Blog posts by John Hattery

Reconsidering Resins - November 2017

November 27, 2017 by John Hattery

Much has changed in the resins market since we last considered it in early October. The market for plastics and resins has stabilized, with the disruptions to supply caused by Hurricane Harvey dissipating as capacity has or will very shortly come back on line. Additionally, reactive buying in the face of uncertainty of supply has been replaced by more proactive supply chain behaviors. Largely, buying behavior was bullish and aggressive in in the immediate wake of the storm, studied and reflective near the peak, and is now becoming more bearish. Given we are entering the second half of the 4th quarter, a period which usually brings tight inventory management, this bearishness is entirely rational. Buyers are balancing both “traditional” year-end pressures to keep working capital tied up in inventory to a manageable minimum with the potential for additional supplies the 3 new major resin plants starting to come to market. Domestic processors will likely work to limit their purchases while they wait for prices to fall back below pre-hurricane levels. Given these changing dynamics in the supply-demand balance, carefully consider large contracts in excess of immediate demand, as prices are likely to continue their softening trend, although with higher energy

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Don't Take Cybersecurity Lightly!

November 21, 2017 by John Hattery

Cybersecurity Compliance in The Age of Hacked Everything? Everyone hears about cybersecurity in the news, it seems with greater and greater frequency, touching more and more of our lives.  Equifax got hacked.  The Chinese purportedly steal intellectual property and military secrets from American companies on a massive scale.  Retailers regularly report breaches of their systems exposing millions of customers’ credit card numbers to the “dark web.” Right now, if your company is at all involved in a supply chain servicing contracts with the United States Department of Defense (DoD) as a direct supplier or as a subcontractor to a prime contractor with DoD contracts, there is a clock ticking away.  Ticking very, very loudly. Your organization has until December 31, 2017, to become compliant with NIST SP 800-171. This is a requirement that is stipulated in the Defense Federal Acquisition Regulation Supplement (DFARS) 252.204-7012.  Fundamentally, the Department of Defense is taking very seriously the risk of cybersecurity and cyberespionage, and have taken a very strong stance that compliance must be achieved by the end of the year.  If a contractor is not compliant, they will not be eligible for to bid on further business.  I know in talking to a number of

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Are You a Leader That Listens? Or a Leader That Hears?

November 16, 2017 by John Hattery

Leaders often ask their employees for input when making decisions big and small, and listen with great sincerity and intent. If workers are given the opportunity to provide input, they figure, workers will be more accepting of the decisions, committed to the process, and invested in the desired outcomes, simply because they feel heard. Not necessarily. The problem is that while asking for input is important, and actively and respectfully listening to what employees have to say is critical, often workers don’t grasp the “bigger picture” that the leader is trying to address. As a result, sometimes a leader reaches conclusions and implements actions that appear to be contrary to the input provided. As a result, employees aren’t likely to get on board, and are more likely to question both the process and outcome. Even worse, they may get angry and lose trust in the leader because they feel as if their thoughtful advice was ignored. If this becomes a frequent pattern of behavior, employees will come to believe that leaders are just pretending to be interested, gathering input primarily to keep people from complaining. Clearly, the answer is not that leaders should abdicate to mob rule and blindly follow

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Reflecting on Resins

October 03, 2017 by John Hattery

The market for plastics and resins continues to be somewhat confusing, operating under very different market conditions as compared to other raw material commodities. Though resin producers have learned the value of managing capacity to stabilize (and potentially to increase margins), the way they’ve been building up inventories is puzzling, even in the face of steady and increasing demand. The fact that producers were pushing for price increases as of August indicates that they anticipate increasing demand, decreasing capacity, or a combination of both, and have some confidence of realizing higher prices for their products. After Hurricane Harvey, demands for increased pricing have only strengthened as stockpiles are drawn down and infrastructure restarts are slower than hoped for. What can you do to keep up with these continually changing trends? Be responsible for your own defense. The best defense for a small manufacturer is to have multiple sources of resin pre-validated in your manufacturing process and pre-approved by your customers. This allows you to seamlessly shift from one supplier to another if faced with an unpalatable pricing demand. Be prepared to play suppliers against each other to ensure they remain in a reasonable margin band as market conditions vary, and

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Metal Musings

September 26, 2017 by John Hattery

For the past few years, manufacturers have enjoyed declining and advantageous input costs on most commodity industrial metals – copper, zinc, aluminum, iron, tin, steel, etc. The party has most definitely come to an end. As the global economy heats up, demand for industrial metals to supply the manufacturing sector in all markets likewise increases, resulting in a steady upward pressure on raw material input costs. Barring another major economic or geopolitical crisis, we have likely seen the last of a softening commodity market for quite a while, and must prepare for a period of increasing cost pressures. Manufacturers in the USA, particularly small manufacturing enterprises, need to be aware and be taking proactive steps to prevent margin erosion due to negative purchase price variance resulting from these commodity pressures. Know what your metal purchases should cost - be better informed than the salesman across the table from you. Hopefully as a manufacturer you haven’t been a passive, price-taking buyer, or a seller allowing larger customers to dictate how material cost inputs are to be dealt with. Hopefully, you already have indexing agreements in place with both suppliers and customers. Most importantly with suppliers, because without such agreements you have

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Equifax: A Financial Tempest

September 12, 2017 by John Hattery

On the heels of Hurricane Harvey, and as we prepared for Irma, another storm was announced on Sept. 7th, this one a financial typhoon. To make matters worse, this particular tempest was actually discovered way back in early July, and could have begun as early as mid-May. Hackers hit Equifax, the oldest of the three largest credit reporting agencies that gather and maintain financial and personal information on hundreds of millions of consumers, and tens of millions of businesses worldwide. The fact credit reporting agencies monitor consumers is broadly known, but people tend not to consider these agencies’ role monitoring businesses. Though it will be more challenging for hackers to make hay with stolen business information, the fact they now have enough personal information on up to 143 million Americans to easily commit identity theft on an unheard-of scale certainly gives one pause. It doesn’t beggar the imagination to envision some enterprising young hacker cross-referencing troves of stolen consumer and business data to see if there might be anything else interesting to exploit. What might this mean to a worried executive? For a large business, likely somewhat little, so long as they keep a weather eye carefully trained on their

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Hurricane Harvey Hits Here?

September 05, 2017 by John Hattery

Hurricane Harvey hit the Gulf Coast with a vengeance on August 25th, delivering the largest single storm amount of rainfall in the continental USA, ever. We have all seen the devastation and misery inflicted upon the residents of southeast Texas, and our hearts go out to them. If you wish to help fellow Americans in need, make sure you do so effectively and intelligently. See what Consumer Reports or other sources you trust have to say about giving before you break out your checkbook. But once we get past our sympathies, we have to begin to wonder - Will this disaster have any impact on me, or on my business? The answer is yes, most definitely. We are all used to seeing above-average rainfall in parts of the Midwest after a named storm system inflicts its mayhem in the gulf area, then meanders along a northeasterly path toward us. But we should expect more than just rain to fall out as a result of Harvey. The Gulf Coast holds about a third of the nation’s refining capacity, and serves as a critically important nexus of America’s “energy superhighway system.” In normal times, crude comes in, refined products go out, either

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