221 Transcript

The following transcript is provided by YouTube. Mistakes are present. To hear the podcast episode, click HERE.

well hello everybody and welcome to the

raw material update my name is trace

blackmore

and uh i’m hosting this event uh this

was originally set to come at the awt

convention but our town hall meeting did

not allow that to happen we know that

this is very important information that

we all need to know about because we’re

going to have to make some serious

decisions about what we do about the

word that i can think of is this crisis

and and how we properly prepare for that

before i introduce my speakers

i’d like to recognize a couple of things

that allow us to do things like this so

some of the things that pay the bills

are the scaling up h2o podcast so if you

don’t know about the scaling up h2o

podcast you can get that anywhere you

listen to podcasts completely free and

this is everything a water treater needs

to know and it’s the water treaters

friend as they’re driving from account

to account the other thing i want to

mention is the rising tide mastermind

the rising tide mastermind is a

group of people we get together and we

talk about issues like this last year we

were talking about covid and how do we

survive a pandemic and what is ppp and

how do we take advantage of it what are

all the things that we need to know

and the great thing about discussing

that with a group of people is no one

person has to do all the lifting we

divided and conquered and we really

helped each other

survive something that nobody knew how

to get to so if you’re interested in

that you can go to scaling up h2o.com

forward slash

mastermind

and with that i want to go ahead and

introduce our speakers

so jill cavano of scranton associates

welcome jill you’re going to be our

first speaker but i’m going to introduce

our other speakers as well we have mike

standish of radical polymers

gary garcia of masters company and john

zabrida of zyback so thank all of you

for

coming to this sharing the information

that you’ve learned what you’ve seen in

the industry

and a little bit of housekeeping

i’d like everybody that’s participating

to please keep

your

your screens muted

i will give time for questions at the

end of all four speakers if you have a

question i’d like to moderate that just

so we’re not talking over each other so

if you can put those questions into chat

please do so and i will ask those

questions uh as they come up

we are recording this my plan is to

share the link that we get from zoom

immediately with our mastermind members

and then what we’re going to do for

everybody else is we’re going to we’re

going to grab that video we’re going to

transfer that to our youtube page and

then send that out via our youtube page

so with that

jill there’s so much going on right now

and you are right in the middle of it

and i’m sure you see things that the

rest of us don’t can you help us out

with all of the stuff that’s going on

right now

thank you trace um i think i’m going to

start by just kind of a state of the

industry

we had this panel uh you know several

months ago and at the time one of the

question was is when do you foresee

things getting better whether it be

chemicals or freight or containers or

such and at the time i think we all

answered somewhat maybe overly

optimistically i’ll speak for myself

that we were hoping that by this time

things might have at least stabilized or

we would have seen some kind of end to

this and then others said no you know

not till you know 2021 and and then now

it’s okay no not till the end of 2021

and then not until quarter two or

quarter three of 2022 well not to be

unoptimistic but i think the state of

the industry as far as freight and

containers and chemical pricing and

price increases and availability i think

you know not to have a crystal ball but

i think realistically my best guess is

when we might start to see some relief

um some stabilization dare i even say

some prices you know staying the same or

coming down

would be you know the end of 2022 going

into 2023. so i think the optimistic

thing that we can all think of if we try

to take anything away is that um and

i’ll touch on this later is it’ll lead

us to be better communicators with our

staff better communicators with our

customers um to have more contact and

more touch points with people but also

if you look at it from this perspective

even though it looks like we might have

another year to go of trying to deal

with all this we already have a year

under our belts a year under our belts

where we’re getting acclimated to kind

of a new way of being a new way of

running the business so i guess if you

want to think positive you know maybe

we’re halfway there but that’s kind of

my state as an industry overall um

as i’m sure everybody knows right now

one of the biggest concerns is

not only pricing and seeing price

increases the likes of which you know

not just maybe on one thing like we did

with sodium molybdate solution you know

back

15 16 or whatever years ago but now it’s

a whole variety of products across the

board and containers and freight so

we’re seeing price increases the likes

of which we’ve never seen before on not

just a handful of products we’re also

seeing you know freight cost the likes

of which we’ve never seen before you

know it used to be maybe last year

depending on where it was coming from or

what it was you’d see ocean freight

three or four thousand dollars a

container i think this week and last

week on some things it was more like 22

000 to 30 000 as a container if you can

even get that over here um

so you know we’ve got the price

increases we’ve got the freight we’ve

got the lack of availability um you know

the the sulfamic acid citric acid uh tt

bzt

cyclohexylamine morphaline you know

d-e-a-e uh d-ha you know all of these

things and more um

i find that you know the the pricing has

gone up exponentially but also the fact

is is can you even get it um so that’s

something that that i want to address um

and you know the same thing with

containers and then kind of just my

words of wisdom and input and things

that i’ve learned but i think the thing

that people are most concerned about is

availability of raw materials so there

