Skip to main content
  • login
  • contact
  • language
    • English
    • Français
    • Español
    • Português
    • Deutsch
    • Italia
    • 简体中文
    • 日本語
  • search
X
GEP Logo GEP Logo
  • Company
    • About Us
    • Leadership
    • Customers
    • Partners
    • AI-First at GEP
    • Sustainability at GEP
    • News
    • Events
    • Culture
    • Mission & Vision
    • Awards & Recognition
  • Solutions
    • Software
      • GEP SMART  
        • AI-First Source-to-Pay
        • Procurement Software
        • Product Accessibility
        • Direct Procurement Software
        • Indirect Procurement Software
        • Intelligent Category Management
        • Digital Procurement Transformation
        • Master Data Management
        • AP Automation
        • Spend Management
        • GEP COSTDRIVERS
      • Midsize & High Growth Enterprises  
      • GEP NEXXE  
        • AI-First Supply Chain Management
        • Supply Chain Visibility and Execution
        • Supply Chain Planning
        • Supply Chain Collaboration
        • Supply Chain Control Tower
        • Should-Cost Modeling
        • Inventory and Warehouse Management
        • Direct Material Sourcing
        • GEP Multienterprise Collaboration Network
      • GEP CLICK  
      • GEP MINERVA  
      • GEP BUILD  
      • GEP ASSIST  
      • GEP SPECTRUM XA  
      • GEP GREEN  
      Strategy
      • Procurement Consulting  
        • Procurement Transformation
        • Digital Procurement Transformation
        • Opportunity Assessment
        • M & A Services
        • Strategic Cost Management
        • Supply Risk Management
      • Supply Chain Consulting  
        • Environmental, Social and Governance
        • Socially Responsible Sourcing
        • Supply Chain Strategy
        • Supply Chain Diagnostics
        • Inventory Optimization
        • Network Optimization
        • GEP Total Inventory Management Solution
      Managed Services
      • Procurement Outsourcing  
        • Source-to-Contract
          • Spend Analysis
          • Strategic Sourcing
          • Category Management
          • Supply Market Intelligence
          • Tail-Spend Management
          • Procurement Support Services
        • Procure-to-Pay
          • Cost Recovery & Invoice Auditing
          • Accounts Payable
      • Supply Chain Outsourcing  
        • Planning & Forecasting
        • Inventory Management
        • Logistics Management
        • Supply Chain Data Management
        • Supply Chain Risk Management
  • Industries
    • Automotive
    • Chemicals
    • Consumer Packaged Goods
    • Energy & Utilities
    • Financial Services
    • Government & Nonprofit
    • Industrial Manufacturing
    • Life Sciences
    • Oil & Gas
    • Private Equity
    • Retail
    • Telecommunications, Media & Technology
    • High-Tech
    • Media & Entertainment
    • Software, Social & Platforms
    • Telecom
    • Travel & Hospitality
  • Knowledge Bank
    • Explore by Topic
      • Artificial Intelligence  
      • Digital Transformation  
      • Software & Technology  
      • Strategy & Planning  
      • Operations  
      • Procurement  
      • Sustainability  
      • Inflation Strategies  
      Explore by Type
      • White Papers  
      • Research Reports  
      • Bulletin  
      • Case Studies  
      • Webcasts  
      • Blogs  
      • Podcasts  
      • Insights From the Top  
      • Glossary  
      Global Supply Chain Volatility Index

      Latest Insight

      Navigating shifts Read More  

      Rethinking Supply Chains for Greater Efficiency, Resiliency, and Sustainability Read More  

