The margin hidden in your procurement data
Most chemical companies digitized procurement long ago. ERP systems are in place, supported by dashboards, spend reports, and supplier databases.
On the surface, everything appears under control. The picture changes once you try to make sense of what the data is actually telling you.
The same category appears under three different names in three countries. There are several versions of “the truth,” depending on who you ask. An analysis that should take minutes takes weeks. And when it’s time to decide, the decision is still made in Excel.
That’s the core issue. Many organizations have digitized procurement without ever bringing it under control. The reason follows a familiar pattern.
Decentralization: the hidden source of inefficiency
Procurement in the chemical industry is often fragmented. Not by design, but as a consequence of how these companies have grown.
Few were built around a central core. Most expanded in layers, through acquisitions and local growth. Responsibility deliberately stayed with regional teams to preserve speed and autonomy.
That model served its purpose. But it also meant procurement never matured into a coherent system. Leadership isn’t steering a single procurement function, but a patchwork of local realities:
- Each plant follows its own processes.
- Each region relies on its own supplier base.
- Each category is managed by its own logic.
- Each decision is limited to what’s visible locally.
Why the cost of fragmentation is only now becoming visible
For years, markets were relatively stable and organizations operated largely within regional boundaries. Local optimization was enough. As long as a plant kept costs in check and production running, procurement appeared well managed.
That’s no longer the case. Markets have become more volatile, but the bigger shift lies in how organizations can now steer performance.
Data is more abundant than ever. When it’s reliable, analyses that once took weeks are available in seconds. Organizations that reach that point can improve processes at a depth that simply wasn’t possible before.
As a result, the gap is widening between organizations that capitalize on this and those that continue to operate as they always have. And that gap is growing exponentially.
Asian chemical companies illustrate the point. They compete in the same markets, with the same products and the same competitors, yet they earn twice the profit. Much of that difference comes down to how efficiently their procurement is organized.
When the underlying business is essentially the same, the gap can’t be explained away by market conditions. It reflects how quickly and effectively an organization can optimize at scale.
What efficient procurement looks like
In the chemical industry, efficient procurement rests on a surprisingly simple foundation: less fragmentation, fewer variants, and purchasing that’s coordinated across the organization.
Rather than buying site by site or entity by entity, organizations consolidate purchasing decisions where it makes sense. Particularly for raw materials and categories that recur across the business.
The result is greater transparency and, more importantly, scale. Product groups that currently involve dozens of suppliers can be served by a handful of strategic suppliers. That strengthens the negotiating position on price, security of supply, and terms.
In practice, this delivers savings of a few percent on total procurement spend. In an industry where procurement is the largest cost item, those savings flow straight to margin.
That makes efficient procurement more than an operational improvement. It’s a direct lever on profit.
Where to start
The first step isn't technology. It's insight. Organizations need to get the fundamentals right: standardizing and consolidating data to reveal where activities overlap and where fragmentation drives unnecessary cost.
With that foundation in place, organizations can optimize procurement at scale. Patterns become visible across all entities, not just within a single plant or region.
That's when technology adds real value: as an accelerator for a structure that's already sound.
When efficiency becomes a competitive advantage
Among companies that make similar products in the same markets, procurement is increasingly what separates the leaders from the rest.
That advantage doesn't grow linearly. It compounds. The opportunities to optimize at scale keep expanding, and your competitors have access to them too. Waiting is effectively a decision to fall behind.
As Maarten Stramrood, partner Chemicals & Chemical Distribution, puts it: “Get procurement right, and you’re prepared for the next crisis and ahead of your competitors.”
Ultimately, the question isn’t whether procurement looks well organized on paper. It’s whether your organization can respond faster, smarter, and more consistently than the rest of the market.
Curious where the biggest procurement gains lie in your organization? Reach out to Maarten via LinkedIn or at maarten@vasco-consult.com.
