The future of agrochemicals procurement: Challenges and solutions

Date:08-28-2023

By George Mathew

The production of agrochemicals includes the process of mixing materials like chlorine, yellow phosphorus, and bromine which are subject to strict rules and regulations. There is a need for conducting thorough research on suppliers and regulations while procuring these materials and making effective use of the information retrieved for making procurement decisions. The production of agrochemicals involves the synthesis of various chemical compounds that serve specific purposes in agriculture, such as fertilization, pest control, and disease management. The specific materials used can vary depending on the type of agrochemical being produced. Some of these chemicals are esters, ammonia, nitrogen compounds catalysts, and surfactants. Agrochemical companies need to identify and evaluate potential suppliers of the required raw materials, chemicals, and additives to ensure continuous procurement of the best quality of materials in order for the smooth functioning of the company.

Challenges in the current agrochemicals industry

Regulatory requirements:

Ever-changing regulatory requirements in the agrochemicals industry is a challenge as companies need to comply with the changes. The agrochemical sector purchases chemicals like ethanol, methanol, nitrogen compounds, etc. that, if used improperly—whether on purpose or accidentally—can be harmful to human health and the environment. These chemicals are subject to strict regulations to ensure their safe use and minimize their environmental impact. The main issue that comes up is determining the new alterations regularly. These regulations vary across countries and regions, making it necessary for agrochemical companies to navigate a complex landscape of regulations. This activity can be time-consuming and costly as the purchasers need to conduct continuous research to stay up to date with the latest information.

Increased procurement costs:

Agrochemical companies rely on various raw materials and inputs to manufacture their products. The solvents used like ethanol and methanol are offered at different prices by different suppliers among which a few vendors mark higher rates than the prevailing market price which increases the procurement cost. Fluctuations in these prices can significantly impact the cost of manufacturing agrochemicals, and the availability and accessibility of certain chemicals like catalysts can also affect procurement costs. Agrochemical companies may need to source materials from different suppliers or regions, which can lead to transportation and logistics expenses. Agrochemical companies may need to carefully manage their costs while ensuring the quality and effectiveness of the solvents, surfactants and stabilizers procured.

Supply chain disruptions:

One of the main reasons for supply disruptions is the complexity of the supply chain, which makes it difficult to ease the flow of raw chemicals to agrochemical companies. These disruptions can be attributed to several factors, including natural disasters, geopolitical tensions, transportation issues, and regulatory changes. Geopolitical tensions and trade disputes can lead to import/export restrictions or tariffs, affecting the procurement of agrochemicals from certain regions. Transportation issues, such as port congestion or disruptions in logistics, can delay the delivery of chemicals to the intended destinations. The purchasing company must monitor the supply chain and analyze the risks attributed to the procurement and resolve them beforehand.

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