Packaging Manufacturer Achieves 8% Resin Price Reduction
“I want everybody to have the same experience that we had because it was really a good experience and a good savings for us working with APD.”
The recent retirement of an APD client spurred an interesting conversation. The Vice President of Purchasing and Supply Chain at a plastics packaging manufacturer turned to APD for help in achieving cost downs on resins in 2019. Hearing of his impending retirement, we reached out to him to get his perspective on the Resins Optimal Sourcing project we delivered for them, and on working with APD in general.
The focus of the project was achieving cost downs with current resin suppliers. This manufacturer of high end bottles for cosmetics relied on a small number of suppliers for the specialty resins that made their product unique. Unfortunately, the same resins had applications in a quickly growing medical market and demand was outstripping supply. According to the Purchasing VP, they had been told by one supplier “You’ve got the lowest price you’re ever going to get”.
APD worked with the packaging manufacturer to negotiate cost downs with current suppliers. To accomplish this, we focused on finding alternative resin manufacturers who were producing equivalent resin grades for the medical market and were eager to expand their customer footprint to include packaging manufacturers. Due to anti-dumping tariffs in place at the time affecting major producers of the target materials, an intensive global search was necessary.
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APD located a smaller supplier in Portugal that was not subject to the anti-dumping tariffs and convinced them of the potential for expanding their market. After developing feedstock cost models for the target materials, APD was able to negotiate competitive pricing with the alternative supplier. The cost models and competitive pricing were key in approaching the current suppliers with knowledge-based price negotiations. For the first time, the plastics manufacturer had a BATNA – Best Alternative To a Negotiated Agreement – to bring to the negotiating table. In addition, the should-be costs from the feedstock cost models allowed them to change the pricing anchor from the fixed position of current pricing to the should-be cost for a more collaborative negotiation.
The cost downs achieved from this project were in excess of $480,000 per year. Our client described the savings as an “Absolute huge home run. . . a grand slam home run.” Click here to read or listen to additional comments from our newly retired client about their experience with APD.