The plastics industry is still suffering from supply chain issues that began during Covid-19 lockdowns and which impacted supplies of raw materials such as polyethylene (PE), polypropylene (PP) and mono-ethylene glycol (MEG) in particular. Resin shortages are set to continue, with some suggesting this situation could continue into 2024.[i]
The pandemic and its factory closures are not the only reason for the issues. There have been US storms that have impacted major plants, a surging demand for everything from food packaging and healthcare products, to DIY supplies and consumer electronics, and significant international shipping issues
The worldwide shortage of containers is affecting resins in particular, as the glass fibres within them require specialist containers, which is high demand. Added to all the woes, counterfeit resins are now finding their way into the market, with some unvetted injection moulders producing goods that might not be fit for purpose so adds the pressures is you are considering changing your supplier
So, what can you do to insure against some of the issues that the supply chain is causing?
The first thing to do is to plan. If your business is reliant on suppliers, whether those are at home or overseas, you need to examine the problems that might arise in getting product or raw materials to your door. Too many businesses go through this process, but only consider their direct suppliers. You need to go far deeper than that and look at who supplies your suppliers and how vulnerable they could be. A failure of any part of the chain will have a knock-on effect for you.
To examine the entire picture and assess where weaknesses may lie, you should work with your broker on a business continuity plan, which will kick in whenever the supply chain lets you down and alternative actions are required. This will help your understanding of where potential problems will arise. This can lead you to identify having alternate back-up suppliers available to you and potentially shortening the supply chain, sourcing more locally.
Forward planning and quick reactions to arising situations and issues gives you the advantage in keeping ahead of disruption that may come. Just-in-time has been an established supply chain principal for many years, however, other supply chain strategies could be beneficial to explore and put in place.
Business interruption insurance in place, or contingent business interruption cover can also support your business. However, you need to be aware that such cover tends to pay out on claims, only if some form of property damage has occurred. Your broker will advise on how supply chain issues can interrupt your business and talk about suitable risk coverage solutions to suit.
As you talk with your broker, if the materials you supply get caught in a product recall dispute, it will be worthwhile to explore Product Recall Insurance. This can cover the costs involved with a recall, product disposal and re-manufacture, dependent on the level of cover you agree, not to mention those costs associated with managing your reputation and limiting the damage to it.
If you are in the plastics sector and need help with supply chain risk management, we have experienced brokers who can assist. If you are in any other sector, we also have brokers who can work with you to manage the risks that the supply chain can pose to your business. Please just get in touch.