is going to be problems and there is

already problems on availability of raw

materials and you know myself and gary

and john and mike you know we’ve done

our best to stock up as much as we can

we’ve done our best to communicate with

customers price increases

what things are going to be tough to get

that lead times are longer

so sometimes if i order something and

someone tells me it’ll be here in a week

i like to prepare myself and customers

well that week could turn into two or

three

i’m as stocked up as i can be and i’m

going to do my best not to run out of

anything

i hope that that won’t happen and i’ll

do everything in my power that i can but

that’s something i think that we all

need to think about and one of the

reasons for this call today that we all

kind of need to be prepared for we need

to have conversations with you know for

uh with my customers so that they can

have conversations with their customers

about price increases uh prepare people

and communicate for longer lead times

and prepare people for what happens if a

supply of something through no fault of

anybody should you know not be available

anymore you know what are some

alternatives that we can use what are

some things that we can do

so that’s a main thing i think is just

stressing communication um one of the

things that i’d like to talk about is

there’s not a lot of direct drop-ins for

some of these products that we’re gonna

you know be in short supply you know the

price is gonna increase you know people

may not be able to get them but there

are things that you can do whether it be

something else that you could use

whether it be changing a formulation to

make it less concentrated use less of

something use something that’s a little

bit different

and that’s something that myself and

gary and john

and mike um can assist you with so that

you can make sure that you know for

whatever is available or whatever is a

more reasonable price point that we can

help and you know guide you to make sure

that you’re using the best things that

are available at the time to try to as

we all kind of navigate this together uh

one thing i do want to point out is if

you do go ahead and change anything um

you know please check with us or please

keep in mind that that might trigger you

to change your labels and your sdss

um so you know don’t make any any

changes without taking that into account

um secondarily i’m talking about i mean

freight we all know that uh you know

sometimes trucks don’t pick up sometimes

there’s longer lead times everything is

costing more um ocean containers there’s

an ocean freight there’s a shortage of

containers

there’s issues at the ports the price is

exponential i’ve heard from several

people that with the holidays

approaching they’re favoring

non-hazardous materials over hazardous

materials so there i would say that

there might be even more delays as we

stock up for the holiday shopping season

so that’s kind of on the front here with

ocean freight as far as containers go um

i think that we might i i hope i’m not

being too hopeful that we might start to

maybe not see monthly increases on resin

i mean that hasn’t happened yet

containers just like everything else the

prices on resin and steel and freight

and then them having trouble with labor

problems i mean that’s all driving the

high prices of containers uh with us we

just have orders booked out for six

months at a time and just keep having

something always on the books to make

sure we don’t run out but you know those

prices are increasing a lot

one of my container suppliers let me

know that there might be a little glitch

once the automotive comes back online

with all of the issues that they’re

having right now the demand for

containers could boom all over again and

you know trigger you know something

worse than what we’ve already seen but

there are still containers available

they’re just costing more and um you

know have to make sure that like we have

and i’m sure gary and mike and john and

everybody else you know get your orders

in and and uh pass along the pricing and

you know do your best to make sure that

you know you don’t run out and that you

have what you need

um but i think as far as you know raw

materials and freight and containers i

guess my biggest takeaways are is that

communication i mean now it’s more

important than ever for us to

communicate you know us being you know

mike and gary and john to communicate

with our customers everything that’s

happening so we set up a reasonable

expectation you know forecasting is

important stocking up is important

knowing about you know what else you can

use if it comes down to it how to change

formulations um and making sure that

anything collateral like your sds’s and

labels is taken care of but also for our

customers to talk to our their customers

that’s very important it’s very

important that if you have a big order

that you’re just about to quote on maybe

a product that you haven’t sold in four

months you know talk to me talk to gary

talk to you know whoever you need to

talk to um because i guarantee you that

price has changed to make sure that

you’re not the one pay you know eating

the difference on that

but you know just from a housekeeping

standpoint for us

many months ago our corporate policy its

grant associates has changed you know my

staff it used to be you know when you

crack the last tote when you crack the

last drum that’s when you come and and

we’re at a reorder point we’ve redone

the way that we do business internally

where you know i’m communicating my

office staff is communicating with our

customers you know everybody’s on the

same page everybody is prepared everyone

knows what’s going on um you know they

may not like the fact that prices are

going up but we’re all on the same page

and the same thing with the staff um

now it’s like when you crack the third

to last tote when you you know are only

have eight drums left then at that time

it’s time to tell me that we need to

reorder and you know stocking up on

things that we think are going to be in

short supply or stocking up on things

before the prices get to be too

outrageous um so our policy has changed

with how we do business and i know a lot