  • Careers
    • Join Us
    • GEP Per Se
    • Campus Connect
  • Partners
   
  • GEP Software ›
    • GEP Software
    • ‹ Back
      • GEP SMART ›
        • GEP SMART
        • ‹ Back
          • AI-First Source-to-Pay
          • Procurement Software
          • Direct Procurement Software ›
            • Direct Procurement Software
            • ‹ Back
              • Bill of Materials Management
              • Data Analytics & Reporting
              • Inventory Management
              • Master Data Management
              • Quality Management
              • Supplier Collaboration Portal
              • Supply Chain Operations
          • Indirect Procurement Software ›
            • Indirect Procurement Software
            • ‹ Back
              • Source-to-Contract
              • Spend Analysis
              • Savings Project Management
              • Category Management
              • Contract Management
              • Savings Tracking
              • Sourcing
              • Supplier Management
              • Procure-to-Pay
              • Guided Buying
              • Procurement Portal
              • Catalog Management
              • Order Processing
              • Invoice Management
          • Intelligent Category Management
          • Digital Procurement Transformation
          • Spend Management
          • Master Data Management
          • AP Automation
          • Product Accessibility
          • GEP COSTDRIVERS
          • Midsize & High Growth Enterprises
      • GEP NEXXE ›
        • GEP NEXXE
        • ‹ Back
          • AI-First Supply Chain Management
          • Supply Chain Visibility and Execution ›
            • Supply Chain Visibility and Execution
            • ‹ Back
              • Inventory and Warehouse Management
              • Logistics Visibility
              • Control Tower
          • Supply Chain Planning ›
            • Supply Chain Planning
            • ‹ Back
              • Supply Chain Control Tower
              • Should-Cost Modeling
              • Demand Planning
              • Supply Chain Bill of Materials
              • Supply Chain Direct Sourcing
              • Supply Planning
          • Supply Chain Collaboration ›
            • Supply Chain Collaboration
            • ‹ Back
              • Forecast Collaboration
              • Purchase Order Collaboration
              • Quality Collaboration
              • Capacity Collaboration
              • Quality Management Software
          • Supply Chain Control Tower
          • Should-Cost Modeling
          • Inventory and Warehouse Management
          • GEP Multienterprise Collaboration Network
      • GEP CLICK
      • GEP MINERVA
      • GEP BUILD
      • GEP ASSIST
      • GEP SPECTRUM XA
      • GEP GREEN
      • Innovation ›
        • Innovation
        • ‹ Back
          • Emerging Technologies
          • Native to Cloud
          • Native to Mobile
          • One Unified Platform
          • Security
          • User-Centric Design
  • GEP Strategy ›
    • GEP Strategy
    • ‹ Back
      • Procurement Consulting ›
        • Procurement Consulting
        • ‹ Back
          • Procurement Transformation ›
            • Procurement Transformation
            • ‹ Back
              • Procurement Strategy
              • Org. Design & Implementation
              • Capability Building
              • Change Management
              • Governance & Performance
              • Processes & Policies
              • S2P Operations
              • Sourcing & Category Management
              • Technology
          • Digital Procurement Transformation
          • Opportunity Assessment
          • M&A Services ›
            • M&A Services
            • ‹ Back
              • M&A Clean Room
          • Strategic Cost Management ›
            • Strategic Cost Management
            • ‹ Back
              • Zero-Based Budgeting
          • Supply Chain Risk Management
      • Supply Chain Consulting ›
        • Supply Chain Consulting
        • ‹ Back
          • SUSTAINABILITY AND RESILIENCE
          • Environmental, Social and Governance
          • Socially Responsible Sourcing
          • Scope 3
          • PLAN
          • Digital Planning, S&OP, S&OE
          • Collaborative Planning
          • PROCURE
          • Source To Contract
          • Procure To Pay
          • MAKE
          • Inventory Strategy & Management
          • Operations & Manufacturing Excellence
          • GEP Total Inventory Management Solution
          • DELIVER
          • Network Strategy & Optimization
          • Warehousing & Transportation Management
  • GEP Managed Services ›
    • GEP Managed Services
    • ‹ Back
      • Procurement Outsourcing ›
        • Procurement Outsourcing
        • ‹ Back
          • Source-to-Contract
          • Spend Analysis
          • Strategic Sourcing ›
            • Strategic Sourcing
            • ‹ Back
              • MRO
              • CAPEX
              • Logistics
              • Packaging
              • IT & Telecom
              • Energy
              • Direct Materials
          • Category Management ›
            • Category Management
            • ‹ Back
              • Contract Management
              • Supplier Performance Management
              • Savings & Compliance Tracking
          • Supply Market Intelligence
          • Tail-Spend Management
          • Procurement Support Services ›
            • Procurement Support Services
            • ‹ Back
              • eSourcing
              • Supplier Performance Management
              • Savings & Compliance Tracking
              • Sourcing Support
          • Procure-to-Pay
          • Cost Recovery & Invoice Auditing
          • Accounts Payable
      • Supply Chain Outsourcing ›
        • Supply Chain Outsourcing
        • ‹ Back
          • Planning & Forecasting
          • Inventory Management
          • Logistics Management
          • Supply Chain Data Management
          • Supply Risk Management
  • Industries ›
    • Industries
    • ‹ Back
      • Automotive
      • Chemicals
      • Consumer Packaged Goods
      • Energy & Utilities
      • Financial Services
      • Government & Nonprofit
      • Industrial Manufacturing
      • Life Sciences
      • Oil & Gas
      • Private Equity
      • Retail
      • Telecommunications, Media & Technology
      • High-Tech
      • Media & Entertainment
      • Software, Social & Platforms
      • Telecom
      • Travel & Hospitality
  • Knowledge Bank ›
    • Knowledge Bank
    • ‹ Back
      • Explore by Topic ›
        • Explore by Topic
        • ‹ Back
          • Artificial Intelligence
          • Digital Transformation
          • Operations
          • Procurement
          • Software & Technology
          • Strategy & Planning
          • Sustainability
          • Inflation Strategies
      • Explore by Type ›
        • Explore by Type
        • ‹ Back
          • Insights From the Top
          • White Papers
          • Research Reports
          • Bulletins
          • Case Studies
          • Webcasts
          • Blogs
          • Podcasts
          • Glossary
      • Global Supply Chain Volatility Index
  • Company ›
    • Company
    • ‹ Back
      • About Us
      • Leadership
      • Customers
      • Partners
      • AI-First at GEP
      • Sustainability at GEP
      • News
      • Events
      • Culture ›
        • Culture
        • ‹ Back
          • GEP Core Values
          • Women@GEP
          • Diversity
          • GEP Cares
      • Mission & Vision
      • Awards & Recognition
      • Contact Us
  • Global Presence ›
    • Global Presence
    • ‹ Back
      • Americas ›
        • Americas
        • ‹ Back
          • English
          • Español
          • Portugués
      • Europe ›
        • Europe
        • ‹ Back
          • English
          • Deutsch
      • Asia-Pacific ›
        • Asia-Pacific
        • ‹ Back
          • English
          • 中文
      • Middle East ›
        • Middle East
        • ‹ Back
          • English
          • العربية
  • Contact Us
  • Careers ›
    • Careers
    • ‹ Back
      • GEP Per Se
      • Campus Connect
  • Language ›
    • Language
    • ‹ Back
      • English
      • Français
      • Español
      • Deutsch
      • Italia
      • Português
      • 简体中文
      • 日本語
  • BLOGS
  • Strategy
  • Technology
  • MIND
Contact Us
  •  
  •  
  •  
  •  
  •  
  •  

