Supply-chain disruptions are expected to continue over the next few years. More than ever, partnering with a reliable materials supplier can be critical to business success.
Sandeep Dalvie | May 04, 2022
As supply-chain disruptions rise in frequency and severity around the globe, procurement professionals in the plastics industry, from those working with masterbatchers to those working with processors, must plan for the worst.
Major events have significantly disrupted the availability of materials in nearly every industry. Ongoing freight shipping issues, labor shortages, and natural disasters have put additional pressure on supply chains that were already hammered by the COVID-19 pandemic.
Supply shortages can halt production, lead to missed orders, deteriorate customer relationships, damage brands, and negatively impact revenue for plastics processors. Supply shortages are arising at a time when demand for raw materials, such as TiO2, remains high, placing even more pressure on procurement departments.
Supply-chain disruptions will persist over the next several years, according to experts. In this environment, procurement officers and masterbatchers must take steps today to prepare for the next inevitable supply interruption.
Working with a reliable raw material supplier who can consistently deliver necessary resources must be a critical aspect of a procurement professional’s contingency plans. When planning for the next supply disruption, procurement professionals should ask their raw material suppliers the following four questions.
1. In the event of a supply disruption, what type of material substitutions or technical support can you offer me?
The answer will reveal how well your supplier truly understands your business and their ability to support you through a disruption. To get a deeper sense of a supplier’s technical expertise, procurement teams should inquire about the suppliers’ technical experts — are they able to find quick, creative solutions when needed? Suppliers that have research facilities and a deep bench of technical experts typically are better equipped to help masterbatchers overcome supply constraints.
With a deep understanding of products, material needs, and production processes, suppliers can quickly offer suitable substitutes in the event of a supply disruption that will enable seamless, continued production or reformulation.
As a follow up, procurement professionals should ask suppliers if they have increased their research and development and technical staff headcount over the last several years. Many suppliers have cut back in these critical areas to save costs. This trend can be an indicator of the supplier’s ability to offer meaningful technical support in a supply crisis.
2. What is your contingency plan in the event of a supply disruption?
Proactivity is key, and the most reliable suppliers have contingency plans for natural disasters and other inevitable disruptions that may impact supply chains. Ask your supplier for contingency plan specifics as well as examples of how they responded to a previous supply-chain issue to get a better sense of their preparedness. Flexibility of production is a crucial element of reliability. Suppliers should also be asked about production capability and for specifics on asset flexibility to assess if your essential products can be produced at multiple plant sites to manage the risk of supply disruption.
When disaster does strike, prepared suppliers will be in touch early and often with options to keep production up and running. The most reliable suppliers will be true partners, working seamlessly with your teams when supply-chain disruptions occur.
3. Do you have a proprietary source of raw materials or other infrastructure in place that helps limit supply disruption?
Having a diversified portfolio of connections with mining sites and raw material sources has become table stakes for suppliers seeking to guarantee the availability of critical materials. The most reliable suppliers will have their own proprietary source for raw materials in various locations to ensure that even in the face of a natural disaster or other regional event, these materials can be sourced at all times.
Key raw materials should also be strategically contracted or come from multiple sources to further reduce concentration risk. It is important for procurement departments to understand the critical raw materials used in their products and to ask suppliers about the sustainability of supply of these materials to best plan for the future.
Logistics infrastructure has served as a key differentiator during the current supply crisis. Ask your supplier if they have dedicated carriers that can sustain a driver or equipment shortage. Do they have preferred ocean contracts that allocate equipment — boxes, chassis, and so forth — as forecasted? Strong partnerships can be the difference between a production halt or a seamless transition.
4. Are you keeping up with regulatory developments and industry standards?
International regulations around the packaging and shipping of raw materials are changing. If your supplier is not fully compliant with these evolving rules, your production may be at risk should regulators intervene. If your supplier is hit with sanctions or penalties, it may affect the availability of crucial materials you need for production.
Procurement departments must ask their suppliers if they are staying ahead of potential regulatory changes and challenges, like updated raw material regulatory classifications and reporting requirements. Additionally, procurement professionals should inquire about packaging and shipping documents to ensure suppliers are in compliance and prevent international shipping disruptions.
Navigating the new normal of supply chains
Finding production consistency in today’s supply-constrained environment will require procurement departments to go above and beyond when it comes to performing due diligence on suppliers. As new supply constraints proliferate and the logistics environment continues to present challenges, procurement departments must form close relationships with their suppliers and ensure contingency plans are in place. Plastics processors’ demands for high-performing, cost-effective plastic materials for use in diverse downstream applications are increasing, and they should do everything they can to avoid the next supply bottleneck. Asking their raw materials suppliers these four questions is a great place to start, and the planning and preparation process must be ongoing as new supply challenges continue to come to light.
Repost from Plastics Today