of you know my customers and and

colleagues and such where they have

changed with their you know sales staff

and service staff how they do business

where instead of you know you’re at a

reorder point when you put the last you

know drum on you’re at a reorder point

when you have four drums left at the

site um so i think the communication and

the way that we all do business is gonna

have to change if it hasn’t already but

that might not necessarily be a bad

thing that might be something that’s a

good takeaway from this where we can

kind of use that to our advantage you

know if at such time when things do

maybe not go back to normal but they

stabilize

um and then uh

i think that’s the pretty much all i had

to say i’m gonna hope that uh you know

i’m sure gary and john and mike can

definitely add to that and i’m happy to

answer any questions anybody has at the

end

all right thank you so much jill again

that’s jill cavano of scranton

associates if you want to reach out to

her next up i’m going to recognize mike

standish

so mike thank you so much for sharing

all the knowledge that you have about

this situation

so i’m going to ask the same question

that we asked jill with everything that

you see going on with uh things that

you’re working with your customers and

your suppliers what do we need to know

and what do we need to do

well first of all i think following jill

is kind of like following the beatles on

ed sullivan so who was that guy you know

who who was the next guy after that so

thank you jill for uh covering all

everything that was that was awesome um

i i probably look and i’ll look down

kind of at some notes that i made but

i probably look at things maybe more at

a 30 000 foot view you know of what’s

going on so

clearly uh you know we’re seeing kind of

a perfect storm in a way and that we’re

seeing increased demand which is kind of

odd you know in this environment plus

decreased raw material availability uh

plus all these logistical issues so you

know those kind of three things combined

make make this kind of the worst case

scenario in terms of just getting

material when you need it at a at a

price which you expect or that you you

know feels fair

one one thing and rob ferguson mentioned

this before

and earlier in the day

one of the things i’ve been saying to

people is look i’m very concerned about

inflation because

from our point of view you know we’re

seeing and i’m sure you know all the

vendors out there are seeing just

huge increases in cost jill mentioned

you know the container cost a freight

container a shipping cost uh

for ocean freight you know going up into

the 20 something 000 versus less than 5

000 a year ago

just for everybody’s kind of knowledge

there for every typically a 20-foot

container is going to have 40 000 pounds

of chemical on it so for every 4 000

dollars that that increases that’s 10

cents per pound in just direct cost

increase of that raw material so if you

have something going from you know say

four thousand dollars uh just shipping

costs to twelve thousand you’ve all of a

sudden added 20 cents a pound in cost

so where i want to go with this though

is we’re seeing tremendous increases in

raw material cost and transportation

costs to get material you know here

and uh

and to me that hasn’t yet hit the

consumer um so i expect at some point

there would be this kind of massive

issue with inflation uh at the consumer

level which may impact demand it’s you

know my two cents rob was just

mentioning earlier today that uh social

security increase went up by 5.91

for next year

that is phenomenal i grew up with my

grandparents and i you know heard them

complain about you know social security

increases of a fraction of a percent you

know 0.5 or 0.8

5.91

i think i saw in the news was the

highest in 40 years

uh so

you know not to be all doom and gloom

but i think on the economic side you

know there’s some chance that there’s a

back end to this that’s worse than where

we are at this point

the logistics everybody’s talking about

is absolutely real i mean we experience

that within our business um and you know

no real reason to kind of belabor that

but uh you know one of the things that

you’re seeing is kind of at all points

in which the product is touched there

are issues with delays so whether it’s

you know transportation in the country

of origin whether it’s trans

transatlantic or trans-pacific uh

transportation

and then whether it’s congestion at the

ports and once something finally does

get cleared i mean

as an example we had something that set

maybe eight days out out

at sea waiting to get into savannah port

but even once it gets there you know

there’s big delays and shortages of

drivers to get it you know from the port

to you know where it’s going you know

domestically here

um so those are real issues

i think you know where there’s some

opportunity and one thing that i would

like to kind of speak to

and i think you know people like john

people like gary

jill

you know the the we have some really

really really good vendors within this

independent water treatment community

and i think you know where things are at

least going on the short term is that uh

and a very positive note i think for

everybody as the independent water

treaters have the ability to make

changes pretty rapidly within their

technology

so if you can’t get phosphonates you can

look at polymers as an example as a

substitute or you can look at extending

your supply with one chemical versus

another and we have very very very good

vendors within you know this community

to be able to support you in doing that

so you know i think kind of two things

that i would say out of that is one

make sure you consult with your vendors

uh you know whether it’s

for modeling of waters to compare you

know additives or whether it’s you know

looking at you know say a polymer versus

a phosphonate or what have you but work

closely with the vendors that you trust

and get the support that you need

you know to

develop something that’s robust

and then the second thing that i would

say is that is where there is an

opportunity in all this chaos because

your larger competitors are not going to

be able to react as as fast as the

people there on this

uh video call

