Fluctuation in resin prising shows little sign of slowing, and in fact gives every impression that it will only grow more volatile. Processors naturally are keen to devise a system that enables them to share the risk of plastics pricing's ebbs and high tides with their customers.
Packaging processor Mauser, with about €1 billion in annual revenues one of the world's largest in the industrial container market (intermediate bulk containers—drums and the like—of plastics and metal), is proposing its customers avail themselves of one of the two plans it has developed to help limit the negative affects of price fluctuation for both itself and its customers. "We would like to improve the situation in a joint effort with our customers, offering new solutions that minimize the distortion effect both for increasing and for decreasing raw material prices," explains the processor's CEO, Clemens Willée. His company worked on the plans with consulting company Simon-Kucher & Partners, which specializes in helping clients develop pricing strategies.
The two models Mauser (Brühl, Germany) is offering are similar to ones already used in other industrial sectors. The first model will involve responding to pricing indices at closer intervals. For instance, most suppliers of HDPE (Mauser's chief plastic buy) adjust prices monthly, and steel suppliers adjust them quarterly, to keep up with changes in the indices. Synchronizing customer price adjustments to this same schedule eliminates the lag effect of highly volatile price developments for both processor and customer. To reduce any additional administrative effort, Mauser is asking its customers to consider using adapted software solutions (Auto Data Read-in) with which the processor would make monthly price data available in a customer compatible format. This format would enable the customer's IT to import the data electronically, allowing for automatic adjustments requiring no manual input of prices.
The second model Mauser is offering its customers involves setting prices for six months on the basis of the current indexed price. At the end of every month, the difference to the actual raw material price is determined. Depending on price developments, quarterly settlements are made by sending either an invoice or a credit note. The advantage is that a customer's IT department can input prices for six months with no need to update price lists during this period.
Mauser reports it is now approaching customers with these plans and working with them to determine which might be best put to use. In the meantime, some of its customers have already reacted and eliminated pricing thresholds in their contracts, says the processor. Implementation of automatic IT system price uploads still takes some time, but customers have already indicated their willingness to change to shorter adjustment periods once this hurdle has been overcome, according to Mauser. —[email protected]