Europe Reports

Defining the boundary between products and services

By Sean Milmo | June 17, 2007

For coatings raw materials suppliers, offering customers both products and services is a complex issue.

Most coatings manufacturers provide a range of services to their customers without having to worry too much about where to draw the line between product and services.

For suppliers of coatings raw materials, however, the boundary between product and services can be a crucial and complex issue.

For a start they have to be careful about the balance between the cost of the product and that of the service so that the service component does not diminish profitability.

Raw material suppliers also have to be particularly careful that they do not stray too far into the territory of their customers so that their services begin to compete with those of their customers.

On the other hand producers of technologically sophisticated materials may find that services-or "forward integration" as some companies call them-have to be a vital part of some sections of their business. Certain customers need a considerable amount of technical backup to ensure they apply materials correctly, particularly innovative ones. Furthermore this support may have to be extended beyond the customers themselves to end-users further down the value chain.

"There is a trend in the materials sector, not just in coatings, for there to be increasing differences between customers who have adequate expertise themselves and those who need full support," Patrick Thomas, chairman of Bayer MaterialScience (BMS), a leading polyurethane materials supplier, told a press conference at the European Coatings Show at Nuremberg, Germany.

"It has become quite a challenge dealing with these differences," he continued. "We have to create new business models and find new ways of giving customers the option of full support packages."

BMS is conscious of the danger of becoming a rival to its own customers, particularly since the supply of polyurethane materials can cover a large proportion of the steps in the manufacture of certain coatings.

"We will remain a raw materials company and not go beyond that role," stressed Joachim Wolff, head of BMS's coatings, adhesives and sealants business.

BMS revealed at the conference that it is setting up a company called Viverso specifically for customers who do not require or want backup services. Due to start business at the beginning of next year, the 100% wholly owned subsidiary based at Bitterfeld, Germany, will handle orders over the internet for materials like alkyd and unsaturated polyester resins and hydroxyl acrylates.

"Viverso will have a new business model based on lean and simple processes," said Wolff. "It will allow us to respond quickly to changes in supply and demand but also to cope with new developments in raw material prices. Our primary focus is on constant product quality and efficient logistics."

The majority of BMS customers will be supported by tailored services provided by sales, commercial and technical staff with the emphasis on innovation through development partnerships.

"Services will be linked back to innovation," said Thomas. "We can be innovative only by working closely with customers and helping with the development of end-use applications."

Research, development and technical marketing operations at the company are being merged into a business development unit which will concentrate on the four growth areas of polyisocyanates, prepolymers, dispersions and raw materials for UV-curing systems.

"Companies that can support their customers quickly, flexibly and with the most innovation potential will inevitably be the most successful," said Wolff. "To do this it is essential to have an efficient innovation chain-from product research through application development to technical marketing."

One area of innovation in which BMS is involved is the development of optical data storage technologies in response to the emergence of high-definition imaging products which will require at least six times more storage capacity than even that on the latest Blu-Ray and HD-DVDs. BMS is working on polyurethane coatings systems for discs able to hold hundreds of gigabytes (GBs) of data, while also making the polycarbonate for the manufacture of the discs themselves.

"In the development of these coatings there has to be close cooperation down the chain to the OEM manufacturers like Philips, Sony and Hitachi," said Thomas. "We are in a key position as a raw materials supplier because we are able to provide both the polycarbonate substrate and polyurethane coatings which cannot be developed properly for the new storage technologies without an understanding of the polycarbonate system."

Ciba Speciality Chemicals is another coatings raw material supplier that has been fast expanding its services in support of innovations by its customers. It now has a wide range of services which assist innovation in color design, formulations and management.

At the beginning of this year it acquired ColorViz, a French startup company with technology for 3-D visualization of colors in coatings and plastic substrates.

"The ColorViz system helps to define colors accurately on screen with numerous extras, such as special effects in pearl, sparkles and textures," explained Gareth Morgans, marketing specialist at Ciba Color Services.

Ciba has also just introduced improvements to its Colibri color matching system which provides recipes for formulations of opaque, translucent and transparent colors. It matches color and opacity while also optimizing pigment load to prevent over-pigmentation in opaque paints.

The new version of Colibri has a visualization tool for exercising quality control and for calculating recipes on the basis of a list of standards. It also has a viscosity module and an ability to make the pigment selection and load consistent with a specific thickness.

Ciba also provides to coatings, ink and masterbatch producers, as well as designers and converters, packages of information and forecasts on global and regional color trends, combined with design tools and technology support.

With the majority of Ciba's color services, however, a sharp distinction is made between them and the company's products, such as its high performance and effect pigments, UV absorbers, photoinitiators and other additives. Customers have to pay separate fees for the services.

"Ciba's services go far beyond product and application technology," said Morgans. "We provide our customers with solutions that cover the whole color chain, right from the initial concept to the finished object and we have an expert team dedicated solely to services."

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