Trade press conference K 2004
on June 22 and 23, 2004, in Ludwigshafen
Close bonds despite biting wind
About the relationship between customer and supplier
News Release
to the Report of Harald W. Kessler
Managing Director, Plasticos Holding AG (Zug, Switzerland)
Plasticos Holding, Switzerland, and BASF have enjoyed a customer–supplier relationship stretching back more than ten years. Plasticos produces composite and barrier film for the European packaging market, finished packaging products for fresh food, disposable items such as cups and trays as well as extruded sheet for use in refrigerator manufacture. Apart from polystyrene and styrene/butadiene resins, which are supplied by BASF, the company is also a big user of polypropylene (figure 1).
What you want and what you get
A medium-sized yet international company like Plasticos expects a number of things from its suppliers:
· Good levels of technical and commercial service
· Long-term cooperation in the development of products and markets
· Flexibility and business cooperation that goes beyond day-to-day operations
But what is it actually like in practice?
Good levels of technical and commercial service
This means:
· Zero-defects, on-spec quality
· On-time delivery; products available on demand
· Competitive prices in a market in which price transparency is low and price volatility high
· Competitive payment terms
Product quality
On the one hand, producers of the end products (ie, Plasticos' customers) do not tolerate poor quality in any way; on the other hand, the specification limits of the raw material suppliers – BASF included – are so broad as to generally rule out any quality liability.
This is not a problem for a business partnership provided that each party recognizes and respects the capabilities and limitations of the other: BASF knows Plasticos' internal quality system and Plasticos understands the conditions under which BASF has to produce.
A difficult topic: Price
The price of raw materials is the most difficult topic between supplier and customer given the lack of transparency in the market. How does the customer know he is getting the best price? It is important to recognize in a business relationship that only a customer who can remain competitive will stay in business – and so remain a customer – in the long term.
Long-term cooperation in product and market development
Joint product development
A certain time ago, sales of Plasticos specialties moulded from Styrolux®, BASF's high clarity, impact-resistant styrene/butadiene resin, were increasingly hit by competition from rival plastic materials. By working with BASF on a product and market development strategy, Plasticos succeeded in winning back lost market share. It turned out that BASF is the only PS supplier that works on the development of new, innovative grades or the optimization of existing ones.
Joint market development
When Plasticos opened a new sheet extrusion and vacuum-forming plant in Poland in 1998, the company had a choice of one local and two international suppliers of PS. In contrast to the other two suppliers, BASF offered guaranteed quality along with reasonable payment terms. BASF's decision to view Plasticos as a strategic customer has helped Plasticos become the largest supplier of extruded sheet for refrigerator linings in central and eastern Europe today. Big-name appliance makers now rank among Plasticos' customers. Plasticos' preferred supplier is of course BASF (figure 2).
Active customer relationship management not just order filling
A customer interested in a long-term relationship expects to receive support that goes beyond routine business matters. The relationship to the customer should therefore be regarded as a valuable asset, something that should not be put at risk by ill-conceived measures aimed at increasing efficiency or saving costs. Elimination of an important product without a suitable replacement, or the loss of a valuable business contact following a reorganization, can easily destroy a good customer relationship—a relationship that takes a lot of effort to restore. Recognizing and attending to a customer's needs without any immediate prospect of business should not be regarded as a cost factor, but rather as a means to mutual success.
Experience shows that winning a new customer is six times more expensive as retaining an old one.
Plasticos Packaging Group (PPG) was set up in Zug, Switzerland in 1993 with the aim of acquiring, restructuring and re-launching companies in the packaging industry. Earnings (EBIT) in 2003 were €6.1 million on sales of €60 million. The group employs 425 people in four production companies in Switzerland, the UK, Germany and Poland, as well as a central management, buying and sales company in Switzerland and the Netherlands. The company's product range comprises plastic sheet and film for use in food packaging. The company specializes in transparent film products, in particular so-called modified-atmosphere packaging (MAP) for easily perishable foods, and is one of Europe's leading makers of complex barrier and other multilayer film; it also makes disposable packaging items and extruded sheet for refrigerators. Plasticos purchases between 42,000 and 45,000 tonnes of resin annually, of which about 25,000 tonnes is polystyrene and styrene/butadiene copolymer, and the remainder polypropylene.