3M: TREAT PURCHASERS OF CUSTOM CHEMICALS MORE LIKE PARTNERS

3M: TREAT PURCHASERS OF CUSTOM CHEMICALS MORE LIKE PARTNERS

Due to its unusual network of business relationships, the custom chemical service industry requires suppliers to handle their customers more like partners, according to an executive from Minnesota Mining & Manufacturing Co., a company known for its agility in new materials and product markets.

William G. Paterson, director of business development for 3M's Chemicals, Film & Allied Products group, offered the perspective here last week as one of the key presentations of Informex '88 - the Synthetic Organic Chemical Manufacturers Association's annual custom chemical services trade fair, attended by some 450 industry executives this year.Comparing the custom chemical manufacturing business to other industries, Mr. Paterson noted that its customer relationships are unique. He called the relationships incestuous.

He said, It's a strange situation that the companies around you are not only suppliers and customers but competitors or partners. Automobile dealers, for example, have no similarities to automobile manufacturers. In our industry, if you are chemical company B, your vendor D is certain to be another chemical company, your customer C could well be a third chemical company - it could even be company A. You can't imagine that in the auto industry or almost any other that comes to mind.

The result is a complex situation that influences the decisions by companies about their methods of manufacturing, he said. Most members of Mr. Paterson's audience agreed they had customers who could make the product purchased themselves.

Noted Mr. Paterson: This isn't just a customer coming to you with what's a seemingly trivial question . . . like you're one of the few suppliers. That company must have had a reason for coming to you. Why do they want you to make something for them when they could make it for themselves?

Mr. Paterson said the answers to that question reveal the need for an attitude of partnership in the industry. He said companies divide their strategic plans in two groups - those they can efficiently do themselves and those they need from outside.

He's come to you because he thinks you make a suitable business partner, emphasized Mr. Paterson. You must be a value-added supplier and help the customer meet his objectives.

Mr. Paterson compared custom manufacturing transactions to strategic alliances and offered some guidelines for partnerships. The toughest rule, he said, is to make the deal a good one for your partner as well as for yourself. You'll establish a reputation as a good company to do business with and it will lead to multiple transactions.

Another of Mr. Paterson's guidelines is that knowledge transfer is important. He urges that knowledge be transferred into the servicing company or it won't be able to do a good job.

Most importantly he urged, The atmosphere of relationships and feelings of trust you establish during negotiations are just as important as the transaction itself.