Plastics and Raw Materials: How Rising Costs Will Affect the Sanitation Industry

The recent COVID-19 pandemic has impacted businesses of every kind, but the sanitation industry, in particular, has been affected in numerous ways. An efficient and organized supply chain is required for companies to operate correctly, and if one component experiences change, the results can be exponential. On top of that, recent snowstorms and winter weather in TX and other key areas have greatly affected thermo-form (plastic molding and resin) companies that supply raw materials to the sanitation industry. Whether it’s low amounts of truck drivers limiting freight delivery, a rise in material costs, shortages of materials, or the impact of COVID-19, businesses in the sanitation industry need to become familiar with effective risk management and economic indicators so they can continue to maximize profit in the coming years.

Understanding the Supply Chain

Whether your company is in the sanitation industry or a different area, you’ve likely heard of the supply chain. Businesses worldwide that operate solely on shipping products utilize a supply chain strategy. A supply chain consists of many moving parts, from materials costs, daily deliveries, and modes of transportation to loading, storage, and planning. The supply chain must be organized and well-planned so businesses remain stocked and meet consumer demands.

However, have you ever considered the cost behind each component and how changes impact your supply chain process? If your answer is no, it’s time to start acknowledging these details. While there are some costs you have minimum control over, others may require you to increase prices, so your overall profit remains. Unfortunately, companies everywhere have started noticing an upset in today’s supply chains due to rising costs of materials, high volumes of freight, low amounts of drivers, and the COVID-19 pandemic.

What About the Number of Drivers?

The minimal number of truck drivers in the United States isn’t necessarily a new obstacle because it has been occurring for many years. Unfortunately, the shortage of truck drivers and high volumes of freight has only continued to be affected by a variety of hurdles in recent years.

  • 2017: The American Transportation Research Institute (ATRI) began sharing the impact the truck driver shortage has had on the shipping industry as more businesses were starting to realize its effects.
  • 2018: CNN Business began to recognize and report the rise in shipping costs resulting from the truck driver shortage. As baby boomers retire, younger generations aren’t as attracted to this career field because of the demanding hours and job-specific requirements.
  • 2019: The U.S. Department of Transportation’s Federal Motor Carrier Safety Administration Division issued full implementation of electronic logging devices (ELDs) to enforce how many hours truck drivers can spend on the road.
  • 2020: The U.S. Department of Transportation’s Federal Motor Carrier Safety Administration Division also made an electronic database called the Drug and Alcohol Clearinghouse fully operational. This platform identifies truck drivers prohibited from operating a commercial motor vehicle based on DOT drug and alcohol violations resulting in numerous drivers being taken off our roads.
  • Now: The pandemic struck early last year, and we’re still experiencing the effects as it’s not going to be over any time soon. Even though businesses are starting to reopen, many truck drivers decided to retire or found other jobs during the shutdown. Like many commercial establishments, truck driving schools were also closed, and with new social distancing requirements, fewer students are graduating.
Some rising costs in the sanitation industry are being created by a shortage of drivers.

Risk Management

A variety of risks exist that can impact the supply chain of businesses worldwide. Whether predictable or unpredictable, the rising costs of plastics and raw materials, as well as freight rates, can be negatively impacted by the risks described below.

  • Predictable Risk: Certain risk factors that can occur to your supply chain are within your control and can usually be identified and monitored early on to prevent a more significant issue. Predictable supply chain risks occur internally and can exist in various circumstances, from manufacturing and business marketing through customer acquisition to planning and control or mitigation and contingency.
  • Unpredictable Risk: Alternatively, risk factors outside of your control can impact your supply chain and are much harder to predict. Unfortunately, these risk factors tend to require more resources and time to overcome. Unpredictable supply chain risks occur externally and can exist in various circumstances, from demand and supply to environmental and business. A prime example of an unpredictable risk: a pandemic, and the severely underestimated storms in Texas that shut down the plastic industry.

Expert Advice

Sanitation isn’t the only industry being affected by rising costs and freight rates. Companies in every industry are being required to reform their approach to shipping. Strong relationships must be developed with sales reps and managers as these connections will enhance communication. Aside from building strong relationships with the individuals in these roles, there are a variety of other tips that should be incorporated into your production and shipping strategies for the best possible results, such as:

  • Proactive planning. It’s now more critical than ever to consider both current and future needs during production and order planning. It’s recommended to place fewer, larger orders that are planned far in advance, so there’s time allotted for the items to arrive. Your business is more likely to grow and evolve if you consider material costs, inventory, and time every step of the way.
  • Account for time. Proactive planning allows you to order in the most affordable time frames, like business days rather than weekends, and avoid having to place expensive rush orders. Receiving orders should be completed on a case-by-case basis because it can be convenient in some instances.
  • Ship to your advantage. Since you’ll be focusing on placing fewer, larger orders, it’s highly recommended to ship to your advantage. Don’t skimp on how much inventory is in the freight truck. Instead, fill the truck so you’re not paying more for less inventory or materials.
  • Strategic thinking. At times, you may have orders that won’t fill a freight trailer completely, which is where less-than-truckload freight shipping (LTL) comes in handy. Be strategic and plan for these times by sharing the shipping cost with another company that’s shipping at the same time.
  • Offer alternatives. If your establishment is located near a distribution center, it’s worthwhile to consider offering customer pickup as this can save time and funds spent on shipping – especially if a shipment isn’t going to fill a freight trailer.

Resilience Is Key

Obstacles that interrupt our supply chains will continue to present themselves. Practicing forward-thinking and adopting a resilient mindset are a few actionable steps to help your sanitation company remain strong. Businesses worldwide have overcome numerous hurdles over the years, and while it may seem like these obstacles are nowhere near over, material costs, freight volumes, and the aftermath of the pandemic will begin to normalize eventually. If you’re a business owner in sanitation and are seeking advice from industry experts, we encourage you to contact Satellite Industries today to discuss the impact of these rising costs and fundamental market changes.

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