Skip to main content
Sister Publication Links
  • Sustainable Plastics
  • Rubber News
Subscribe
  • Login
  • Register
  • Subscribe
  • News
    • Processor News
    • Suppliers
    • More News
    • Digital Edition
    • End Markets
    • Special Reports
    • Newsletters
    • Resin pricing news
    • Videos
    • Injection Molding
    • Blow Molding
    • Film & Sheet
    • Pipe/Profile/Tubing
    • Rotomolding
    • Thermoforming
    • Recycling
    • Machinery
    • Materials
    • Molds/Tooling
    • Product news
    • Design
    • Mergers & Acquisitions
    • Sustainability
    • Public Policy
    • Material Insights Videos
    • Numbers that Matter
    • Automotive
    • Packaging
    • Medical
    • Consumer Products
    • Construction
    • CEO Issue
    • Diversity
    • Best Places to Work
      • 2022 winners
    • Processor of the Year
    • Rising Stars
    • Women Breaking the Mold
      • 2022 class
  • Opinion
    • The Plastics Blog
    • Kickstart
    • One Good Resin
    • Pellets and Politics
    • All Things Data
    • Viewpoint
    • From Pillar to Post
    • Perspective
    • Mailbag
    • Fake Plastic Trees
  • Shop Floor
    • Blending
    • Compounding
    • Drying
    • Injection Molding
    • Purging
    • Robotics
    • Size Reduction
    • Structural Foam
    • Tooling
    • Training
  • Events
    • K Show Livestream
    • Plastics News Events
    • Industry Events
    • Injection Molding & Design Expo
    • Livestreams/Webinars
    • Editorial Livestreams
    • Ask the Expert
    • Plastics News Events Library
    • Processor of the Year submissions
    • Plastics News Executive Forum
    • Injection Molding & Design Expo
    • Plastics News Caps & Closures
    • Women Breaking the Mold Networking Forum
    • Plastics in Automotive
    • PN Live: Mergers and Acquisitions
    • Polymer Points Live
    • Numbers that Matter Live
    • Plastics in Politics Live
    • Sustainable Plastics Live
    • Plastics Caps & Closures Library
    • Plastics in Healthcare Library
    • Women Breaking the Mold Networking Forum Library
  • Resin Prices
    • All Resins
    • Commodity TPs
    • High Temp TPs
    • ETPs
    • Thermosets
    • Recycled Plastics
    • Historic Commodity Thermoplastics
    • Historic High Temp Thermoplastics
    • Historic Engineering Thermoplastics
    • Historic Thermosets
    • Historic Recycled Plastics
  • Rankings & Data
    • Injection Molders
    • Blow Molders
    • Film Sheet
    • Thermoformers
    • Pipe Profile Tubing
    • Rotomolders
    • Mold/Toolmakers
    • LSR Processors
    • Recyclers
    • Compounders - List
    • Association - List
    • Plastic Lumber - List
    • All
  • Directory
  • Custom
    • Sponsored Content
    • LS Mtron Sponsored Content
    • Conair Sponsored Content
    • KraussMaffei Sponsored Content
    • ENGEL Sponsored Content
    • White Papers
    • Classifieds
    • Place an Ad
    • Sign up for Early Classified
MENU
Breadcrumb
  1. Home
  2. Viewpoint
Viewpoint
October 13, 2003 02:00 AM

Work with suppliers to improve earnings

  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    It's hard to believe that any company in the plastics industry would pursue the tactic of asking suppliers for rebates, especially after seeing the reaction that the idea generates in the automotive industry.

    Plastics processors generally describe what automakers and Tier 1 suppliers politely call ``requests for rebates'' with less genteel language: shakedowns or extortion.

    Here's how rebates typically work: Company A asks its key suppliers for a payment based on a percentage of revenues that Company A has generated for those suppliers during the past year or two. There's no legal obligation to pay the rebate, so Company A says the decision is voluntary. The catch, though, is that Company A claims that any future contracts may depend on suppliers' willingness to pay.

    In other words, if you don't pay, don't be surprised if your customer finds a new supplier next year.

    Editorially, we've been consistently against rebates for some time. It's been clear to us, as it has been to most processors, that the best way to deal with suppliers is by working together. When two companies negotiate a contract, it's obviously unfair for one party to come back a year or two later and ask for a refund.

    Well, SMS Plastics Technology apparently was not paying attention, although in its case the target is component suppliers, not processors. The Meinerzhagen, Germany-based company - which supplies Battenfeld injection presses, Battenfeld Gloucester film equipment and American Maplan and Cincinnati-brand extruders - recently sent form letters to its suppliers of parts, products and services asking for a 7 percent rebate on goods that SMS has purchased since mid-2002.

    As in the auto industry, you can chalk the decision up to the intense competitive pressure in the plastics machinery market. SMS was upfront about that in the letter to its suppliers: ``The economic situation continues to be under pressure and the market for our products seems to be recovering slowly,'' it said. ``Additionally, according to our sales forecast, there will be a moderate market recovery with only slight increases in sales volumes for 2004 and 2005.''

    Certainly desperate times call for desperate measures, although no one is saying that SMS is in extreme danger. In fact, one of the unusual things about the plastics machinery market is that, despite the deep drop in sales during the past three years, at least in the United States, no significant player has gone out of business.

