1-Aug-2011

Challenges of modern distribution

The role of the chemical distributor has changed from that of a simple trader to a full service supplier, ensuring that the right goods are supplied at the right time to the right place and with the right quality. Ella-Louise Ceraulo, Technical, Quality & Regulatory Manager at Cornelius Group, describes how the company has gone about meeting the challenge

There was a time when a chemical distributor could be considered simply a trader. A demand was identified, a supplier was found, material was purchased and sold. Life was simple. The reality now is that the world is a smaller but much more complicated place.

A chemical manufacturer needs distributors to offer more than a middleman service. Customers not only want the right price but quality of supply – meaning consistent supply with no disruptions, just in time deliveries, security, legality and, of course, quality of product. To survive, the distributor has had to evolve.

Some of the key changes affecting Cornelius’s business in the industrial, cosmetic, food, nutritional and pharma sectors described below.

Quality challenges

The relationship between the distributor and the manufacturer is vital to the quality of supply – working together to provide the best service possible for the customer is essential. The distributor must act as a quality buffer for the customer, understand the supply chain, manufacture of the product and assess potential issues. The distributor must be sure that it can form a good working relationship with the manufacturer and that the manufacturer will be flexible enough to meet the needs of the end customer.

As manufacturers outside Europe will often work to different standards and legislation, a European distributor needs to be careful to work only with companies that can meet the high standards the customers expect, communicating customer needs clearly to the manufacturer. Cornelius selects suppliers that have these qualities and looks to develop long-term business and goals together. We have implemented a robust audit system to highlight business risk, and prioritise auditing of suppliers, putting in controls to protect the customers.

Cornelius’s China office has been invaluable in developing a network of reliable, high quality Chinese suppliers. For example, we have QC tested several batches of the food grade material from our Chinese suppliers to the appropriate spec in independent labs to ensure the conformity of the ingredient to the standard declared. Cornelius strongly believes that low prices without convincing Quality Management Systems (QMS) or safe production facilities can in no way justify the corporate risk.

Legislative challenges

There are two major pieces of legislation to hit the chemical industry in recent years.

Regulation (EC) 1907/2006 REACH (Registration, Evaluation, Authorisation and restriction of Chemicals) has been described as the most important piece of EU legislation for 20 years. In the past, all too often new substances had been developed and put on the market in large quantities with insufficient information on the effect these chemicals can have on human health and the environment. REACH put the onus on the chemical industry to create dossiers on chemicals giving data allowing for the full awareness of the hazards materials may represent.

This shake-up has forced EU distributors to take control of their supply chains. The European Chemicals Agency (ECHA) had confirmed that 3,400 substances had been registered by 1t December 2010. There remain, however, more than 100,000 EINECS listed substances that still need to be registered.

EU distributors need to be sure that materials being imported are REACH pre-registered and be aware of the tonnage limit that will form the deadline for full registration in 2010, 2013 or 2018. We can confirm that all materials sold by Cornelius that fall under the REACH legislation have been confirmed to be preregistered with the manufacturers’ full intent to register.

Cornelius bespoke CRM systems have allowed us to contact all customers requesting Use Descriptors and pass these back up to the manufacturers to ensure these are included in the REACH registration and exposure scenarios. There will be a change to product SDS's as they need to be in the REACH Annex II format with a deadline of 1 December 2010 for substances and 30 November 2012 for mixtures, and the distributor needs to be ready to accommodate this change. We have also been monitoring materials containing Substances of Very High Concern (SVHC), which may have a risk of becoming unavailable in Europe, and can confirm that we have no products expected to be withdrawn from the market.

Classification Labelling and Packaging (CLP EC No 1272/2008) legislation came into effect on 1 December 2010 and has caused a shake up in the classification of goods hazardous for supply. This legislation seems to have passed some companies by, as some customers are unaware of the changes while all attention has been on REACH. There will be many goods now classed as hazardous that formerly were not.

The calculations for classifying mixtures have changed and there has been a change in the flash point deciding if a material is flammable, coming into line with the ADR transport regulations. The EU chemical hazard classification system now looks dramatically different: pictograms have changed to squares on a point, R phrases are now Hazard Statements, Safety Phrases are now Precautionary Statements.

Hazardous substance labelling now needs to be in the CLP format, although there is a period of grace for product already produced and labelled in warehouses in the EU (see Figure 1 timeline). Safety Data Sheets need to be rewritten to include the new classifications though the CLP deadlines do not appear to have been set with consideration for the REACH Annex II requirements. Figure 1 provides a useful timeline outlining the deadlines for REACH and CLP.

Figure1: Legislative time line REACH and CLP

As European distributors we need to play a key role in the communication of these changes, particularly to the Non EU suppliers.

(EC) No 1272/2008 Article 1 includes the following:

''(b) providing an obligation for:

(i) manufacturers, importers and downstream users to classify substances and mixtures placed on the market;

(ii) suppliers to label and package substances and mixtures placed on the market;

(iii) manufacturers, producers of articles and importers to classify those substances not placed on the market that are subject to registration or notification under Regulation (EC) No 1907/2006;

(c) providing an obligation for manufacturers and importers of substances to notify the Agency of such classifications and label elements if these have not been submitted to the Agency as part of a registration under Regulation (EC) No 1907/2006.''

