An insight into small business success: the UK chemical distribution industry

1. An insight into small business success: the UK chemical distribution industry Dr Evri Lampadarios Business Manager WSB PT Lecturer LBU

2. A bit about myself…

3. Contents The research problem The chosen industry My research Supplier management Challenges

4. The ‘research problem’ No universally accepted definition for SMEs with significant variations in different countries (Smallbone et al., 2010; Unger et al., 2011) No single agreed-upon definition of success (Rogoff et al.,2004) No universally accepted model to incorporate all aspects of small business success (Chawlaet al.,2010; Lampadarioset al., n.d.) Knowledge more fragmented than cumulative(Dobbs andHamilton, 2007) High failure rates and poor performance levels (Gray, et al., 2012; Ropega, 2011) CSFs vary with the business environment(industry and country) (Krasniqi et al., 2008; Simpson et al., 2012). …creates need for more empirical studies to investigate the critical success factors in each individual industry and in a specific country setting.

5. UK chemical distribution industry £4.42bn turnover 10% of the total European market 6,800 employees Forecasted for growth Strong consolidation trends Regulatory requirements High fragmentation Strong presence of SMEs To make it worse…. No research on success/ failure and modus operandi No universally agreed definition of a chemical distributor(Chemagility, 2008). No official statistical and/or financial data Confusion with other types of trading in the industry Wide variety of functions

6. Chemical distribution Rationale Chemical distribution originates in the gap between producers who wish to sell large lots without regulatory or logistical complications and customers demanding small volumes and who have very specific needs on technical, regulatory and logistical level (Mortelmansand Reniers, 2012) Chemical distributors allow their principals to profitably reach smaller customers in many industries and countries (Chemagility, 2008) However… genuine chemical distributors add value through an extensive range of services to both customers and suppliers (Hornke, 2013)

7. Definitions No universally agreed definition….wide variety of functions and confusion with other types of trading in the industry Not logistics Not traders Not agents ‘A company that takes title to bulk and/or non-bulk chemicals from a chemical manufacturer or supplier and re-sells the chemicals to an end-user’ (NACD, 2005)

8. Classification • By products • Commodities • Specialities • Full range • By geography / market coverage • Regional / national • multinational

9. Services Customers: broad product portfolio with complementary products access to reputable suppliers competitive (and stable) pricing stock management and Just In Time (JIT) deliveries competent and knowledgeable sales team technical support and problem solving skills product expertise for formulation purposes value-added services, for instance, custom blending, repackaging) sample management financing and credit in line with local terms safety training and hazardous waste removal Sources: BCG, 2013; Burns, 2010; Chemagility, 2008; Chemanager, 2013; Districonsult, 2012; FECC, 2013; Mortelmansand Reniers, 2012).

10. Services Suppliers: market share and penetration logistics services including storage and packaging in-depth market intelligence assist with the implementation of marketing strategies demand forecasting and planning market development capabilities new product approvals conforming to local regulations and language repackaging and relabelling arrangement of import authorizations trainable staff with good technical knowledge modern IT infrastructure allowing automated information exchange Sources: BCG, 2013; Burns, 2010; Chemagility, 2008; Chemanager, 2013; Districonsult, 2012; FECC, 2013; Mortelmans and Reniers, 2012).

11. In a nutshell… Quality Speed Flexibility Dependability Cost

12. Finding a chemical distributor …how hard can it be??? Complex market Varied requirements and strategies Managing expectations Cultural differences

13. Important… …but still academically understudied

14. My research • Aim: Identify CSFs for SMEs in the UK Chemical distribution industry • Target group: • SMEs as defined by the European Union; located in the UK; • not part of a another organization or belonging to a larger corporation; • no manufacturing activity and capability • Population: 180 • Key informants: Owners and Senior managers (CEOs, MD, Directors)

15. My research • Twenty two (22) factors critical to small business success identified and their impact is investigated. • Categorised in: • entrepreneurial (relating to the personal characteristics of the owner/manager) • enterprise (relating to the firm) • business environment (external) factors • Positivistic philosophy, deductive approach, concurrent embedded mixed methodology, survey strategy, self-administered questionnaires. • Response rate 65.5%.

16. Success factors

17. Critical Success Factors (CSFs)

18. CSFs explained… • Entrepreneurial factors • Entrepreneurial Orientation • Prior Work Experience and Management skills • Enterprise factors • Customer Relations Management • Market and Product development • Human Capital • Strategic Planning • Business Environment factors • Regulatory compliance • Economic environment

19. Main findings Success is a multidimensional phenomenon, where both firm-internal and firm-external factors need to be optimal simultaneously. Flexibility and adaptability required

20. Main findings II • SMEs are not a homogeneous group - different strategies are needed for different sized businesses. • Variations in all enterprise and business environment CSFs • i.e. customer focus, formal vs informal strategy, sources of finances, HR management, market orientation, regulatory strategy

21. Main findings III • Strong interrelations • Business networks / owners/managers’ prior experience. • Age, education, skills, financial and social capital accumulated / prior working experience • Economic environment / financial resources • Personality / entrepreneurial orientation. • EO / elements of the political and socio-cultural environment • Marketing / regulatory compliance, customer relations management, market and product development and strategic planning. • Internationalisation / market and product development.

