. We have all relevant certifications for chemical handling, including USDOT, IATA, IMDG, HAZWOPER, and C-TPAT.
We are dedicated to the ethical and responsible handling of chemicals. We have a great deal of experience in handling all classes of chemicals, and our capabilities enable you to handle storage, distribution, and transportation of chemicals from a single source. At the WSI Family of Companies, Reliability is Everything™.
If you’d like to learn more about our company history and values, please visit our About Us page. For more information about our chemical logistics capabilities and how we can improve the profitability of your chemical operation, please don’t hesitate to contact us or call us at 920-830-5000.
[1] “The Global Chemical Industry: Catalyzing Growth and Addressing Our World’s Sustainability Challenges,” ICAA, https://icca-chem.org/wp-content/uploads/2020/10/Catalyzing-Growth-and-Addressing-Our-Worlds-Sustainability-Challenges-Report.pdf
[2] “The Business of Chemistry – By the Numbers,” American Chemistry Council, https://www.americanchemistry.com/chemistry-in-america/data-industry-statistics/the-business-of-chemistry-by-the-numbers
[3] “COVID-19’s Impact on the Chemical Industry,” GEP, https://www.gep.com/blog/mind/covid-19s-impact-on-the-chemical-industry
[4] “Chemical Safety Quick Facts,” American Chemistry Council, https://www.americanchemistry.com/Policy/Security/Chemical-Safey-and-Security-Fact-Sheet.pdf
[5] “Chemical trends 2020: Winning strategies for an era of sustainable value chains,” PwC, https://www.pwc.com/gx/en/ceo-survey/2020/trends/chemicals-trends-2020.pdf
[6] “The Business of Chemistry – By the Numbers,” American Chemistry Council, https://www.americanchemistry.com/Jobs/EconomicStatistics/Industry-Profile/Industry-Facts/Chemistry-Industry-Facts.pdf
[7] “The Extraordinary Growth of Chemical Logistics,” Robins Consulting, https://www.robinsconsulting.com/the-unprecedented-rise-of-chemical-logistics-around-the-world/
