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In this final episode of series one, we put a spotlight on the unspoken needs of Glass Suppliers, so that glass buyers can trade their exemplary customer behaviour, for the best possible pricing.
Today our countdown moves to the Number 1 Need of Glass Suppliers and indeed Packaging makers in general – “Volume”.
Beyond any shadow of a doubt, Volume or quantity, is the primary need of packaging manufacturers the world over, because they must “utilise their production capacity”, as close to a 100% as is possible, in order to cover their very high fixed costs and generate a margin.
“’Fill the machines!” is a war cry heard routinely within manufacturing environments and never more so that right now with so much underutilise capacity, due to COVID-19 and other hostile trading conditions.
So once again, the opportunity is for FMCG glass customers to contemplate this primary supplier need and consider how they can satisfy it, on mutually beneficial terms.
The process short start with understanding just how much volume your business represents as a percentage of your supplier’s production capacity at the factory you draw from. Chances are, that unless you are a Lion, CUB, Treasury Wines or Bundaberg Soft Drinks, you are not going to absorb more than 15% of production output. But do not distress, because your opportunity is to collaborate with other packaging customers to create scale, and thus buying power.
One of the best examples of this comes from an organisation known as the Independent Winemakers Group or IWG. This group, comprising a handful of Australia’s best-known winemakers including De Bortolli, Brown Brothers and Angove’s, came together to buy glass bottles some 20 years ago. At the time they realised that to compete with larger wine producers they needed to drive down production costs & becoming a glass buying group was one way to do so. Almost overnight, they entered the top 10 list of OI Glass customers, and in doing so, scored a material improvement in their unit price per bottle & service prioritisation. Since then they have continued to procure as a large team and generate even better buying conditions for their stakeholders. At the same time, they established an internal code of behaviour that made them a far more professional entity to negotiate with & gave them direct access to key Packaging CEO’s.
Is this hard to replicate for the many smaller glass & packaging customers operating across Australian & New Zealand just now? Not at all. Craft Beer, craft soft drink, premium food, premium juice & boutique wine makers all have access to one another like never before, either directly or through contract fillers, and can replicate what the mighty IWG did all those years ago. Even if your very small, a simple doubling of your size will give you more buying power. Do that twice and expect even more of the priority treatment from Suppliers. Building volume scale clauses into your supply agreements is a prudent thing to do. No matter if it’s immediately or sometime in the future, they offer a powerful incentive to secure more volume under conditions that are mutually beneficial to both supplier and buyer alike.
So, this concludes our countdown of the Top 7 Glass Supplier needs. We started with Innovation, moved to exclusivity, then down to Moulds and from there, Forecast Accuracy. Payments terms followed, then contract length and finally, we landed here with our number one need of … Volume!
These needs are universal amongst packaging makers. Consider them carefully when you look to procure and consider always how to “Give the supplier what they want, on your terms, not just theirs!”