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Medicine for Resin Pain

Hurricanes Katrina and Rita, combined with 1020 years of resin industry consolidation and increasing depletion of domestic natural gas supplies, compound an increasingly severe problem with resin prices and availability. Within days of rapid price increases and shortages of basic resins, Wal-Mart announced that they plan to lower prices. Consider the timing of Wal-Marts statement.

Who Pays
Does this sound like the conditions for a squeeze on OEMs and Processors? Who will eat these increases? You? Your molder? If its your molder; do you really want to generate more molding industry consolidation and less choice by further reducing their protability? More consolidation only reduces the choices available to you for the long term. Maybe you can get Wal-Mart to change their mind.

25-30% Cost Savings Are Typical

It is a fact that most plastic packaging uses more material than is required, and sometimes even the wrong material. Our experience suggests 15 20% weight reduction opportunities on average, not to mention the near universal presence of throughput inefciencies of all kinds. Generally, packaging can be done for total costs of 25 30% less. In the historic environment of $.30/lb HDPE, the economic system tolerated and even encouraged overly conservative package and plastic product design. Is this going to continue to be affordable for your company?

East advantage even larger. At a recent SPI meeting attended by SES engineers, knowledgeable sources discussed of the possibility of prices rising to $25/MCF this winter.

PE Industry Is Leaving Home

A shift of the polyethylene center of gravity to the Middle East will put a new and higher economic oor under PE prices. The old oor was based on domestic production selling at $1 2 per thousand cubic feet (MCF) of natural gas, which is currently priced at $6 7/MCF. The move to the Middle East wont happen overnight, but the fundamental natural gas feedstock costs in the United States are globally uncompetitive and will remain so due to tighter, dwindling supplies. A recent Modern Plastics article puts the landed current cost advantage for Middle East polyethylene at $300 per metric ton, $.14/lb. Recently, domestic prices have peaked to $13/MCF, which will make the Middle

SES Can Help

Are you going to continue to use plastic at $.60 $1.00 per pound the same way you have done for the last 20 30 years when plastic was $.20 $.50 per pound and still give reduced prices to the big chain stores? SES can help by putting its design, economic, manufacturing, and engineering skills to work exploring what alternative is best for you.

Shed Unnecessary Weight

Determine the lowest amount of plastic that will perform to your targets and make the adjustments necessary to run these reduced weights. The savings will be large, and they will grow

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as the cost of resin grows. Few reductions wont justify the tooling expenditures that may be required. This is the fastest and easiest solution, so dont wait to take advantage of it.

Consider Fillers
Is it time for using llers in routine plastic packaging and products to reduce cost, instead of only using llers to generate poor mans engineering resins? Some llers can potentially, and meaningfully reduce resin cost. Fillers can also improve resin properties, thereby allowing further light-weighting than may be possible with pure resins. In addition to reducing cost, llers can improve production efciency by lowered cooling time requirements. The downside is that llers will accelerate mold wear, and can affect appearance in some cases. At what point is your consumer more interested in an affordable product that looks OK, compared to a product that looks great but is too costly, or not offered because you cant make enough money?

Consumers value convenience and are willing to pay for it. However, at some point the cost of that convenience exceeds the benet, and consumers will choose the lower cost approach. You need to know if your product is one of those where the new and permanently higher costs exceed the convenience benet.

Resin Sourcing
There are inequities in the prices of resin, particularly in the blow molding industry. Some OEMs are nding it advantageous in managing their business to source the resin themselves, gaining both savings and long-term transparency. Do you have multiple resin sources established, or have you limited your specication to a single source of resin that you maybe now cant get? Multiple sources require work to establish, but this approach can reduces prices and protect supply integrity at the same time.

Manufacturing Efficiency
Manufacturing efciency continues to have opportunities as well. Is your product being made with the right machine, the right cycle, the right number of cavities, and at the right location? Experience shows that most of the time the right system is not used, leaving money on the table. As transport costs grow, the reasonable shipping radius will shrink. Shipping across the country, let alone overseas, will become untenable for some products. SES will help you take advantage of all of these cost-reducing ideas, and to nd even more. Our skills are deep and broad, and were completely motivated to your benet. We succeed only by helping you get a better, less expensive product. The higher resin prices climb, the cheaper we become. Can you afford to wait?

Packaging System Design

Has the time come to reconsider greater total package system efciency? For example, can we continue to afford large, disposal detergent bottles containing mostly water? Perhaps the time for concentrated packaging of household chemicals has nally arrived. It may now be prudent to invest in a single, more expensive, long-use, and better performing point-of-use package supported by much less expensive rell packages that would lower total costs. How about lling your cleaning product bottle at a bulk tank in the retail store? Would it be any less convenient than having to drive your car to the gas station? We dont take gasoline home in 10 20 gallon bottles and then put it in the car. The system cost would be lowered substantially with a near total elimination of packaging and its not likely stores would carry 12 different brands like they do now which would possibly allow better prot for the survivors.

Reduce the Pain of Resin Price Increases

Call SES today at 866-888-8333.

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