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May 1, 2007

4 Min Read
Resin Speck Check | Resin cost reduction strategies

If you can’t get your material supplier to reduce its price, maybe a different resin will reduce your costs.

Almost every question we receive here at IDES relates in some fashion to cost reduction. OEMs and injection molders across every plastics market segment continually look for every advantage they can get. Pressure from abroad, rising oil prices, and continuing trouble in the automotive sector suggest that injection molders will face considerable challenges to stay competitive.

For an average injection molded part, the resin comprises 75% of the total cost. It is for this reason that resin price hikes immediately get everybody’s attention. Every molder understands that if he or she can improve his or her resin price position, even by a small margin, it can dramatically reduce the cost of the overall part. It’s easy to verify this by running a simple example. Use one of the free injection molding part cost estimators like the CostMate website at www.ides.com/costmate and vary the resin price by a few pennies. It can change the job cost by thousands of dollars.

When it comes to resin price, there are only a few strategies that can actually help. It boils down to three basic actions: • Get your supplier to lower its price.

• Find a new supplier with a better price.
• Downspec to a less expensive resin.

When you can’t pass on the increase

We all vividly remember the major events over the past couple years that drove resin prices through the roof. Katrina caused supply disruptions, driving prices up substantially. There was also an issue with benzene supply that caused dramatic price increases for styrenics and other materials. Every molder grew weary of receiving yet another price increase letter from its supplier or distributor. The increases are very tough to pass on, especially within the automotive sector and to Wal-Mart. During these resin crises, there is typically no alternative but to accept the increase, thereby eroding a molder’s bottom line.

The truth of the matter is that resin suppliers will not be as quick to lower their prices as they were to raise them. How often has a molder received a call or letter from a supplier announcing that it wanted to cut its price? (The answer is almost never.)

It’s only fair that when feedstock prices go down, resin prices should decrease, too. To make suppliers play fair, a purchaser needs access to timely feedstock information, especially when these costs decrease. One website, www.propurchaser.com, is dedicated to arming the molder or OEM with the right information to better negotiate resin cost reductions. There are also a number of pricing sources that can help. A summary can be found at www.ides.com/resinprice/default.asp.

Of course, having more than one supplier is a key to effective price negotiations, and having a backup in case of a supply disruption is a good idea. However, most molders buy resin from distribution and a given grade is generally only available from one or two of these sellers. Why not consider an offset grade to the one that is currently in use? Many distributors carry drop-in grades that could be offered at an attractive price. Molders can also use a database tool like the IDES Prospector to identify alternatives. Prospector is supplier agnostic, treating them all equally.

Finally, and maybe most importantly, is the right resin being used for the job or is it overspecified? In other words, is it possible to downspec the material to a less expensive family?

For example, an industrial products OEM had been using a long-glass-fiber-filled nylon 6/6 in an enclosure application for a plumbing valve. Good dimensional stability, a tensile strength of at least 30,000 psi, and flexural modulus of 2,800,000 psi were required. The nylon worked well; however, the OEM was open to looking for less expensive alternatives. A search using the above parameters yielded an impact-modified polypropylene copolymer as a potential candidate.

From a cost perspective, the nylon 6/6 was $1.50/lb vs. $.95/lb for the polypropylene. Further investigation is required to determine whether the replacement can be made. There are truly countless examples where less expensive grades can be used in applications.

Developing a resin cost reduction strategy really boils down to having the right information at the right time. Those injection molders who are armed with solid data will surely have a competitive advantage.

Mike Kmetz is president of IDES (www.ides.com), a plastic materials information firm based in Laramie, WY. IDES’s primary product is Prospector, a database of materials that provides vertical search capabilities on a variety of resins and materials technical data. Kmetz can be reached at [email protected] or (307) 742-9227.

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