22. Supplier Management Where does it fit in?

23. Supplier Management …remember distributors do not manufacture products Significant part of CRM and MPD and HR Integral part of strategic planning Suppliers / Principals key to success Suppliers need to be treated as best customers Input in NPD and R&D Providing resources: technical expertise, training, product knowledge, applications etc. Opportunities for integration

24. Where is the focus then? • Need for extra services • Integration • Outsourcing • Strong supplier relationships • Focus on operations management

25. Integration Way to survive and solve issues?

26. Outsourcing • Way to survive and solve issues? • Main functions to outsource: • Logistics • Warehousing • Sampling • Accounting

27. Location Where would you base your offices / warehousing? • Criteria: • Infrastructure • Access • Customer base • Suppliers

28. Challenges in real life • Suppliers • Selection • Single or multiple sourcing? / Exclusivity or not? • Global sourcing / internet • ‘Market based’ or ‘relationship’ supply relationships? • Customers • Expectations / Do they know what they really want? • Internal issues • Manufacturing delays • Shutdowns: planned and unplanned / FM • Inventory / Warehousing • Logistics / Transportation • Changes in demand? Seasonality / environment / trends?

29. Future / Current research CSFs for SMEs – European chemical distribution – Collaboration with FECC SMEs - Food storage and distribution – Collaboration with Food Storage & Distribution Federation (FSDF) SMEs PR Consultancies – Collaboration with PR Consultants Association (PRCA) Call for new collaborations

30. References • Boston Consulting Group (2013) The Growing Opportunity for Chemical Distributors: Reducing complexity for producers through tailored service offerings, [online], Available at: https://www.bcgperspectives.com/content/articles/process_industries_supply_chain_management_growing_opportunity_chemical_distributors/#chapter1, [Accessed 20 February 2014]. • Burns, N. A. (2010) Chemical Distributors, [online], Available at http://www.neilaburns.com/2010/11/chemical-distributors, [accessed 15 December 2010]. • Chawla, S. K., Khanna, D. and Chen J. (2010) Are Small Business Critical Success Factors Same in Different Countries?, SIES Journal of Management, Vol. 7, Iss. 1, pp. 1-12. • Chemagility (2008) UK Chemical Distributor Market Report 008: Information, Insight and analysis of the UK Chemical distribution industry, Surrey: Chemagility. • Chemanager (2013) Distribution & Logistics for the Chemical and Life Sciences Industries, [online], Available at: http://www.chemanager-online.com/sites/chemanager-online.com/files/printausgabe/epapers/SDL/SDL0113/blaetterkatalog/index.html, [Accessed 14 February 2014]. • DistriConsult (2012) Chemical Distribution in 2012: What’s next on the horizon?’ 6th Brazilian Congress of Chemicals and Petrochemical Distributors (EBDQUIM), Praia do Forte (Bahia), 16th March 2012, [online], Available at: http://www.associquim.org.br/ebdquim2012/palestras/Ebdquim2012_G%C3%BCentherEberhard.pdf [Accessed 10th May 2013] • Dobbs M. and Hamilton R. T. (2007) Small business growth: recent evidence and new directions, International Journal of Entrepreneurial Behaviour and Research, Vol. 13, No. 5, pp. 296 – 322. • FECC (2013) The Chemical distribution Sector in Europe [online] Fecc.org., Available at: http://www.fecc.org/fecc/about-fecc/the-chemical-distribution-sector-in-europe, [Accessed 9 March 2015].

31. References • Gray, D., Saunders, M. and Goregaokar, H. (2012) Success in challenging times: Key lessons for UK SMEs, University of Surrey. • Honrke, M. (2013) The future of chemical distribution in Europe: Customer relations as key value lever, Journal of business Chemistry, Vol. 9, Iss. 2, pp. 65-66. • Krasniqi, B. A., Shiroka-Pula, J. and Kutllovci, E. (2008) The determinants of entrepreneurship and small business growth in Kosova: evidence from new and established firms, International Journal of Entrepreneurship and Innovation Management, Vol. 8, No. 3, pp. 320–342. • Mortelmans, S. and Reniers, G. (2012) Chemical distribution in Belgium from 2007 to 2010: An empirical study, Journal of Business Chemistry, Vol. 9, Iss. 2, pp. 105-113. • National Association of Chemical Distributors (NACD) (2005) The Chemical Distribution Industry & Its Focus on Security, [online], Available at: http://www.chemserv.com/pdf/NACD%20ChemicalSecurity.pdf, [Accessed 15 February 2015]. • Rogoff, E. G., Lee, M. S. and Suh, D. C. (2004)“Who Done It?” Attributions by Entrepreneurs and Experts of the Factors that Cause and Impede Small Business Success, Journal of Small Business Management, Vol. 42, Iss. 4, pp. 364–376. • Ropega, J. (2011) The Reasons and Symptoms of Failure in SME, International Advanced Economic Research, Vol.17, pp. 476-483. • Simpson, M., Padmore, J. and Newman, N. (2012) Towards a new model of success and performance in SMEs, International Journal of Entrepreneurial Behaviour and Research, Vol. 18, Iss. 3, pp. 264-285. • Smallbone, D., Welter, F., Voytovich, A. and Egorov, I. (2010) Government and entrepreneurship in transition economies: the case of small firms in business services in Ukraine, Service Industries Journal, Vol. 30, No. 5, pp. 655-670 • Unger, J.M., Rauch, A., Frese, M. and Rosenbusch, N. (2011) Human capital and entrepreneurial success: A meta-analytical review, Journal of Business Venturing, Vol. 26, pp. 341-358.

32. Thank you! Any questions?