Lower material costs. Lower wage costs. A profitable final product price point. There are many reasons why offshore production has been attractive to manufacturers. Then, 2020 happened.
The escalation of the pandemic and global trade tensions exposed inherent risk by disrupting the once-comfortable global manufacturing and supply chain dynamic. Today, concerns still persist regarding supply chain challenges and slow movement through ports. As manufacturers take firmer control of the global supply chain and invest in more local production, they’re enjoying the benefits of “Made In America” manufacturing solutions.
On-time delivery (OTD). Suppliers are defined by it. Industrial buyers demand it. A recent study about supplier sourcing confirms it, reporting that “delivery performance” is the most important factor buyers consider when compiling supplier shortlists.
Undoubtedly OTD carries clout. However, when delivery performance and unprecedented circumstances collide, suppliers either live up — or down — to their OTD reputations.
In a perfect world, supply chain management is cost effective and seamless. Materials, inventories, services, production, and distribution flow as anticipated with minimal difficulty.
It’s been a far from perfect world since 2020.
Global supply chain disruptions have altered the course of business in all industries. Plastics is certainly no exception. The resin shortage continues to dictate aspects of injection molding supply and demand. Manufacturers are left to deal with the aftermath of force majeure, raw materials unavailability, prolonged lead times, and escalating costs.
For decades, U.S. manufacturers leveraged the benefits of globalization. The lower costs, lower wages, and competitive final product price points of the global supply chain were powerful incentives for using overseas suppliers.1
But 2020 changed everything.
Pandemic-related import shortages, fuel and freight cost spikes, and extended delivery-time delays made the once-attractive total cost of offshoring much less appealing to OEMs. The low bottom-line price of an overseas supplier no longer outweighed the benefits of partnering with U.S.-based suppliers. Manufacturers migrated production — and a projected 350,000 jobs in 2022 alone — back to the United States.2
With steady, predictable 3.9% growth projected for the next decade, there is some talk that the global plastics market is stabilizing after a long period of turbulence.1 The conclusion is logical, based on the numbers — but is it really signaling positive change for those relying on plastics?
The impact of several ongoing plastics industry trends may influence the current and/or future status of the market. As we reach the mid-point of 2022, it’s prudent to perform a reality check for manufacturers and suppliers.
In February, 2021, the plastics industry was devastated by a freak winter storm that laid waste to Texas power grids and 80% of U.S. resin production.1 As though the widespread after effects of the natural disaster weren’t enough for the plastics industry to handle, substantial polypropylene (PP) and polyethylene (PE) price hikes and a 30% diminishment of production capacity added to the burden.1
In the year since, prices remained volatile and sluggish supply chain logistics kept materials from timely distribution; yet, there seemed to be an undercurrent of optimism in the industry. PP and PE production capacity was on the upswing despite shipping woes. Resin prices were leveling off, if not slightly receding.2 The global resin shortage was presumably reaching a tipping point.
Unfortunately, the optimism was short-lived. Russia invaded Ukraine on February 24, 2022. Its impact waylaid the market’s potential recovery and further complicated ongoing industry challenges.
Supply chains are vital in any industry, yet they can be vulnerable to devastating disruption. The current supply chain upheaval drives the point home, but it should also give you pause.
Are you working with suppliers that can accurately pinpoint sources for every material, process, and shipment related to your orders and getting products to market? In turn, can you use this information to confidently manage your projects, vendors, and business? These questions — and answers — are crucial in understanding if you’re leveraging the benefits of supply chain mapping.
Viewing 2021 through the lens of the resin shortage, the year went out much like it came in.
Q4 found commodity resins polypropylene (PP) and polyethylene (PE) available in greater quantities at lower prices.1 However, for many manufacturers, custom injection molding partners, and other supply chain vendors, the late-year good news was overshadowed by resin shortage challenges that will likely continue to pervade the plastics industry in 2022.
The widespread and ongoing disruptions in the plastics industry has given rise to a certain degree of panic. Manufacturers and suppliers are at the mercy of broken supply chains, and solutions for resins, service, and delivery aren’t always readily available.