Breadcrumb

  1. HOME
  2. BLOG
  3. MIND
  4. SUSTAINED DECREASE MEDICAL POLYMER PRICES DID YOU REALIZE MILLION DOLLARS SAVINGS
Blog Image

Sustained Decrease in Medical Polymer Prices: Did You Realize Million Dollars In Savings?

September 27, 2017 | Pharma and Life Sciences

Sustained depression in crude oil prices, from $100 per barrel in 2014 to the current level of $50 per barrel, has brought the prices of derived polymers such as Polypropylene (PP), Polyethylene (PE) and others down by an average of 20 to 30 percent. Due to these developments, medical devices manufacturers have realized annual savings close to $1 million $10 million spend on categories such as disposables which heavily utilizes the use of plastic polymers.

Medical devices industry utilizes a number of medical polymers to manufacture their products. Polyvinyl chloride (PVC), Polypropylene (PP), Polystyrene (PS) and Polyethylene (PE) are some of the most prominent polymers used in the medical devices industry. For certain products such as disposable syringes and tubes, the plastics constitute almost 40 to 50 percent of the total cost associated with the product. The prices of these polymers are heavily dependent on the prices of the source material i.e. crude oil. Any major fluctuation in the crude prices is mimicked in the resin and polymer prices.

Polymer Trends

During the period from 2012 to 2017, crude oil prices have rapidly declined from more than $100 per barrel to the current levels of $47 to $50 per barrel. This happened due to higher outputs, oversupply, declining demands and competition from U.S. Shale. This pattern has also been mimicked in the medical polymer market and prices of polymers have declined from 2014 levels. The price of PP has declined by almost 30 percent, PS by 24 percent, HDPE by 25 percent and PVC by 16 percent.

Savings Opportunity: Realized or Lost?

Let’s assume a scenario for Company X that spends around $10 million on their product category which heavily utilizes polymers like PP, PE and others. Assuming that plastics constitute 35 percent of the total cost of product, the total addressable spend due to plastics comes around $3.5 million. Company X has mid to long term (3-5 years) agreement with their current supplier or outsourcing partner and the contract was framed during the period of 2012-2014. Considering the decline in polymer prices, Company X had an opportunity to realize savings of $500 thousand to $1 million per year. When combined, this interprets into unrealized savings of an average $2.5 million in past 3 years. On top of this, factor-in the decrease in costs associated with manufacturing such as utility costs (due to decrease in coal costs), logistics and transportation costs (dependent on crude), the lost savings keeps on stacking.

