The raw material crisis and how Metro Plastics navigated the squalls.
"Everywhere You Look, the Global Supply Chain Is a Mess," read a recent headline in the Wall Street Journal.
"What's next?" That's what most of us have been saying for the past year and a half!
From the pandemic to natural disasters…indeed the global economy is unstable at best.
Industry wide the supply of raw materials has been a turbulent sea to traverse.
So, what caused this unsettled atmosphere?
Harvard Business Review named the following five contributing factors:
We can start back at the end of 2018, plastics suppliers across Europe warned of impending critical shortages of certain polyamide materials, which are used in the production of engineered plastic components. The low supply of adiponitrile (ADN), a precursor chemical, is manufactured at only five plants in the world.
Then came logistics and tariff changes…the trans-Pacific shipping industry saw a short-lived boom as American and Chinese companies purchased excess inventory in advance of tariff implementation, business dropped off and carriers had too much capacity.
In August of 2020, Hurricane Laura forced a number of petrochemical factories in Louisiana and Texas to shut down; overnight 10% to 15% of U.S. PE and PP production stopped.
The winter storm that came in February of 2021 struck the Gulf Coast. Texas is home to the world's largest petrochemical complex, which turns oil and gas and other byproducts into plastics. Almost 100 critical chemicals and derivatives used widely across many products and industries are processed in Texas. It will take more than six months to correct the imbalances caused by the storm.
The grounding of a container ship in the Suez Canal on March 23 could not have come at a worse time in the material crisis.
And then add in the fact that we had seen lower gas prices which resulted in a decrease in supply; frankly, that came back to "…bite us in the butt" says J. Salewicz of Metro Plastics.
Covid-19 topped it all off to form what could have been a disaster for Metro Plastics but was a reality for struggling manufacturers.
Accumulation of these variables in the right environment produced the perfect storm. By design, Metro had the right people with the right skills to forecast what we could do to protect our customers.
The survival strategies:
Relationships! Metro has spent over 45 years building relationships with suppliers. 45 years of trust and communication that has grown into mutually beneficial success stories. Simply put, our suppliers kept us informed of what was coming down the pipeline. The result is us knowing how to act accordingly.
Reprocessing! As you know, we have a reprocessing program that allows us to use our resources efficiently and effectively. Read more about our extrusion process here.
Preparedness! What do we do to prepare for emergency situations? We practice! A few years ago, Metro basically did a "business tornado drill" to prepare for just the types of volatile business environments we have faced over the past 18 months. That's right, have a plan!
We acknowledge that not all links in the supply chain bear these strategies. We are extremely grateful for each supplier, customer and opportunity. Contact us today to ensure your plastic parts outperform and outlast the competition.