This effectively puts the onus on the importer into Europe to ensure that the product is properly labelled with the correct SDS and notified to the European Chemicals Agency. Though CLP covers chemicals that fall under the scope of REACH we must not forget that hazardous chemicals that do not fall under REACH, for example flammable food materials, must still comply with the CLP regulations.

Cornelius has tackled these challenges to give our customers confidence in continued supply and help our suppliers by investing in training of staff and software, allowing us the flexibility to create our own compliant documents. Cornelius is actively making its own notifications to ECHA and our experts now often guide our suppliers in classification of products and paperwork requirements.

‘The raft of legislation that has hit the industry in recent years, has created a huge volume of work and cost for the industry,’ said Dr Neville Prior, chairman of Cornelius and chairman of the Chemical Business Association, (CBA), the main industry association for chemical distributors and others associated with the chemical supply chain. ‘However, CBA has managed to provide very strong support for its member organisations, to ensure that the sector meets all the legislative requirements, and can face a strong and sustainable future.’

Added value services

Offering added value in the supply chain is essential. An increasing number of end product manufacturers are looking to reduce their supplier base. For a manufacturer with worldwide manufacturing sites, European legislation (such as REACH, CLP and different SDS requirements for each country) may appear confusing and present a problem. Sourcing materials worldwide using a Europe-based distributor experienced in all the facets of European legislation is a much welcomed alternative.

The Cornelius Technical, Quality & Regulatory (TQR) Department's regulatory expertise and REACH/CLP support has allowed us to remove the burden of being an importer from customers who may have previously imported goods direct.

Inventive and new ways of promoting our products are always being sought out. In 2009 Cornelius was the first distributor in the UK cosmetics industry to have delivered the ‘Virtual Exhibition’ at a time when customers were reluctant to travel to large exhibitions due to cost and time implications. The enabled us to promote our principals and services in a new interactive way while cutting customer travelling costs during a financially dificult period.

We are always looking for new ways of working with our principals to find innovative solutions to the difficulties faced by the end product manufacturers to benefit the whole industry. For example, Cornelius has co-ordinated the pioneering project between cosmetic supplier Lonza and the Soil Association in the UK, exploring and developing the scheme for an approved list of materials that would be accessible to formulators and developers and thereby bringing benefits to the manufacturer and customer.

Back in 2009 Cornelius invested in a project to implement a business development and marketing capability across the business, developing both the existing and new international markets sales and marketing strategies. As a result of the project, a clear marketing strategy was devised, allowing the company to grow and diversify against the background of the recent recession.

‘Enhanced marketing capability has allowed even stronger relationships to develop with our global principal,’ said group marketing manager Natalia McDonagh. ‘Working with our customers to grow their business with sustainable, quality assured products remains our main aim.’

Further to the regulatory expertise the Cornelius TQR Departments labs can prepare demonstrative samples, offer formulation support, innovations and suitability testing which offers added value to manufacturers and customers alike.

Ethical supply

Industry in general has become more aware of the impact we make on the environment, employees and society. This can be seen at supermarkets where there has been an explosion in availability of ethically sourced and Fair Trade products. There is a growing trend towards consideration of corporate social responsibility.

Cornelius has always regarded itself as an organisation at the forefront of its industry, and it is no different in terms of its philosophy to sustainability and corporate social responsibility, (CSR). The company’s strategy encompasses five strands:

  • Employees
  • Local Community
  • Supply Chain
  • Environment
  • External Stakeholders

Cornelius uses this strategic framework to ensure that it provides a rich environment for its employees, where they can flourish in a safe environment. We support our local community where we can, through the actions of our organisation and its employees; we manage our supply chains to the highest standards of safety and quality; we minimise our impact on the environment where we are able and operate to the highest business standards and ethics with all our stakeholders.

We not only believe that this is the right culture to have within our organisation, but also that it brings with it a level of sustainability to the company, which benefits all. This aspect of our culture continues to develop and shape our organisation.

While searching cosmetic shelves many consumers opt for 'natural' formulas and in the DIY store would rather avoid picking up the tin with a scary dead fish or harmful label. This commercial pressure, coupled with legislation change such as VOC level restrictions, has acted as a positive driver for change in the chemical industry. We have grown our portfolio of naturally derived materials and lower toxicity alternatives.

As many customers want naturally sourced materials to fulfil requirements of Ecocert and The Soil Association, we are having to tackle issues such as our impact on deforestation. Palm Oil products particularly pose many questions, with many customers seeking RSPO (Roundtable on Sustainable Palm Oil) Certification.

In the food sector worldwide food labelling laws differ greatly. When dealing with food grade materials manufactured outside the EU great care is needed to monitor materials that may potentially be of Genetically Modified Origin. Our industry needs to have a system in place to warn customers of the potential presence of GMOs. We need to be aware of any changes in the manufacture and feedstock materials in food products as a change that may not be significant in the US may have huge labelling repercussions in the EU. All this leads to the need for distributors to have strong relationships with their suppliers to allow for full and open transfer of information.

In conclusion distributors face many challenges and responsibilities, both legal and ethical, for the products they supply. This makes us an essential part of the supply chain, being able to add value for both the manufacturer and customer.

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