    Companies that ask for rebates are sending the market a message: We're exploring all possible avenues for saving money and generating revenue, even options that might produce a very negative response. The move also puts suppliers on the defensive. They know the chances of boosting their prices this year is nil; in fact, they'd better find some room for discounts fast.

    Our advice for companies that are getting rebate letters: Say no. If the customer wants to open a dialogue about future cost savings, by all means you should cooperate. But if the firm's just looking for cash and an opportunity to beat it out of its suppliers, then walk away.

    To companies considering asking for rebates, you should consider first whether you've done all you can to work with your suppliers to improve productivity.

    The right path is clear, although it's not always the easiest.

    RECOMMENDED FOR YOU
    Women break the mold in plastics, gender roles
    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Plastics News would love to hear from you. Email your letter to Editor at [email protected]

    Most Popular
    1
    ‘Crazy' offers prompt sale of medical supplier Molded Devices
    2
    Compounder Aurora Plastics breaks ground on Ohio expansion
    3
    Material Insights: July resin price drop could be start of trend
    4
    Auto supplier Gissing enters Chapter 11, owes Tesla $13.3M
    5
    Stratasys buying Covestro additive manufacturing business
    SIGN UP FOR TO RECEIVE THESE EMAILS AND ENEWSLETTERS
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    Get our newsletters

    Staying current is easy with Plastics News delivered straight to your inbox, free of charge.

    Subscribe today

    Subscribe to Plastics News

    Subscribe now
    Connect with Us
    • LinkedIn
    • Facebook
    • Twitter
    • Instagram

    Plastics News covers the business of the global plastics industry. We report news, gather data and deliver timely information that provides our readers with a competitive advantage.

    Contact Us

    1155 Gratiot Avenue
    Detroit MI 48207-2997

    Customer Service:
    877-320-1723

    Resources
    • About
    • Staff
    • Editorial Calendar
    • Media Kit
    • Data Store
    • Digital Edition
    • Custom Content
    • People
    • Contact
    • Careers
    • Sitemap
    Related Crain Publications
    • Sustainable Plastics
    • Rubber News
    • Urethanes Technology
    • European Rubber Journal
    • Tire Business
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • News
      • Processor News
        • Injection Molding
        • Blow Molding
        • Film & Sheet
        • Pipe/Profile/Tubing
        • Rotomolding
        • Thermoforming
        • Recycling
      • Suppliers
        • Machinery
        • Materials
        • Molds/Tooling
        • Product news
        • Design
      • More News
        • Mergers & Acquisitions
        • Sustainability
        • Public Policy
        • Material Insights Videos
        • Numbers that Matter
      • Digital Edition
      • End Markets
        • Automotive
        • Packaging
        • Medical
        • Consumer Products
        • Construction
      • Special Reports
        • CEO Issue
        • Diversity
        • Best Places to Work
          • 2022 winners
        • Processor of the Year
        • Rising Stars
        • Women Breaking the Mold
          • 2022 class
      • Newsletters
      • Resin pricing news
      • Videos
    • Opinion
      • The Plastics Blog
      • Kickstart
      • One Good Resin
      • Pellets and Politics
      • All Things Data
      • Viewpoint
      • From Pillar to Post
      • Perspective
      • Mailbag
      • Fake Plastic Trees
    • Shop Floor
      • Blending
      • Compounding
      • Drying
      • Injection Molding
      • Purging
      • Robotics
      • Size Reduction
      • Structural Foam
      • Tooling
      • Training
    • Events
      • K Show Livestream
      • Plastics News Events
        • Plastics News Executive Forum
        • Injection Molding & Design Expo
        • Plastics News Caps & Closures
        • Women Breaking the Mold Networking Forum
        • Plastics in Automotive
      • Industry Events
      • Injection Molding & Design Expo
      • Livestreams/Webinars
        • PN Live: Mergers and Acquisitions
      • Editorial Livestreams
        • Polymer Points Live
        • Numbers that Matter Live
        • Plastics in Politics Live
        • Sustainable Plastics Live
      • Ask the Expert
      • Plastics News Events Library
        • Plastics Caps & Closures Library
        • Plastics in Healthcare Library
        • Women Breaking the Mold Networking Forum Library
      • Processor of the Year submissions
    • Resin Prices
      • All Resins
      • Commodity TPs
        • Historic Commodity Thermoplastics
      • High Temp TPs
        • Historic High Temp Thermoplastics
      • ETPs
        • Historic Engineering Thermoplastics
      • Thermosets
        • Historic Thermosets
      • Recycled Plastics
        • Historic Recycled Plastics
    • Rankings & Data
      • Injection Molders
      • Blow Molders
      • Film Sheet
      • Thermoformers
      • Pipe Profile Tubing
      • Rotomolders
      • Mold/Toolmakers
      • LSR Processors
      • Recyclers
      • Compounders - List
      • Association - List
      • Plastic Lumber - List
      • All
    • Directory
    • Custom
      • Sponsored Content
      • LS Mtron Sponsored Content
      • Conair Sponsored Content
      • KraussMaffei Sponsored Content
      • ENGEL Sponsored Content
      • White Papers
      • Classifieds
        • Place an Ad
        • Sign up for Early Classified