Collaboration with partners up and down the supply chain is central to better understanding customer needs and preparing for cyclical demands, especially in volatile markets. The pandemic underscored the importance of never being too prepared, and it’s a lesson that drives our planning and coordination today. Alliance for Chemical Distribution (ACD) members have navigated product overstock and backlogs that have become all too familiar since the height of the pandemic, and our members and supply chain partners have adjusted their business planning and focused on building relationships to stay abreast of these market flows. Optimizing our relationships with supply chain managers in the paint and coatings industry has prepared us to better tackle market fluctuations and logistical challenges. So, when supply chain pressure points arise, we can quickly work together to identify solutions. The chemical distribution industry may face a range of challenges, but through our long-term partnerships with our customers, we can better navigate this “new normal” of supply chain disruptions and uncertainty, together.

Several significant trends in the paints and coatings industry are shaping distribution strategies, most notably ongoing supply chain challenges intensified by ocean freight disruptions and geopolitical unrest. To address these issues for our customers, we have bolstered our logistics by securing additional ocean freight contracts, analyzing route options, and creating backup strategies while increasing our on-hand inventory to counteract longer lead times. This investment in inventory reduces supply instability and lowers risk for our customers.

Additionally, regulatory pressures drive formulation changes, particularly concerning "forever chemicals" that are highly persistent in the environment and resistant to degradation, such as PFAS, including fluoropolymers, commonly used in coatings. These chemicals are of significant concern due to their environmental persistence, bioaccumulation potential, and associated health risks, leading to increased regulatory efforts to control their use.

Ongoing global supply chain pressure points continue to be a significant challenge to ACD members and our partners in the paint and coatings industry. Despite assuming we saw the worst during the pandemic, supply chain uncertainty and high inflation continue to impact businesses both small and large. Between labor disputes and shipping challenges, these fluctuations have become the “new normal.”

In addition to labor shortages and economic declines, customers of chemical products must be cognizant of labor disputes at our nation’s ports and Canada’s rail system. The industry relies heavily on ports and freight rail to efficiently and safely deliver critical materials, such as chemicals that are essential to industrial paints and safety coatings. However, unresolved labor disputes place significant uncertainty on the smooth operations of our supply chain, impacting businesses across the nation. For example, port closures due to unresolved labor contract negotiations have significantly changed delivery locations and caused logistical nightmares.

On the other hand, disruptions in the Red Sea continue to delay shipments of chemical products, forcing shipping vessels to reroute that have added weeks to delivery times. As a result of these logistical challenges, shipping carriers earlier this year increased cargo rates so much so that it outpaced what we saw during the pandemic. To put this into perspective, Asia to East Coast routes have jumped 130%, and Asia to West Coast routes have jumped 100%. These delays and price increases impact end-users, like our paint and coatings partners.

The paint and coatings distribution sector is currently facing significant challenges, particularly in logistics and labor, which are common hurdles shared by many in the industrial sector today. Additionally, rising interest rates have put pressure on the cash flow of our customers, especially small- and mid-sized businesses. To navigate these challenges, we rely on our “4 C's”: Committed, Connected, Candid, and Competitive. We prioritize putting people first, we deeply understand our customers' businesses, we are dedicated to solving sourcing challenges and ensuring a truly diversified supply chain, and we communicate clearly and intentionally, staying mindful of our commitments. Moreover, our ambition drives us to move faster and compete harder by identifying our customers' supply needs, securing competitive and diverse sources, and offering to hold inventory for just-in-time delivery with extended payment terms to help them navigate an unpredictable market.

Just as our business is shaped by market trends and the preferences and needs of our consumers, it is also shaped by the regulatory climate. As we continually assess consumer preferences, we must similarly evaluate regulatory trends and changes as we develop and promote new products and business offerings to stay compliant with the latest rulemaking. While keeping up with regulatory demands can be a burden, falling behind is worse.

A recent example of regulatory changes impacting our business is a new line of floor care products that Barentz formulated to be cognizant of the evolving consumer and regulatory concerns surrounding PFAS substances. Adjusting to new regulatory demands is always a challenge, but in the case of PFAS regulation, it is a demand that aligns with the preferences of many consumers. By adjusting our business to remain compliant, we have also had the opportunity to deliver to new customers or markets that we might not have had access to otherwise.

Regulatory changes, particularly those focused on sustainability, have significantly impacted our operations and product offerings. We have expanded our portfolio to include a broader range of renewable and bio-based chemicals in response to these changes. Recent acquisitions have played a crucial role in this expansion, allowing us to align more closely with evolving regulations and market demands for sustainable solutions. This shift helps us meet regulatory requirements and positions us to serve better our customers who are increasingly prioritizing environmentally friendly products in their formulations.

Customers constantly seek ways to reduce costs, streamline procurement and service needs, supplement their labor force, and scale their growth. As a distributor we bring product consolidation and supply chain stability to customers, and as a manufacturer we are able to deepen our partnerships by providing a wide range of services such as full laboratory capabilities, custom proprietary manufacturing and blending, and contract packaging to expand and improve their business.

As the paint and coatings industry continues to evolve with a strong focus on efficiency, our strategy has adapted to be more economical, integrated, and streamlined in our services and products. We are committed to leveraging ingenuity and technology to meet our customers' needs while ensuring we do not compromise on the personal and highly responsive relationships essential to a productive partnership. This approach allows us to stay ahead of industry developments while maintaining the close, trusted connections that our customers rely on.