and maybe the last comment i’d make i i

had a a conversation day with dave

fitzgerald at

north metals and

you know i think he and i you know and

and this community of vendors are very

much advocates of let’s support each

other in this you know i think uh you

know our independent businesses are very

important to this community and and i

think it’s a real opportunity for us to

you know uh be supportive of the

independent you know businesses that

exist which is a whole lot of them

within within this community

well thank you mike and again that’s uh

mike standish of radical polymers

i’m not going to recognize gary garcia

of masters company gary thank you so

much for

allowing us to to get some knowledge

from all the things that you’re seeing

so again the same question just chaos

going on and we got more to come

what do we need to know what should we

well

a couple of things right off the bat i

would take a very cautionary note of

making changes to certain products and

formulations look on the boiler side you

have fda and usda requirements you can’t

just

abrogate cyclohexylamine and change i

would also say that you need to be

extremely careful because of the

unintended consequences that can happen

literally weeks and months down the road

the rush to replace something can

literally bite you in the rear end if

you’re not really really

focused on it so i would encourage

anyone who wants to make a change or is

looking to do that to communicate with

mike jill myself john anybody in in the

supply community you know

if i make this change what is it going

to cause how is it going to affect it uh

not only from the standpoint as jill

mentioned with labels and sds but also

in the actual performance in a product

downstream

there would be some

risk and some legal liabilities that you

should be really really aware of before

you start making wholesale changes

the next comment i would have is is i i

think it’s kind of interesting in that

um last week

the projections were for 500 000 jobs to

be created and the numbers came in at

less than 200 000

i was listening to a couple of

economists and they’re talking about the

fact that this is likely to be the new

norm

and the new norm is is that we have

as a as a society

promoted people um getting free money

and people don’t want to work

and i think you see that in some of the

trucking companies i mean i i talked to

one trucking company they have a seven

thousand dollar bonus package

so they’ll send you to trucking school

they give you 3 500 up front 3 500 after

you’ve been there 60 days

they cannot fill the positions quick

enough

i heard another statistic the other day

that the port of savannah has

000 containers sitting there waiting to

be picked up and distributed across the

united states

so the point i would make is we’re not

going to get out of this in the short

term

i’m not even i’m

sorry to be pessimistic

but i’m not so sure you’re going to get

out of this in 2023. i think um

there are too many changes in this

society with this

one of the things that concerns me

is the fact that a higher labor costs

have yet to hit the marketplace

and those labor costs are fairly

significant

you you could be looking at

as one example one of the problems here

in chicago is that the fact that amazon

is now paying drivers twenty dollars an

hour

that’s the new norm why why come to work

for you at 18 or 15 when amazon’s going

to pay me 20 bucks an hour

um i do think that you’re going to find

that some of that is

institutionalized in this society until

there’s a correction and the correction

is always historically a recession

so looking in that crystal ball

i’m kind of pessimistic

for jill and i

have to kind of

juggle the logistics issue because

even if mike or jan or someone says okay

you know it’s going to be there in a

couple of days the reality is

is that freight sits in the terminal for

x number of days and then it disappears

magically reappears and then sometimes

it’s two weeks when you’re looking at

freight

we see where we’re shipping finished

goods out and our customers sometimes

call up and say well what happened to it

it’s been 10 days

you know well we processed the order we

gave it to the carrier it’s sitting

someplace in the united states

and i don’t think that that’s going to

be alleviated in the short term i i my

personal opinion again is i actually

think it’s going to get worse

before it gets better so when you put

all of this into the mix what happens is

we’re having repetitive high prices

and the there’s a cumulative

effectiveness

and the effect is is jill or any of us

issue a price list by the time you get

it all done it’s probably obsolete you

got to do it again

and

customers

their patience is now beginning to wear

a little bit

um in the beginning

okay well we take the price increase

that’s fine when they’ve had five of

them since the first of the year

uh their patience is wearing a little

bit thin and

i appreciate that everybody wants to get

new customers everybody wants to shop

around a little bit

but frankly most of the shopping in the

marketplace is because they can’t get

what they they need

and so that causes another whole set of

problems

the trickle-down effect is from what i

see is is pretty significant because we

deal not only in in the toll

manufacturing area but in test kits

reagents equipment items like that we’re

seeing that trickle down to the point

where

something that was uh 89 cents is coming

back at 289

lead times are now

up to 6 8 10 weeks

we can’t even count on that

the story for us is we went to buy

bottle caps and

that was back in

march

we will get delivery on those bottle

caps maybe in december that’s

unprecedented

unprecedented at all

in talking to a number of the container

manufacturers they simply don’t have the

rest they literally have product product

manufacturing lines sitting dormant

because they don’t they don’t have the

resin

from my

personal point of view i’m a little

pessimistic about it

i would ask the marketplace to have some

patience with all of the vendors that

are in awt because we’re just a conduit

for this

we’re not the ones

in charge of necessarily

product producing the molecule uh we’re

in the pass-through phase

[Music]

