Top Strategies for Efficient Chemical Procurement in the Agrochemical Industry
Agrochemicals are chemicals used in agricultural processes. The agrochemical products are utilised in the industrial agriculture sector, which includes biocides, pesticides (insecticides, herbicides, fungicides, and nematicides) and synthetic fertilisers.
Besides biocides and fertilisers, the inputs are chemicals applied to soils or crops for agricultural purposes. Efficient chemical procurement in agrochemicals is very important for large-scale agricultural operations.
A balance is achieved between efficiency and safety for humans and the environment by responsible management. When the world’s demand for food surges across the world, the chemical procurement strategies become more significant in sustaining agrochemical supply chains that encourage sustainable agriculture.
Navigating the Complexities of Agrochemical Procurement
The agrochemical world resembles a confounding crossroads of agriculture, chemistry, and global trade. In what is one of the most volatile industries, the procurement men and women face arguably unprecedented challenges. Thus, strategic solutions become a necessity.
As per Ground View Research, the agrochemical market, valued at USD 234.2 billion in 2022. According to reports, this number is going to rise with a CAGR of 3.4% by 2030. This puts up many opportunities and challenges for tomorrow’s procurement teams.
{Ref: USD 234.2 billion in 2022, CAGR of 3.4% by 2030}
Key Procurement Challenges in the Agrochemical Sector:
Here are the key procurement challenges in the Agrochemical sector when it comes to efficient chemical procurement:
- Fluctuating Prices: Fluctuation of prices is due to heavyweight geopolitical tensions, trade policy variations, and fluctuating energy prices.
- Interruption in Supply Chains: The pandemic of COVID-19 has exposed tender spots in the supply system of the entire globe.
- Regulatory Complexity: Over 160 countries have unique chemical regulations (FAO data).
- Sustainability Pressures: Growing environmental consciousness among stakeholders pressures buyers to prioritise eco-friendly sourcing, even when facing higher costs or limited supplier options.
- Quality Consistency: The variable raw material quality impacts the product’s efficacy.
Neshiel Agrochem understands these intimate challenges. With decades of experience, Neshiel Agrochem has shown that chemical procurement strategies can transform these challenges into competitive advantages.
This article will share with you five proven strategies that leading agrochemical companies employ to optimise their chemical procurement processes.
Implementing Strategic Sourcing for Competitive Advantage
The market has shifted significantly as strategic sourcing represents a major paradigm shift from traditional price-focused purchasing to a holistic, data-driven approach.
Bain & Company analysis shows that strategic sourcing helps in reducing 12 to 18 per cent in cost, along with improving supply reliability.
The Strategic Sourcing Framework:
- Spend Analysis and Category Management
- Conduct granular spend analysis across all chemical categories
- Identify consolidation opportunities (e.g., 73% of companies save through volume bundling)
- Design specific strategies for herbicides, fungicides, and speciality chemicals.
- Comprehensive Supplier Evaluation
- Execute weighted scorecards like quality 40%, reliability 30%, price 20%, and innovation 10%.
- Conduct on-site audits for critical suppliers
- Establish alternative supplier networks for risk mitigation
- Advanced Negotiation Techniques
- Total cost of ownership (TCO) modelling is higher than the unit price.
- Multi-year contracts with price adjustment mechanisms
- Performance-based incentive structures
Leveraging Technology in Efficient Chemical Procurement
The digital revolution has made some exceptional opportunities for chemical procurement optimization. A recent Deloitte survey found that 79% of chemical companies are increasing investments in procurement technologies.
Key Digital Solutions and Their Impact:
Implementation Roadmap:
- Process Digitisation: Automate purchase requisitions and approvals
- Data Integration: Connect ERP, CRM, and supplier systems
- Advanced Analytics: Implement machine learning for spend analysis
- Supplier Portals: Enable real-time collaboration
Ensuring Compliance and Sustainability
Regulatory compliance has become a vital factor in efficient agrochemical procurement. According to the European Chemicals Agency (ECHA) reports, there has been a 37 per cent rise in regulatory actions since 2020.
It becomes mandatory for the Agrochemical procurement team to implement proper chemical procurement strategies to ensure compliance and sustainability.
Global Regulatory Hotspots:
- EU: REACH and CLP regulations
- USA: EPA FIFRA requirements
- Asia: China’s new Chemical Management Regulations
- South America: Expanding GHS adoption
Compliance Management Framework:
- Regulatory Intelligence: Continuous monitoring of 160+ jurisdictions
- Documentation Management: Centralised SDS and compliance documentation
- Product Stewardship: Full lifecycle chemical management
- Audit Readiness: Regular compliance health checks
Sustainability Integration:
- Green chemistry adoption (market growing at 8.9% CAGR)
- Carbon footprint tracking across supply chains
- Circular economy initiatives (e.g., packaging recycling programs)
Building Strong Supplier Relationships
In an era of agrochemical supply chain uncertainty, supplier relationships have evolved from transactional to strategic partnerships. Generally, companies with strong supplier relationships enjoy better supply chain resilience in handling efficient chemical procurement.
Supplier Relationship Management Best Practices:
Tiered Supplier Classification:
- Strategic Partners (5-10% of suppliers): Joint innovation programs
- Preferred Suppliers (20-30%): Long-term contracts with KPIs
- Transactional Suppliers: Spot buying with quality controls
Collaboration Models:
- Co-development Programs: Joint R&D initiatives
- Vendor-Managed Inventory: Supplier-owned stock at client sites
- Risk-Sharing Agreements: Market fluctuation protections
Performance Metrics:
- On-time in-full (OTIF) delivery
- Quality incident rate
- Innovation contribution
- Sustainability performance
Future-Proofing Your Procurement Strategy
The agrochemical procurement landscape continues to evolve rapidly. Emerging trends include:
- Geopolitical Diversification: Nearshoring and friendshoring strategies
- Alternative Chemistry: Biologicals and green chemistry adoption
- Digital Twins: Virtual supply chain modelling
- Circular Supply Chains: Waste-to-resource initiatives
Conclusion
Efficient chemical procurement needs a multifaceted approach to combine strategic sourcing, digital transformation, regulatory expertise and strong supplier relationships in today’s complex agrochemical market.
It becomes essential for companies to master these elements to gain significant leverage on cost control advantage, agrochemical supply chain assurance, and regulatory compliance.
At Neshiel Agrochem, we’ve helped over 1500 agrochemical clients transform their procurement operations with over 90 products to ensure that clients find the perfect solution for their business.
