Resin prices have jumped 30 percent to 50 percent in 2021 to date, with no relief in sight. Polymer prices will remain elevated, and shortages will continue in the medium term, driven by inflationary pressures, force majeures, and post-pandemic demand surge. Toyota, as well as about 50,000 plastic converters across North America and Europe, had to ramp down production in during Q1 2021 because of the plastic raw material shortage with nearly no time to plan mitigation measures. Either companies get their act together with agile and resilient supply chains, or they’ll lose time and money reacting to what is rapidly becoming the great global plastic shortage. To navigate this crisis, multinationals need to follow the following five practical actions:

Provide rolling 12-month forecast to your suppliers: A solid rolling 12-month forecast will reduce exposure significantly. One of our clients, a leading medical device manufacturer, suffered a major disruption due to its supplier’s inability to supply the assemblies as promised. In response, the medical device leader established a vendor-managed inventory with an estimated 12-month rolling forecasted demand to avoid last-minute order placing. It combined better planning with incentives, specifically preferential payment terms to suppliers to ensure continuity of supply.

“The revival of the plastic supply chains will take longer and will force companies to tweak their existing business strategies to stay in the game and navigate through the uncertain times"

Optimize buffer capacity for critical material: Increase your safety stock and move away from just-in-time orders. One of our clients, a large chemical company doubled all its critical plastic packaging material orders, beginning with long lead items of up to four months. This ensured the company was well-covered for the rest of the season. It also secured additional warehouse space, incurring 12 percent increase in storage costs to ensure adequate supplies for at least four months to keep its production running. In this volatile market, only when you have data-driven assurances from your suppliers that they can quicken the replenishment times, can you consider reducing inventories to lower costs.

Substitute your materials with alternatives to combat shortages and ensure continuity of supply: In order to avoid shutting production when aramids (synthetic fibres) were short, Protolabs, one of the world’s leading 3D-printing and computerized numerical control manufacturing companies, used PPA (polyphthalamide) in its motor and bearing pads. Many of the lesser-known plastics work as a solid alternative for commonly used polymers like acrylonitrile butadiene styrene (ABS), polycarbonate (PC), or even polypropylene (PP). Leverage your existing supplier’s expertise to explore raw material options. Great alternatives across industries are polysulfone, polypthalmide, polyphenylene sulfide, polyphenylene oxide and syndiotactic polystyrene. These substitutes are currently far more easily available than many of the more commonly used polymers and are an easy way to alleviate shortages

Build redundancy in your supply network: Add a second qualified supplier to your global network, specifically to mitigate geographical bottlenecks and build resilience. For instance, many of the European plastic converters are all adding a second and third qualified supply base for plastics from non-traditional markets, specifically the Middle East, in their overall otherwise local plastics value chain. The on-time, in-full delivery or number of shipments increased dramatically once the supply base was diversified. Although the companies’ overall logistics costs went up by 7 percent to 10 percent, they’re now far better positioned to manage shortages because of their diversified their supply base.

Move your supply chains to closed loops where materials can be recycled and reused: Key automotive players such as Audi AG have started using recycled PET for the seat upholstery; and Jaguar Land Rover Automotive PLC has started to employ econylnylon for floor mats. Making the financial and sustainability case is not difficult given the times we operate in; however, finding the right partner with the right assets in the right geography and right supply chain is the most challenging task. Embracing the circular economy in a staggered way changes the game completely. From being externally dependent, you become independent. The waste plastic industry is currently valued at over $34 billion now and is expected to grow significantly over the next couple of years. Plastic waste is positioned to become a valuable alternative to virgin grade. Setting up the right infrastructure for the recycling of plastics is a crucial influencing factor for the profitability of plastic manufacturers. With the right investment and structured approach to recycling, this golden opportunity can be tapped and expanded organically.

The revival of the plastic supply chains will take longer and will force companies to tweak their existing business strategies to stay in the game and navigate through the uncertain times. Several enterprises are dramatically re-imagining their plastics supply chain to be more resilient and agile. Apart from these five practicable moves, do not forget the basics —leverage a strong supplier relationship program and keep your key allies close and strategic partners closer.