outside of that um it’s chaos and i

don’t see an end of the chaos in the

short term at all

well gary thank you for that again

that’s gary garcia of masters company

our next speaker that i’d like to

recognize is zanzibrida john zabrida of

zybex

so uh john you you’ve heard all the

comments

you’re involved in

all the raw materials

how can you shed some light on this and

give us some advice

well the first thing i’d like to address

is the fundamental

economic indicators so that people can

get an idea of what’s happening with raw

materials in them i’ll start by going

year over year the price of oil is at

two times the price a year ago west

texas intermediate is at

80.74 cents on october twelfth versus

forty seventy a year ago

new york exchange diesel is 253 versus a

dollar sixteen that’s a two point two

factor

propane is at a two point eight factor

natural gas

industrial use natural gas now not the

commodities exchanges at two times the

price and gas prices and diesel prices

are up over a dollar at the pumps that’s

a retail price glacial acrylic acid is

up two to three times the price from a

year ago

and this this

commodity

thing that mike alluded to called fbx

which is the transportation index is up

to ten thousand from 2500 a year ago

that’s the price of shipping a container

across and then a fundamental price of

some individual like p4 was at two to

three dollar two to three thousand

dollars a metric done

that spiked at eleven thousand dollars a

metric ton

uh and is now settled closer to nine to

ten however because of a yunnan china

provincial

change they have shut down ninety

percent of the p4 production from the

month of september through

uh december which will put a real strain

on phosphonates that is 70 to 75 percent

of the world’s production of yellow

phosphorus which has been curtailed by

so those are some general factors on the

economy to understand that it’s not a

percent increase but a complete integer

increase increase from two to four times

in some cases higher than that

um i wanted to talk about something gary

had mentioned earlier according to a

source

two different sources it’s 80 000

containers in the port of savannah as of

october 11th that that’s a mere 3

billion pounds of material just sitting

there waiting to move it’s been very

it’s very congested at the ports uh we

import from from india and things that

took 45 to 60 days and great times are

now 120 to even greater than that so i i

was going to suggest to people also to

i put a bunch of p words together if i

can find my paper here which

it was

somewhere here

oh well

is to have here it is

the thing here we need we have prices

going up

we have to

add additional patience we have to have

some perseverance

we have to be pliable and plausible

different formulations of what to do to

alternate

and we have to have better planning like

jill mentioned lead time transit time

and you know there’s there’s five stars

to delivering a product one is do you

have the product two can you get a truck

to pick it up

three is will it show up to pick it up

four is will it deliver it and most

importantly will it deliver the product

the bill of lading and the c of a

sometimes you get two or one of the

three we’ve had shipments where the

product didn’t show up but the paperwork

did

it’s just tough right now because

things are not as efficient as they once

were

even

two years ago or a year ago

so we see a lot of bottlenecks and

transportation and raw materials and

prices but if we plan

and and our patient with our with our

supply chain

will work through this is it going to

get better

probably not in the near term i think it

won’t be until later next year certainly

what i mentioned about the curtailment

of p4

and p4 is yellow phosphorus which makes

pcl3 and phosphorus acid that is the

h3po3

you cannot make upgraded phosphorus

chemistry from po4 it has to go through

yellow phosphorus that’s going to put a

real strain on our phosphonate supply in

the next couple of months probably be

restored

in in the in the late first quarter of

last year

that this will be a very serious matter

for all of us and we’re doing the best

that we can to survive

uh through this

i think though that we have

that that we are very good at innovation

we’re very careful on how we can make

some adjustments and adjust our stance

choke up on the battle a little bit but

as long as we understand

what we’re up against and we’re patient

and we plan we can get through this

thing that’s all i have to say

well that’s great alliteration john

thank you for all of that well

i’m thinking instead of just i know you

all have questions so instead of just

putting questions in the chat here’s

what i’m going to ask it only works if

if we’re orderly otherwise we won’t be

able to hear

everybody so if you have a question at

the very bottom

uh or are you on your screen you can

raise your hand so if you have a

question go ahead and raise your hand

and i will recognize those people that

raise their hand you can ask your own

question to whichever speaker you wish

so if you right click you should be able

to see where it’s so right on your video

and you can put ray well where is that

they moved it where’s ray’s hand ray’s

hand is

ray’s hand is on the reactions now

so if you go down to the bottom of your

screen you’ll see reactions and click

raise hand so jay farmery if you will

unmute and ask your question please

the biggest question gary probably saw

what i had posted but the problem is

the fda chemicals and

uh things that we may already have

approved blends we already approved for

npds permitting requirements for our

customers and things like that

uh cycloaxl mean you can’t get

i mean

you you just can’t get it so

we may have to think of other mechanical

ways to

to handle that we may have to

have remote condensate feeds in multiple

places in a hospital or something like

that whether they need fda

approved a means

um but the problem is trying to get how

we handle that

the second thing is the npds permit

uh you already have things approved i

don’t know how you’re gonna get

something else approved it takes six

months to a year sometimes

okay if i may you’re absolutely correct

because let’s assume that someone just

arbitrarily says i’m going to substitute

deae for cycle so not only you know do

they have an fda issue they also have a

performance issue and then as you know

