Rising plastic prices, what can you do about it.
Posted on Apr 5, 2017
Plastics are subject to market price fluctuations. Price increases are not uncommon. We tell you how you can react to this in our blog article
The market for plastics is subject to constant fluctuations and thus constant price increases for the purchase of raw materials, semi-finished products or finished plastic parts have not been uncommon recently.
Are they also a problem for you?
Have plastic prices exploded for you too and do you now have to pay 600 - 800 € more per tonne than three months ago? Then you have come to the right place, because we will show you how you can counteract this.
Material use in thermoforming
On average, the material input in thermoformers is roughly 50%. Therefore, the material price is an important factor in pricing. Thermoformers usually have a return on sales of about 5%. This means that an increase in the price of the plastics used by only 10% would result in a loss of profit. For this reason, thermoformers must not simply accept or even completely ignore price increases.
This is where countermeasures must be taken.
Relationship of the participants
In principle, we are talking about a triangular relationship. You as a contract processor, your plastics supplier (extrudeur) and last but not least your customer. Yes, all three are initially affected by the price increase. And all three are in the chain with each other. First the plastics supplier, then you, and after you your customer.
Your supplier
You get the announcement of the price increase from your supplier.
What do you do as a supplier?
What do you do first? Ask yourself whether the price increase is justified and whether the amount of the price increase is in line with the market? Here you should leave your comfort zone and send an enquiry to several potential suppliers to compare the offers. Price increases are not always dependent on the market, and in some cases it can make sense to change suppliers.
Many manufacturers have special contracts, special orientations and technical machines that differ. The output of extruders alone can be between 400 and 2000 kg per hour. There are enormous differences here and this ultimately affects the price per kilo. In your enquiry, try to describe the size of the entire order, or the annual quantity, in order to make you or the order even more attractive. In this way, it is not exactly uncommon for the purchase prices to suddenly turn out to be lower than they were before the price was announced.
Your customer
Pass on the price increases to your customers in a comprehensible way
Let's assume that your enquiries with the suppliers give a consistent picture and the material has actually become significantly more expensive. Then it is necessary to react to the price increase at the latest now by raising the prices with your customers.
Many people do not react to the price increase.
Many find it difficult to approach the customer to adjust prices. Also, the customer usually does not accept a higher price for the same product and will question your prices. But this should not be a problem for you. After all, you have checked the price increases in advance and found them to be justified, so your competitors' prices will also increase. You can therefore increase your prices with complete peace of mind.
What if the customer presents an offer from your competitor that is below your price?
You do not have to be the cheapest supplier! This assumption is an absolute mistake!!! On the one hand, you of all people should be able to judge whether the price difference is so high that the customer would actually change suppliers. But it is not only the price that binds a customer permanently. Good service, comprehensive advice, fast delivery times and, last but not least, consistently high quality can also be reasons for your customer to accept the higher price. Present to the customer the advantages that you offer and that justify this extra price. If you have always delivered TOP quality and on time, you certainly have nothing to fear here.