CONTRACT & TOLL MANUFACTURING
“ What ’ s more , if these products are licensed or specified , we must undertake a rigorous supply chain risk assessment , conduct tests , re-certify and seek approval from the appropriate industry body . This clearly takes time and resource and adds pressure to the purchasing process .”
Energy challenge
Whilst supply chain and raw material availability issues remain at the forefront of the industry ’ s thinking , the recent exponential increases in energy and fuel costs are proving to be equally as challenging to CMOs in their efforts to continue to deliver services for their clients . UK diesel prices have risen by almost 19 % since 1 January 2022 alone , according to the RAC . Meanwhile British Gas reports that wholesale gas prices are 250 % up , at the highest they have been for 15 years . The increasing cost of manufacturing and delivering products for CMOs is an undeniable additional challenge .
“ The energy issue is affecting the chemical industry significantly , due to the high-intensity manufacturing processes involved in production , with costs increasing anywhere between 20 % and , in some cases , 300 % for some products ,” says Marr . “ These increases are no longer something that can be absorbed solely by contract manufacturers , and we are in regular contact with our clients in respect of managing their pricing expectations . It will undoubtedly have an impact on costs for the consumer for the foreseeable future .” Meyer concurs and adds : “ We are already seeing a significant increase in energy prices , which not only affects our business costs , but also those of our employees . This may lead to more dynamic workforce movements as they seek the best returns for their time , adding costs to an already competitive labour market .”
Collaboration is key
Strong relationships between both suppliers and clients have always been an essential part of the CMOs ’ offering . Indeed , the longstanding partnerships that BCMPA members have developed with their clients , together with effective planning , have helped to maintain the service that speciality chemicals customers need . In the current circumstances , such an approach is all the more critical - Jones sees this daily . “ We are working closely with our customers in terms of more regular communications regarding the sourcing of raw materials and price increases ,” she says . “ Our customers understand the situation and are supportive of any recommendations . In many ways it has brought us closer as we work on solutions together to ensure we reduce the risks both to our own and our customers ’ businesses .” Cod Beck ’ s Meyer agrees . “ The topic of price rises is so well documented and publicised that customers are generally accepting of the need for further clarity on forward planning . Similarly , with costs , the conversation is unavoidable ; therefore , whilst they are not necessarily welcomed , any increases are at least understood and accepted .”
Trends & challenges
There seems little doubt that the sourcing of both raw materials and the maintenance of reliable new supply chains will continue to occupy the minds of contract manufacturers and their clients this year . With the added challenges that huge energy price increases and political insecurity present , agility , innovation and resourcefulness will remain the key instruments in the delivery of a stable supply of products to consumers . “ We believe the war in Ukraine will continue to bring uncertainty to the supply of raw materials ,” says Meyer . “ Specifically , Ukraine and Russia are significant suppliers of feed materials , including wheat and fertiliser materials such as urea and potash . This will have a huge impact on food production capabilities worldwide .” Jones agrees , saying : “ We expect to see freight costs increasing , adding further costs to products already impacted by higher raw material prices . The use of renewable energy sources has always been high on our agenda , but with spiralling energy costs this has become a priority for 2022 as we strive to reduce both our production costs and our carbon footprint by looking for cleaner , greener sources of energy such as the installation of solar panels .” Clearly , strong and collaborative relationships between clients and CMOs remain crucial in the preservation of viable commerce channels in such troubled times . It seems , fortunately , that many of these already-established bonds continue to yield positive results within the speciality chemicals sector . •
Rodney Steel
CHIEF EXECUTIVE
BCMPA k + 44 1494 582013 J info @ bcmpa . org . uk j www . bcmpa . org . uk
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