Need to Know
The lubricants business has confronted—and continues to confront—a lengthy period of extraordinary challenges. Among them are supply chain interruptions, an unprecedented number of cost and price increases, labor shortages, and shortages and disruptions in the transportation sector. Add to the list the rapid rebound in lubricant demand after the sharp drop that occurred following the initial impact of the pandemic. And beyond these challenges, each and every person in the business has a life and must consider the lives and livelihoods of others in their day-to-day decision-making.
Without a doubt, the past two years have tested the mettle of everyone in the industry, and most have figured out ways to get through it. But surprisingly, among all the challenges lubricant distributors talk about, many say the most confounding and troublesome one is poor communication from their suppliers.
According to many distributors—across nearly all brands—major suppliers and some independent lubricant manufacturers are falling woefully short of keeping them informed about supply issues and working with them to navigate through the shortages to assure business continuity and sales growth. To the contrary, the level and quality of communication has diminished significantly in the past year. Not only is this hurting sales, but it is driving brand switching.
As many in the business are painfully aware, supply of certain finished lubricants and greases has been extraordinarily tight for more than a year. Beyond deep allocations, the shortages have been so profound that some products are simply unavailable. Distributors cannot get the product, and retailers are “out of stock.” While it varies by major, the scarcity of products has been most pronounced with 15W-40 and 5W-40 heavy-duty engine oil, certain grades of full synthetic passenger car motor oil, some hydraulic fluids, way oil, synthetic gear oil and grease.
While there are many underlying reasons for the shortages, the ones at the point of the stick include very tight supply of various lubricant additives as well as certain base oils; however, base oil supply is now loosening. In addition, the supply of grease took a significant hit after the explosion and fire at the Chemtool plant in June 2021.
Distributors say they understand what’s driving the shortages. What they don’t understand—and take issue with because it is costing them business—is the level and quality of communication coming from their suppliers. Specific to these concerns is poor communication about product availability and the status of orders.
While it is understandable that suppliers’ inventory of certain products can run low in these challenging times, what many consider wholly unacceptable is finding that their supplier is out of stock at the time an order is placed or seeing that the supplier has canceled an order after it has been placed. Adding insult to injury, some distributors cite instances where if not for them calling the supplier, they would not even know an order was delayed or canceled. Further, several distributors say they have called the trucking company to check on the status of a delivery only to find, unbeknownst to them, their order was canceled by the lubricant manufacturer.
These situations create anxiety for distributors who must scramble to tell their customers the bad news and try to resell them another product. Worse yet, some suppliers offer little to no clue as to when backordered products will be available. Distributors say they have been told repeatedly by suppliers that the kinks in the supply chain should be worked out in three to six weeks. In many cases, particularly related to grease, these estimates are already off by several months.
In short, distributors say they need straight and honest answers from their suppliers concerning product availability, lead times and the status of orders. And ideally, the suppliers would be proactive in providing such information, and offer some level of guidance about how to move forward when supply-line interruptions are anticipated.
Whatever the answers are and however long delays might be, distributors say they can deal with it. But trying to manage their business and customer expectations when left in the dark with no information—or with scant or inaccurate information—can be costly to both the distributor and its suppliers. The most visible cost is loss of market share as customers switch to other lubricant brands in an effort to ensure they have what they need to keep their businesses running. In addition, it is increasingly common to hear distributors say they are reluctant to pursue business with new accounts because of the uncertainty of supply and the risk of being unable to service existing accounts should they take on new business.
While effective communication is fundamental to the success of any sales organization, it has apparently been quarantined by some since the supply chain was rocked by the COVID-19 pandemic and other issues in the past two years. As one large distributor said, at times it almost seems as if the majors are hiding when questions about supply come up. But in fairness to the majors, this distributor and others say it is possible the majors are experiencing the same challenges in getting information from their own suppliers (i.e., suppliers of base oils, additives, packaging and transporters).
But whatever the reason, communication—or a lack thereof—has become one of the more formidable challenges for distributors. This problem is affecting sales and market shares in ways that can be far reaching and long lasting. When customers fail to get information from their suppliers at any point in the supply chain, you can be sure they will look for and find other suppliers who can give them answers they can count on.
Tom Glenn is president of the consulting firm Petroleum Trends International, the Petroleum Quality Institute of America, and Jobbers World newsletter. Phone: (732) 494-0405. Email: tom_glenn@petroleumtrends.com