you get a month or two down the road you

start having undue corrosion and then

there’s a whole set of legal risks off

of that

and

no different on the npdes permit someone

arbitrarily changes it and they get

caught

it’s a severe problem so my point again

don’t arbitrarily change it you really

have to take a look at the consequences

and the unintended consequences

and gary stated um you know i agree with

gary a hundred percent but some of these

things like cyclohexamine morphline

d-e-a-e all of that um and this also

goes to the question that jay asked but

that dave fitzgerald also asked um you

know you can still get these things i

don’t know if you know next year it’ll

be the same case but for right now you

know speaking for myself and you know

i’m sure for gary and others as well you

can still get them it just depends is

there going to be a point and this goes

to dave’s question where even if you can

get them the price goes to a point that

people are not willing to pay that point

on certain things right now like for us

cyclohexylamine morpholine d-e-a-e we

can get it and we’ve passed along those

price increases and customers have

understood and they’re willing to pay

that price but to dave’s point and i

don’t have a strict answer for dave

other than to say that i do think at

some point for certain products maybe

not like what jay and gary were saying

you know where there’s fda you know

products that you’re supposed to use

that you cannot just go and make a

substitution for i think on certain

products we will get to a point what

that point is i don’t know where

customers will no longer want to pay and

they would just rather run out

let me ask this of the panel for those

of us that are thinking about either

keeping a normal level of inventory

should we be thinking we should double

triple quadruple it what advice do you

have for that

well if i might add

i think all the customers would like

their suppliers to have raw materials

when they’d like to order it so they

would expect their suppliers to do the

same for them so you have to think about

in order to stay in business you have to

have your your working capital employed

in inventory in your plan and it will be

more expensive to operate your

businesses and you have to

to stay in the game you have to take on

those financial risks i think

the opposite side of that john would be

everybody stocks up on inventory and

then we get a market correction in next

quarter and now we have very expensive

inventory on the books what would you

say is the the lesser of two evils

i think if none of us have ever had to

do a mark to market adjustment from

inventory that would be sort of naive

both directions either going up in price

and going down in price that’s just part

of business risk i think it’s it’s part

of the game

if i may okay what do you do when

everybody wants to stock up and there’s

a limited supply

so everyone rushing to stock up and

tripling their inventory only goes so

you far only accommodate it to a certain

point and we’re at the point quite

frankly for a number of compounds jill’s

talking about cyclohexamine john’s

talking about phosphonates the fact is

there isn’t any more in the supply chain

i agree with you and what i would say is

look most of our relationships probably

i haven’t looked at all 85 participants

today but most of our relationships are

not transactional you know between our

businesses so you know what i would say

is we’re in a little bit of a unique

situation where we can talk with

customers say what do you need and when

do you need it and here’s what you know

we as a supplier can can provide and

here’s where we’re seeing some hiccups

or issues or what have you so i’m

absolutely not an advocate of people

over stalking but i would rather have

kind of a collaborative relationship for

me to understand what our customers need

and then them to understand what our

challenges are and when we can deliver

what

yeah to piggyback on to what everybody

else you know kind of had said you know

right now cash is king that’s why all of

the webinars and all the talk that you

hear about making sure that you have

cash and that you have a good cash flow

and keep your eye on it you know to go

on to what gary mike and john said i

mean people are stocking up as much as

they can but it’s as much as they can

and also there’s constraints about you

know maybe you’ve stocked up on a

material as much as you can buy maybe

your building is only x amount of square

feet so it’s the importance of you know

communication and you know everybody’s

had to you know take a gamble and maybe

you’re stuck with some higher priced

inventory for a second but you know it’s

a crystal ball and i think you know like

what mike was saying all of us have the

flexibility you know to pivot you know

when we need to to try to best serve our

customers and i think that’s what makes

awt so unique is that all of our main

goals are to best serve our customers

and i think we’re all trying as hard as

we can within the confines of of things

that are available and communicating

price changes and even things that you

know the the how much can our buildings

hold at one time um i think that that

we’re all lucky and if i could say one

thing to the membership and all of our

customers is that you know you’re in

good hands and that we’re all trying to

do everything that we can and that we

will get through this together one way

or another by sharing all of our

knowledge and information and

communication with each other

yeah i think the original crest question

that that trace had asked is with the

raw material prices being double or

triple

and do we maintain the same amount of

inventory and when you do that if you

maintain the same amount of inventory

you’re going to triple your holding

costs it’s not about

increasing your inventory it’s the

reality that you will have to

find cash to maintain the same amount of

inventory i do not urge anyone to stock

up or to go crazy right now because then

everyone will crash but at the same time

you have to come to the reality that

your business will require more capital

to maintain the same inventory as you

had before i think that’s the question

right trace

absolutely

yeah

well i know there’s more questions out

there you can’t ask a better group of

people uh they’re directly involved in

all of this so i’m going to give you

