As we all look back over the last few years of pandemic-era economics, it’s never been clearer how much the success of every business depends on the strength of its supply chain. And specialty oil suppliers can be particularly impactful.
Signal Fluid Solutions staff recently gathered to discuss key strategies that affect the bottom line for specialty oil customers: manufacturers of synthetic rubbers, thermoplastic elastomers, agricultural products, personal care products, and many more.
Below, we pull back the curtain to give you a behind-the-scenes look at three “secrets” about our industry that have a direct impact on your bottom line. (Though we admit they’re not so secret if we’re publishing them, of course.)
The Impact of Specialty Oil Suppliers
There’s nearly as much diversity among specialty oil customers as there is among the brands and consumers these industries serve. This is far from an exhaustive list:
- Automotive and Industrial Oil Manufacturers
- Food Manufacturers
- Agricultural and Household Product Manufacturers
- Rubber, Adhesives, Sealants, and Insulation
- Household and Sports Equipment
What these industries have in common are hundreds of niche needs that major refiners aren’t prepared to fulfill directly.
Specialty oil suppliers, like Signal Fluid Solutions, are essential intermediaries between customers and refiners, filling critical gaps in the market and often developing new niche products.
Naturally, customers often have questions about pricing, quality, and supply security. They want to know about the critical supply chain factors that affect their bottom line.
Here are three of the most important.
1. Refiners and specialty oil suppliers bear significant pricing pressure from crude oil fluctuations before adjusting costs.
Historically, typical small fluctuations in crude oil pricing do not have an observable effect on specialty oil pricing.
This is because most refineries, anticipating these fluctuations, are good at setting stable pricing floors that are conservative enough to stay above the volatility.
It takes a sustained period of unanticipated market increase to force refineries to raise these prices. This happened several times in the first three quarters of 2022.
A sustained period of rising prices, like the one we saw in 2021-2022, leads to reduced margins, pricing pressure, and potentially, pricing increases for specialty oil customers when necessary.
The opposite is also true. A period of sustained market decrease, like the one we’re now seeing in Q3-Q4 of 2022, eventually leads to pricing decreases at the refineries.
With reduced pricing pressure from refiners, specialty oil suppliers like us hope to have more pricing flexibility in 2023 as we extend competitive rates to our customers.
2. Certifications have a much greater impact on logistics and product quality than many realize.
On the surface, specialty oil supplier certifications are about meeting the minimum requirements for food safety and the safe transportation of chemicals.
However, the benefits to specialty oil customers go far beyond checking a box for meeting regulatory compliance requirements. Here are a few examples:
- SQF Certified. To obtain a Safe Quality Food certification, suppliers must meet rigorous requirements for efficiency and continual improvement that exceed the internationally-recognized ISO 9001 quality management system (QMS). In addition to exceeding FDA food contact standards, think of this as a 4-star rating for operations, quality, and logistics management.
- REACH Compliant. For specialty oil suppliers to comply, they must satisfy the European Union’s requirements for managing the risks associated with transporting chemicals. The key benefit for customers is the ability to freely transport products into and throughout EU countries. UK REACH and K-REACH are similar sets of guidelines that open United Kingdom and Korean markets, respectively, to suppliers and customers as well.
- Kosher, Pareve, & Halal. These certifications primarily concern standards for food contact. But their benefits extend beyond religious markets, as they are more broadly associated with end product quality. Almost 80% of all kosher sales are made outside of the Jewish market, making the use of kosher-certified white oil suppliers a key benefit for any food manufacturer.
3. A diversity of supply points is one of the most important factors concerning supply security.
Specialty oil suppliers are only as dependable as their own supply lines. If you’re working with one that sources all the specialty oil your business needs from one location, you’re at risk.
Floods, tornados, and winter storms can knock out roads and bridges on key supply routes, bar access to railyards and other transload locations, or damage terminals themselves.
Of course, among the most significant threats are hurricanes.
At the time of writing, Ian is only our most recent reminder of the havoc hurricanes can wreak on supply lines. And of course, no one who’s been in the oil industry long enough to experience Katrina will easily forget the dramatic disruption it caused.
The only way to mitigate the risk of natural disasters to your specialty oil access is to work with suppliers who are not dependent on any one region, such as the Gulf Coast.
This is one reason why Signal Fluid Solutions maintains deep inventories at seven terminals across the U.S. and one in Europe.
The second is convenience, as we try to position our terminals as close to our customers as possible.
To inquire about partnering with Signal Fluid Solutions and to learn more about the “secrets” of turning our success into your success, contact us today.
