- April 01, 2001, David J. Bentley Jr., RBS Technologies
You know that economic conditions in 2001 are not as good as they have been recently. Therefore, you suspect that the inevitable eventually will happen, and day it does. A supplier notifies you that the price of your adhesive, coating, or primer will increase. The reason for the increase will be a shortage of raw materials your supplier is experiencing or a price increase for his raw materials.
Since the price increase could be as much as 5%, maybe even 10% or more, you obviously need to act. Compounding your problems may be the fact that this is not the only price increase you are experiencing. What can you do to counteract this price increase — an inevitable occurrence in these economic times?
Two possible actions are business decisions that require input from and cooperation among people in the organization responsible for sales, marketing, finances, etc. One is to do nothing but continue operations exactly the same. This is a “biting the bullet” scenario that will reduce your profits. It is not a common or popular action for obvious reasons.
The other action is to pass on the price increase by raising the prices for the materials that you make. With this approach you run the risk that your customer may not accept the increase and may look elsewhere to purchase his product. Make sure any attempt at raising prices is accompanied by a reinforced emphasis on items such as technical service support.
What can you do from a technical viewpoint? The key is to act only with a plan that considers all possibilities. Remember that you worked very carefully to prepare whatever construction you are currently making that uses the material subject to the price increase. Do not substitute another raw material! Do not reduce the amount of adhesive, coating, or primer applied! Do not increase the oven temperature so you can possibly run faster! All of these hasty “solutions” can result in trouble. Any of these changes may mean that the final product will not perform properly.
If you want to consider ways to reduce the cost by making a change in your operation, you should evaluate the approach as a completely new qualification of your product. This means that you will need to run as many end-use tests as possible to determine that the lower coating weight, increased speed, or whatever change you make does not have any deleterious influence.
All the possible options noted above have some negative factors associated with them. In many cases, the negative items are very serious. What action can a converter facing a price increase take that might be more palatable? In many cases, the answer is efficiency.
Even organizations that think they are running very efficiently usually can find ways to become even more efficient. The best source for ideas to improve efficiency is the workforce. Ask the personnel in the adhesive, coating, or primer mixing room, the coating machine operators, and all the other workers to brainstorm ways to become more efficient. This method always leads to discovery of unique techniques for saving money.
Surprisingly, the more efficient methods are usually very simple. One company devised a method of using a rack to turn “empty” drums of adhesive upside down. This allowed the organization to use the very last drop of the adhesive in their converting operation. Another company changed a door leading outside near the coating machine to an emergency-only exit. In the winter, this reduced the amount of gas consumed in the drying oven by eliminating the need to compensate for a sudden influx of cold air into the plant. These ideas were simple, but they worked. Enough of these “simple” solutions can add up to a significant savings.
The important point to remember when faced with a price increase for an adhesive, coating, or primer: Consider everything. Many options are available, but they all require investigation of every ramification.
David J. Bentley Jr. is a recognized industry expert in polymers, laminations, and coatings with more than 30 years of experience in R&D and technical service. Contact him at e-mail: firstname.lastname@example.org.