another chance to go down and hit the

reactions button

and let me know if you have a question

and we can get that answer so rachel i

see you have a question if you’ll go

ahead and unmute yourself and ask your

question please

hi um something that we have

recently not recently but we’ve run into

is issues with

getting in totes and drums

and i was kind of wondering how you guys

are handling that because

now we’re not just facing the raw

material issue but just what to even put

our products in to be able to ship them

um what are your guys’s thoughts on

how to navigate the drum and tote issue

gary please go first uh all right if i

may rachel um toasts are like uh gold uh

you know they’re almost as much as a

tesla these days um and if you can find

them

when the

petrochemical plants went down in the

gulf um it caused the resin shortage and

the manufacturers still have not caught

up with that

we’re seeing lead times on a trail load

of drums sometimes extending to four

weeks

and there’s just no way around it i’ve

had conversations with with people who

said

you have an extra you know 505 gallon

containers you can sell it because they

can’t get them

open head pails again are like gold

there’s just no easy answer for it

one of the things you might want to

consider is working with your supplier

and give them multiple purchase orders

extend out your shipping date so that

they can plan that production um that

should help you out a little bit but

there is no magic answer to any of this

because the materials simply aren’t

available

any of the other speakers want to weigh

i was going to just comment the similar

to exactly what gary is saying i think

one of the things that is so important

is to have you know your suppliers that

you’ve been with for a while that you’re

loyal to and those suppliers will you

know go out of their way to help you you

know as much as they’re able to but

similar to what gary said is i have

orders out all the way six nine months

out where i have a revolving delivery

that just happens once a month and i

think that you know what gary said you

know place multiple pos you know place

them out far and you just work with the

supplier as the date gets close to if

you need to push it back a little bit or

change the composition of an order but

um it’s just important to get those in

and get those on the books that way

you’ve got existing orders in-house and

they can plan around

right that falls into the flexibility

part of totes drums or bulk whatever’s

available and some weeks there’s no bulk

trucks available some weeks there’s no

drums some weeks there’s no totes

but what jill pointed out was putting

orders in in advance and planning is an

excellent idea because with today’s

modern sap systems

they can put that into the plan a

purchase order is put into the plan

whereas a forecast is less weighted than

a purchase order

that way material resources can plan for

the production and get it out and even

though production might be delayed by

weeks or months because of the

availability at least it’s in the plan

to be manufactured and that is a very

good idea to just to plan ahead a little

bit better

not not to expect things to be shipping

yesterday

well let me ask the question everybody

mentioned communication

how often should we be communicating

with all of you how often should we be

communicating with our customers

okay so i’ll get myself in trouble again

we try and do it at least on a monthly

basis uh i’ve been writing um a in

essence an update to customers every

month um just telling them what’s in

shortage what we see and what we don’t

see

that’s an email blast that goes out of

masters every month

on a on a daily basis i

talk to a lot of people back and forth

and every one of those conversations is

well okay

there is no sulfamic acid left

this raw material is going up in price

um this is what’s on the horizon

so it’s almost a daily hourly minute by

minute process

there’s there’s no other way around it

anybody else like to weigh in

all right everybody last chance for

questions okay robert i see you have a

question if you please unmute yourself

yeah i would i would just like to say

that also on the equipment side which is

kind of where i live

uh the same kind of sharing and and

planning

is critical we have very actively been

trying to

uh you know to

limit our customers exposure to the pro

the problems uh but if a customer can

start to tell us hey

in a couple months i might be needing

this type of pumps controllers

tanks whatever uh we we have been very

glad to

uh you know to try to

bring equipment in we’ve also been able

to you know maybe if we have a couple

weeks notice uh figure out ways to

you know convert equipment to make sure

that that can be filled

but every little bit of information that

we can we can get

will help us to uh to honor uh

the need

and make that make that possible

thank you for that any other questions

trace my ad uh a comment please um

you know one one things and jay alluded

to this earlier um you know there’s a

lot of different

tools that we have to employ so you know

don’t disregard that kind of step back

look at water chemistry needs as an

example there may be equipment options

you have you know

levers to pull such as ph adjustment

that can reduce chemical demand or cycle

adjustment to reduce chemical demand or

switching technologies you know

alongside with your vendors or even a

mitigation approach so

you know i’ve been talking with

customers this week they’re having

issues getting phosphonates they have

some phosphonate on the floor you know

they’re they’re that maybe they have a

month’s worth as an example and they’re

two months out from getting more raw

materials so they’re looking at

mitigation approaches in the mid

in the midterms so you know it might be

combining you know a little extra

polymer a little less phosphonate or

whatever they

you know scenario is to to extend out um

you know that that product a little bit

longer that is difficult for them to get

there’s a lot of tools to employ

i think we gotta go back to basics a

little bit here in this scenario

okay any other comments from the

speakers or any more questions from the

audience

well mike jill gary john thank you so

much for for spending the time to do

this sharing all the valuable

information that that you’re seeing in

your practices and sharing it with us

