Editorâs note: With oil hitting the $70/bbl mark for the first time in history last September, resulting increases in feedstock costs and resin prices followed. Although oil prices subsequently stabilized somewhat, resin costs continued to ratchet up. IMM asked Bill Bowie, CEO of Resin Technology Inc. (RTi), to explain how to avoid letting these rising costs erode a molding operationâs profit margins. What follows are Bowie and RTiâs prescriptions for neutralizing the effects of runaway resin costs.
Heartburn. Every processor in America has it right now. Itâs caused by resin reflux. Just like excess acid in the human body that causes so much discomfort, resin reflux causes great processor pain. âCan we pass along resin price increases to our customers?â âIncreases keep coming like a tsunami that wonât stop.â âWhen will it stop?â âCapacity is full. We might not get the resin we need.â These are the typical comments we hear every dayâeven whispers of âHow will we survive?â The result: hand-wringing and resin reflux.
These dark days are actually the gloom of opportunity if heads are held high, Chicken Little is locked in the barn, and a few solid, proven plastics business principles are followed. The only way to relieve resin reflux is to change the pattern that causes it, and then judiciously follow the prescription for success.
Resin Rx #1: Change is wonderful
Teach your organization not only to look for and accept change, but also to embrace it. This is critical for your organizationâs survival. Donât fear change. Donât try to run from it. You certainly canât hide from it. We all see it, we all feel it, and we all experience change every day. In many ways, the success of your business and our success as individuals depend greatly on how we deal with change. If you anticipate change, you will put yourself and your organization ahead.
At RTi, we see more than 100 companies a year whose failure to embrace change costs the majority of them millions of dollars every year. The real secret of success for any organization is to create a culture that embraces and sees opportunity in change. This must start with the president and continue throughout the whole organization. Itâs not easy. Itâs hard work and takes a constant effort to not let the attitude, âthis is the way weâve always done things,â creep into the program.
Along with that, develop a culture of discipline. Cut unnecessary actions that consume your most precious commodity, which is time. Be vigilant. Be tough. Donât let this cause you more resin reflux.
Resin Rx #2: Become your own best doctor
Use knowledge, not emotion, as your weapon. Know the market drivers and how they affect you and your organization. Use facts to support your position. It works. For example, when you meet with a supplier, know the days of inventory, export numbers for the current month (and last month), costs at the producer, benchmarks, how your resin price fits their portfolio, and so on. This way you have negotiating strength. If not, expect more resin reflux.
Resin Rx #3: Continue education
Very often organizations donât continue to learn. Example: How could you purchase and import resin to North America? Have you made a concerted effort to talk with your industry peers? Have you been active with organizations such as the Society of Plastics Engineers (www.4spe.org) and Mid-America Plastics Partners (www.mappinc.com)? What was the last industry trade show you attended? How many companies can say they have gone through this learning process? I venture to say, âNot many.â If you havenât done so already, do it soon.
Resin Rx #4: Exercise
A key to health is activity. Predictability is your enemy. Change your pattern. Bring new people into the process. Court new suppliers and keep existing ones on their toes. Mix it up. This does not mean you need to play games or be disloyal. Strategically introduce change.
Resin Rx #5: Loose lips can sink your ship
Because of the many variablesâtime, distance, number of parties involvedâcontrolling communication is not always possible. But I can tell you from a wealth of experience that money is lost every day because the wrong person said the wrong thing to a supplier. For example, letâs say youâve developed a strategy to qualify a new resin supplier (XYZ) in order to gain some price leverage. During a routine visit, one of your employees tells your current resin supplier representative, âI donât know why weâre sampling XYZâs resin, because yours works better.â This is a typical response brought on by human natureâpeople naturally resist change. Unfortunately, youâve just lost negotiation strength as a result of this conversation.
Resin Rx #6: See the light
Many organizations we visit believe that no one can improve on what the company is already doing. In fact, they immediately shoot bullets in any new idea. This alone costs North American plastics processing companies hundreds of millions of dollars each year. Be open. Explore and evaluate new methods, procedures, and opportunities. (Remember Rx #1.)
Resin Rx #7: Complications can kill
What do you really need to produce a quality product? Simplify and leverage what you have, and donât overengineer.
Resin Rx #8: Be low maintenance
Who gets the best offer? Is it the tough guy who constantly lets the supplier know heâs âthe buyerâ and that heâs in charge? Or is it the informed, knowledgeable buyer who smiles? Who would you rather deal with?
I was fortunate early in my career to work for a dynamic, growing, successful organization. This organization did many, many things well. It had, and still has, top-quality products in diverse markets. It runs a lean and creative organization and did, and still does, many things the right way. When it came to resin, it was among the best and bought extremely well. Yet it treated its suppliers as well or better than some organizations treat their customers. This processor also used everything from producersâ floor sweepings to the highest-quality metallocene resins available.
Resin Rx #9: Develop a coach
Who determines your resin price? The resin supplier rep sitting across the table? Most often he or she takes the information back to a decision maker. So make that rep your advocate and help him or her sell your position to the home office.
Resin Rx #10: Pay on time
If you need 60 days, negotiate 60 days but pay in 59. Anything else costs you money.
Note: All graphics in this article courtesy of SmallwoodPhoto.
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