KEY CONCEPTS
•
Current supply chain issues are calling for creative solutions.
•
Consolidating products and raw materials will increase buying power, while working with as many suppliers as possible for individual components will reduce dependence on one source.
•
A number of these workarounds may become best practices going forward.
Meet the Presenter
This article is based on an Industry Insights presentation titled
Raw Material Shortages and the Effect on Formulating New Products by Jennifer Lunn on Oct. 20, 2021. Industry Insights is a monthly virtual event series available for free to STLE members. These events provide a forum for members to collaborate with STLE industry peers and an expert on a specific topic who gives a brief presentation, then facilitates conversation by asking discussion questions and providing actionable takeaways. For more information, click
here.
STLE member Jennifer Lunn has a bachelor of science degree in chemistry from Case Western Reserve University and is an STLE Certified Metalworking Specialist™. She spent the first 17 years of her career in various positions at The Lubrizol Corp., including research and development of additives, research and development of metalworking formulations, metalworking product manager for North and South Americas and project manager for hydraulic and industrial gear oils. Over the past four years, Lunn has been the senior research chemist and product manager for JTM Products, Inc.’s metalworking division. She focuses on formulating high-performing innovative products that meet the ever-changing landscape of the metalworking industry. You can reach Lunn at
jlunn@jtmproductsinc.net.
Jennifer Lunn
Disruptions in the supply chain have impacted everyone, from chemical manufacturers to finished part suppliers and everyone in between. From a formulator’s perspective, this disruption can significantly impact producing and delivering current products and developing anything new. The need to consolidate raw materials becomes a primary focus during development and even in reformulations. This article focuses on current reasons for shortages and possible ways of overcoming them.
A metalworking fluid, which is Lunn’s primary focus, is a complex formulation that can contain a myriad of additives including mineral oil, corrosion inhibitors, emulsifiers, lubricity additives, extreme pressure additives, etc. Each formulation typically contains anywhere from 10 to 20 or more additives. The base fluids and all of these additives need to be sourced, in addition to ancillary items such as containers and packaging. In today’s climate, there are a number of purchasing issues that are affecting the sourcing of these materials such as extended lead times, drastic price jumps, piggybacking price increases, raw material shortages, allocations too low to cover needs, rising freight costs, lack of drivers to move product, extended shipping times due to logistics issues, natural disasters, etc. Costs have become out of control because price increases are drastic and volatile—sometimes fluctuating from one order to the next.
Rethinking just-in-time purchasing strategy
Long lead times for products and components have necessitated an altered purchasing strategy on the part of customers. “Before the pandemic, as consumers, we became dependent on same-day, next-day or two-day delivery in everything we wanted,” Lunn explains. “The need for delivery increased significantly once shutdowns and quarantines went into effect, and products such as toilet paper and hand sanitizer became scarce. Over the course of the last year and a half, we have moved from one shortage to another, all put into motion because of those early days.”
She continues, “Lack of raw materials due to production shutdowns and reallocation of resources delayed or even stopped downstream processes. The trucking industry is lacking drivers to move product around; anything from overseas is delayed because there are not enough workers to unload product. As we all work to play catch-up in our businesses, we must understand that it is going to take time to readjust and balance supply and demand as well as reestablish the appropriate number of resources. The only way to do that is to focus more on planning.”
At the finished fluid manufacturing level, Lunn is being told its anywhere from two to six weeks for lead times from suppliers. “Because of this, it’s essential to work with customers, through the sales force, and build a solid forecast,” she says. “Having open discussions about new opportunities will allow those in purchasing to reach out to suppliers if larger quantities or new raw materials are required. The earlier these conversations can be had, the sooner we can identify potential problems.”
A supplier involved in this Industry Insight discussion concurred, saying that his customers have become used to depending on just-in-time delivery, and they need to get away from that.
One way to deal with the supply issue is to increase the number of potential suppliers, but as a discussion participant pointed out, most companies competing in the same industry are dealing with the same limited pool of suppliers.
Reducing components
A workaround for reducing reliance on suppliers is to reduce the number of components required to produce products. Lunn uses the following example: At the formulator level, if a raw material has the potential to be unavailable when it’s needed, the formula should be reexamined with an eye toward finding a suitable replacement. “This takes time for receiving samples and testing; if we wait until we have a purchase order for the product, it is too late,” she says. “Consolidation of raw materials also is a good practice in general. It’s easy to continue to make ‘one-off’ products when supply isn’t a problem. But having a significant number of raw materials that only go into one or two products that are only sold to one or two customers can be tedious for production staff to maintain. The raw material slow down probably forced a lot of companies to clean house—making production more streamlined.”
New product development
The current situation also changes new product development strategy. ”It’s important to note that evaluating new chemistry is essential to producing new and unique products that allow companies to stay relevant in the industry,” Lunn advises. “This is where being single sourced is problematic; these new products are mostly proprietary. Evaluating as many similar products as possible and building an understanding and library of the positives and negatives of each chemistry then becomes a big part of product development. So even if you don’t have an exact match chemically, you have an idea of what might perform similarly if supply becomes an issue.”
Increasing importance of fluid analysis
Another great point that Lunn raises is that fluid analysis—metalworking fluid analysis in particular—can reduce the need for new fluid and, therefore, reduce supply issues. She explains, “Water-based metalworking fluids will go bad due to the microbials that come in with water, constant hardening of the water and contamination. You can extend the useful life of your fluid by monitoring a few simple data points: pH, concentration, appearance and microbial content. By monitoring these characteristics and identifying problems before the fluid is no longer salvageable, the sump life can be increased. All of this decreases the need for new oil because the shop doesn’t need to dump the sump and recharge as often. With other industrial fluids, there are tests that can be run to measure the components present and possibly extend oil life. Most of these tests, however, are not run in-house and need to be run at an external oil analysis laboratory.”
Lunn’s suggestions for dealing with current supply issues can be summarized as follows:
•
Consolidate products and raw materials to increase buying power and decrease total number of suppliers when possible.
•
Convince customers that are using older formulations unique to them to upgrade to something that is more modern and mainstream.
•
Continuously evaluate substitutes that might work as replacements—requires sampling and testing, but starting early eliminates problems later on.
•
Identify as many sources as possible to reduce dependence on one source.
“Once the pandemic has subsided, I do think those two areas—reducing or eliminating the need for certain components and expanding the number of suppliers—will become best practices,” Lunn concludes. “I think what’s transpired over this past year just cemented in everyone’s mind that being single-sourced is not an ideal situation. I know that for us moving forward, we will continue to identify more sources for current and new raw materials.”
Lunn also suggests participating in industry associations such as STLE and networking with peers to uncover ways that organizations are successfully coping with the situation.
Jeanna Van Rensselar heads her own communication/public relations firm, Smart PR Communications, in Naperville, Ill. You can reach her at jeanna@smartprcommunications.com.