Naples, Fla. — As plastics processors battle through inflationary pressures like rising material costs and wages, some are looking for increased transparency as a strategy.
Financial executives at several manufacturing firms told a panel at a recent Plastics News event that rising prices have them increasingly trying to build cost indexes and transparency into contracts, as much as business realities allow.
Steve Wisniewski, chief finance and integration officer of Teijin Automotive Technologies, told a panel at the PN Executive Forum in Naples that he doesn't expect price relief anytime soon.
"Just last month we received another significant increase in our resin and we're having issues with our fiberglass, so how are we risk-protecting ourselves?" he said. "We're pushing back on our suppliers. We've been asking them to index themselves because right now it's kind of a black box where they keep coming back to us and saying we need another price increase."
He said Teijin understands the cost pressures its suppliers face but would like a clearer picture from them.
"We've asked them to lock into an index and help us understand what your movers are," he said.
Teijin Automotive, which is based in Auburn Hills, Mich., and has 13 plants in North America, wants the same with its customers in the transportation industry, he said.
"We're doing the same thing with our customers. We're trying to create indexes, full transparency," Wisniewski said. "We go up, you go up. We come down, you come down. It's not been easy.
"Our heavy-truck customers want to work with us, our industrial customers want to work with us," he said. "We get to the OEM side and they could care less. We're navigating that every day, and it's hard because it's contentious."
Full transparency can be very difficult, he acknowledged to the audience at the forum, held March 21-23.
"We're trying to figure out how we're going to get price recovery back from our customers, and it's not a very easy answer," Wisniewski said. "I think I've spent the last six months trying to figure out a way because we have proprietary resin packages we use which we can't share with our customers.
"We can't go to them and say, 'This is everything that makes up our resin package,'" he said. "We've had to find ways to define it differently."
Wisniewski spoke on a panel of four chief financial officers at plastics processing firms. One of the panelists, Angela Breitbach from Radius Packaging in New Berlin, Wis., was named PN CFO of the Year and was profiled in a separate story.
She said close relationships with suppliers can help.
"The relationship part is incredibly important," she said. "We've been working with our resin suppliers for them to understand our business and how our contracts work so they can smooth the curve for us, if you will."
Another panelist, Jim Wojtila of Mar-Bal Inc. in Chagrin Falls, Ohio, said his company tries to tie contracts to an index it creates because it can't find reliable third-party tools that closely track its thermoset resins.
"We call it the Mar-Bal raw material index," he said. "We've shared that and taught our customers about that index.
"We've been fortunate to have, I think last year, over 50 percent of our revenues were tied to our index," he said. "As it goes up and down, we were able to pass along via the contract those increases."
On the salary side, though, it's a different picture for Mar-Bal.
"With the labor side, that was the other story, having increased dramatically last year," Wojtila said. "We didn't have provisions in our [agreements] to accommodate for labor. So we have to try to open up those contracts and get some labor relief as well, which has been kind of about 50-50 at this point."
Rising wage pressures are not being felt evenly within factories, creating needs to be transparent with employees, said Matt Fish, president and CFO at Vital Plastics Inc. in Chippewa Falls, Wis.
It's seen more wage pressure for machine operators than it has for more skilled employees, compressing wages between job categories.
"We've got operators out on the floor that we've had to raise their rates," he said. "And now some of your more skilled hourly people are looking, saying, 'Wait a minute; there's compression here,' and they're wanting to be compensated for that.
"But yet we've found that the market isn't necessarily paying at a higher rate for some of those more skilled positions, so we've had to deal with that," he said. "Being transparent and honest with people is really important and leaning on what you're good at. Our culture is really strong."
Wisniewski said the company sees itself in a new market for wages.
"For the labor market, the question [of] will it continue to rise, I'm not sure," he said. "But it's not coming back down. We've established a new labor market. We're going to be dealing with that."