oh i see michelle’s got a question

michelle go ahead and unmute yourself

please

so surprised it’s not michelle uh she

shared her link with me uh it’s eric

russo here and

my question is as our customers

are you see the dynamic where they start

price shopping or looking around or

they’re saying you know they they try to

leverage this global scenario and think

maybe it’s just a supplier standpoint

from our end

uh as water treatment companies

potentially do the same for the

suppliers of the chemical

how likely are you guys going to respond

to maybe a new company coming to you

guys asking to take over all their

orders or something are you focusing on

your existing customers first

is it a bad time for new people to come

your way

i’ll i’ll tackle that real quick and

then mike and john and jill can can jump

um so

first of all like every business you

want to take care of your core customers

they pay the bills you know they put

food on your table and there’s a loyalty

with that

by the same token i mean um there’s

always ways to create stuff as mike was

saying before so if you were attuned to

product x and you’re starting something

new you know that’s that’s

fairly easy to address

but there’s limitations and those

limitations are real and the fact is and

it comes back to people wanting to put

in lots more inventory there’s a certain

point where there’s just not any more

material in the chain

and that’s the real problem that we’re

seeing

you know

as john says there’s not going to be any

yellow phosphorus coming out of china

for at least six months and so that’s

going to have a domino effect and then

when it does finally come out they’re

going to have to fill that chain so you

may be actually looking at a year year

and a half from now before that’s

actually

back in supply

i’ll answer it in a little bit different

perspective uh too a complimentary uh

perspective from from our point of view

we um

became a lot of people’s best friend

that you know didn’t want to you know

didn’t give us the time of day uh you

know uh a year ago what have you and so

you know we had kind of people or

companies coming out of the woodwork uh

looking for material uh particularly

some of the large you know companies are

looking for truckloads after truckloads

of material

our decision uh was to you know not

accept that and and not entertain that

uh because we ultra wanted to protect

our you know existing customer base we

have you know accepted business within

the awt community that have been

struggling to get raw material where we

could you know provide support but if

the nature of the question was more what

if a large company comes and asks for a

product at least in our case we’ve um

you know we’ve not uh accepted that that

opportunity if you will

and i eric i agree it’s funny because

gary and mike and john and i were

talking about this with trace right

before we got ready to go into the

recorded session and you know i concur

with what gary and and uh with mike said

is that you know we’re always all

looking for new customers but right now

we have to temper that you know as gary

said with the loyalty to the current

customers we have we’re always happy to

take on you know new customers but we

also have to be careful that somebody

that we know that’s never going to stay

with us come in like what mike said

swoop in and take everything that’s in

high demand and then you know the

customers that have been with us for 10

or 20 years then they don’t have any so

i think it’s a situational but i think

again just what makes the awt so special

is that we’re here to take good care of

our customers

i see that larry pond has a question

larry if you’ll unmute please and ask

your

i think it’s unmuted

um looking down the crystal ball that

gary keeps talking about um

is there a point in time uh where all

the floodgates open and all the

manufacturers are producing the raw

goods again and

from that point when do you think the

supply chain would normal out or level

itself out from that point

how long would it take

i don’t have a full answer there but

i’ll make one comment justin

or i’m sorry larry um

i think that we’re going to have to see

a decrease in demand that’s my personal

opinion before you start to see

things level out with supply

that’s my opinion and and i feel like

what’s going to trigger that is some

sort of inflationary uh

trigger that that essentially decreases

demand and then all of a sudden

particularly with transportation right

now and i’m sure all the panelists here

would would probably back me up on this

right now

a lot of the freight companies don’t

necessarily want our business you know

they’re not looking we have one freight

company that

will only pick up here um because uh we

have they have an existing customer

they’re accepting no business so they’re

accepting no new business have no

interest in you know making pickups the

trans uh oceanic uh people

they don’t want your i mean they’re not

looking for new business they’re looking

to increase price of existing business

they don’t have capacity so i think

there’s gonna have to be some sort of

decrease in demand in order to you know

for people to get religion if you will

um on the supply side

my two cents

larry if i may keep in mind let’s make a

presumption that you had a moth called

chemical processing plant manufacturer

by the time they got permits by the time

they got in operation you could be

looking at two years down the road

it’s not a question of you snap your

finger and you’re suddenly manufacturing

molecules that that just doesn’t happen

so we have my personal opinion is is

could there be a decrease in demand

yes but more likely what happens from a

historical standpoint is you hit a deep

recession

and at some point then you get a huge

leveling effect

wages come down prices come down

availability materials go up

when that’s going to be

i haven’t got a clue but you can bet

that at some point that ugly monster is

coming

yeah that’s kind of what i was getting

at gary with the decrease in demand at

some point

all right just go ahead john i was gonna

say something about the global dynamics

of ocean freight there’s been a

consolidation to from 18 companies to

six

major shipping lines and with a global

alliance

they’ve pretty much controlled

the the portages between countries and

between ports

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