Why are companies like X unable to capitalize in such markets?

Contracts will certainly have clauses for passing costs or benefits due to the fluctuations of underlying cost drivers, but, in the end it is totally depended on contract compliance. In an ideal case scenario, the supplier should automatically pass on the savings achieved due to raw material price decrease to the client which some suppliers certainly practice, the word of importance here is “some” as it is not the ideal world where businesses operate. Factors like poorly framed contracts, lack of strong contract compliance teams, absence of market tracking teams, inefficient SRM program and others leads to waste of such cost saving opportunity.

Recommendations

The key to extract the best out of the market fluctuations is to have a robust contract compliance team which is empowered with strong contracts containing performance and penalty clauses. The team should ideally have access to category databases or third party research platforms and should track market movements of the major categories of spend once every quarter. Any sustained fluctuation over a period of three quarters should be immediately addressed with relevant suppliers and stakeholders within the organization.

 

Sources:

  • Polymerupdate.com
 

Add Comment +

FEATURED POST

...
Inventory Management Software

Achieving Supply Chain Resilience With Total Inventory Management Solution

...
Supply Chain Strategy

Sodium-ion vs. Lithium-ion Battery: Which is a Better Alternative?

...
Supply Chain Strategy

3 Best Practices to Tackle Inflation in Supply Chain Network Design

    BLOG CATEGORIES

  • Marketing
  • Pharma and Life Sciences
  • Professional Services
  • IT & Telecom
  • Logistics
  • Chemicals
  • Energy & Utilities
  • Market Intelligence
  • Oil and Gas
  • Supply Chain
  • MRO
  • Facilities Management
  • Human Resource
  • Agro
  • Procurement Process and Excellence
  • Direct Materials
  • CAPEX
  • Packaging
  • Automotives
  • Healthcare
  • Metals & Minerals
  • Corporate Travel
  • Technology
  • Awards and Events
  • Category Management

TAGS

sustainability
Procurement Software
supply chain strategy
Inflation
Russia-Ukraine War

By checking the box below, you consent to GEP using your personal information to send you thought leadership content – such as white papers, research reports, case studies – and other communications. GEP representatives may contact you to provide additional information or answer questions.

If at any point in time you decide to withdraw your consent, you may unsubscribe by emailing your request to us at privacy@gep.com.

Please refer to the GEP Privacy Statement to understand how we manage and protect your personal information.

Terms of Use | Privacy Statement

Contact Us

Ask Us

Send us your question(s)

RFP

Request for a business proposal

Feedback

Share your thoughts, comments and suggestions

Demo

Schedule a live demo of our software

Discover
STRATEGY
Strategy
  •   Procurement Consulting
  •   Digital Procurement Transformation
  •   Strategic Cost Management
  •   Opportunity Assessment
  •   Supply Chain Risk Management
  •   Supply Chain Consulting
  •   Supply Chain Strategy
  •   Supply Chain Diagnostics
  •   Inventory Optimization
  •   Procurement Transformation
  •   Sustainability and ESG Consulting
SOFTWARE
Software
  •   Procurement Software
  •   Supply Chain Software
  •   Source-to-Contract
  •   Procure-to-Pay
  •   Supply Chain Planning
  •   Supply Chain Collaboration
  •   Supply Chain Visibility & Execution
  •   Supply Chain Control Tower
  •   Should-Cost Modeling
  •   Inventory & Warehouse Management Software
  •   Source-To-Pay Software
  •   Midsize & High Growth Enterprises
MANAGED SERVICES
Managed Services
  •   Procurement Outsourcing
  •   Strategic Sourcing
  •   Tail-Spend Management
  •   Category Management
  •   Procurement Support Services
  •   Supply Chain Outsourcing
  •   Supply Chain Planning & Forecasting
  •   Inventory Management
  •   Logistics Management
COMPANY
Company
  •   About Us
  •   Leadership
  •   Customers
  •   Sustainability at GEP
  •   Careers
  •   News
  •   Awards
  •   Partners
  •   Contact Us

Fresh Insights, Now on Your Phone

  • GoGEP app on Apple App Store
  • GoGEP app on Google Play Store
Stay Connected
  •  
  •  
  •  

Latest Tweets

© Copyright GEP 2023. All rights reserved. Terms of Use | Privacy Statement | Cookie Policy |   | Quality Policy | GEP Logo