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23
FEB
2022

DB Blog #57 – In The Pursuit of Pricing Stability

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Everywhere we go now, we are showered with financial doom and gloom; price increases, surcharges, inflation – all likely to mean the same thing, more costs and less bottom-line profitability!

It is increasingly evident that we are living in globally volatile times with politics, energy crises, transportation challenges and difficulties sourcing raw materials, all of which play a huge part in our own economy so, how can any business achieve pricing equilibrium when faced with such an unstable financial landscape?

Our own Purchasing Department continues to be hit by increased supplier charges, some temporary, some permanent, some predicted and some unexpected. They are admirably fighting the fight dealing with the ever-changing financial backdrop whilst simultaneously batting away product and packaging component availability hurdles, where possible.

As a business, we continually try to absorb price increases where we can, however as with all organisations there are limits, and as such our sales team is faced with the unenviable task of passing a substantial part of these on to our customers who are already feeling the pinch. The only consolation in all of this is that most businesses are in the same boat, albeit that there are some tempting product price-hold out there! In reality, we all know that sadly, and inevitably, golden carrots are likely to be short-lived, replaced only by high prices or poor service penalties at some later date in the financial year.  There is no sugar coating.

Cause and Effect – What are our suppliers telling us?

Over the last 18 months or so we have been given a number of different reasons for price volatility, initially stemming from UK’s exit from the EU and then of course the post pandemic global economy coupled with sustainability demands.  More specifically: (the following data has been taken from supplier information and has not been verified by CJS Portsmouth)

  • Raw material price increases are compounded by component volume restrictions
  • Producers of cartons are struggling to meet surges of demand following switch out of plastic packaging
  • The price of wooden pallets has risen by over 23%
  • Crude oil pricing has increased more than 100% from July 2021 on top of an 85% cost increase between 2020 & June 2021. This has impacted on the pricing of some core feedstocks for both chemicals & packaging (for some of our suppliers) including Polypropylene at 31% and Ethylene at 27%.
  • Packaging resin prices have increased from between 50% to 70% since 2020.
  • HDPE (High Density Polyethylene) has increased 51% which is also impacting on packaging costs
  • PP (Polypropylene) pricing has increased by 73%
  • There is a 50-80% increase in metals which forms many key components in cleaning machinery
  • The industry is suffering from a limited availability of shipping containers which is driving freight prices up by an increase of 386%
  • Energy increases of over 80%
  • Raw material costs across cotton (14.5%) and paper (46%) …the list goes on

We are of course acutely aware of the financial shock this has on our customers, and we are taking measures to mitigate the impact of these challenges by offering lower cost alternatives wherever possible as well as looking at different suppliers to mitigate any supply shortage. 

When will there be light at the end of the tunnel?

Currently, we are all frantically in search of the beginning of the tunnel let alone the end.  In times like these, we all need to pull together and accept help where we can.  Whilst we cannot do anything about ongoing price increases, we do have a cleaning and hygiene management system (CleaningSafeguard™) that looks at all areas of cleaning, including budgeting controls, product rationalisation and product effectiveness to help reduce costs and improve efficiencies.  We recognise, that whilst we are all in the middle of an extremely unpredictable and never-ending financial storm, if we all work together to overcome the obstacles and hurdles, we should see a way forward. 

So, batten down the hatches, keep smiling, be safe at all times and of course talk to us about how we can help with your cleaning budgets.

Yours, DB