Monday 26 July 2021

The Plastics Industry – How Is It Organized & What Are The Key Success Factors

Hello and welcome to this post on how the plastics industry is organized. After graduation I spent my whole business career in the plastics industry and it is one of the most exciting and versatile industries to be in. In Europe, the plastics industry value chain covers over 1.5 million people, together with 55,000 companies with a turnover of 350 billion Euros in 2019.

"Without natural polymers, there is no life; without synthetic polymers, no standard of living" Prof. Dr. Hans Uwe Schenck

The plastics industry itself can be divided in five major segments:

1. Polymer manufacturing

2. Compounding

3. Distribution

4. Processing

5. Equipment and tooling

The five major segments of the plastics industry -

Each of the segments has at least one factor which differentiates it from the other segments. The factors, which we will discuss in detail, are the foundation for strategic planning and business operations. The overall knowledge on the factors will keep the plastics business operational and allows fulfilling the customer needs.

1.    Polymer manufacturing

Polymer manufacturing has a high need of vertical integration (from monomer to polymer) and most polymer manufacturers are a division of larger chemical or petrochemical companies. Compared to most downstream processing steps, which are physical processes, polymer manufacturing is a chemical process. It involves lots of capital since the manufacturer needs to have a minimum plant scale due to monomer making and polymerization. There is the continuous manufacturing way and the batch production way, however most polymers are made over the continuous way. Batch processes allow smaller quantities, and flexibility. This is in particular useful for specialty polymer manufacturing.

Key factors

For polymer manufacturers, technology is a key factor which allows them to produce high performance materials with consistent properties at completive costs. It covers the polymer chemistry on small as well as large scale and how to manufacture the polymer in the most effective way (reactor technology).

2.    Compounding

Polymer manufacturing is the first step, followed by compounding to modify the properties by incorporating fillers and additives. Compounding can be done at the polymer manufacturer or can be a standalone business by itself. There are also some cases where a company runs a part-time compounding in certain periods of the year to satisfy some local customers.

Key factors

In compounding, formulation technology is key and compounders must be able to develop special grades in the range of smaller volumes. For customers, there are two major reasons why they want such special grades. Firstly, it allows them to replace more expensive materials. For example, a newly developed flame retardant polypropylene can replace an engineering polymer with flame retardant properties in car electrification applications. Secondly, new compounds can combine several properties such as low friction with electromagnetic shielding. Compounders use twin screw technology for their extruders, however single screw compounding is also highly used.

3. Distribution

Small processing companies buy their needed material over distribution which reflects an important route to the market. Polymer manufacturers have a minimum order quantity (usually ranging in tons) and small amounts are all covered by distribution. Furthermore, distributors stock different materials and this allows them to ride out supply chain interruptions. However, more and more distribution companies move to a more just-in-time delivery, ordering the material at the polymer manufacturers just when they received the order from the customer. 

Key factors

Customer relationships is one of the key factors since the customer trusts that the distributor delivers the right material on time, every time, together with fulfilling the paperwork (invoices, technical data sheets, certificates of analysis). As important as customer relationships are supplier relationships for the distributor, since the supplier allows security of material supply. Distributors can also be seen as the extended marketing and logistics arm of a polymer producer. Also, the suppliers provide discounts on the volume purchased, which makes up a big portion of the distributor's gross profit. Geographic factors are important too. Distributors start out serving a certain region and with growth they can serve nationwide too.

3.    Processing

Processing companies cover small and medium size operations as well as billion euro multinational agglomerates. Within those processing companies, different specializations can be found: one can focus on certain material or equipment, other have an industry focus, and part focus including painting and assembling is also a route to business.

Key factors

More than base knowledge of the utilized processing technique, which can be injection moulding, compression moulding, extrusion, blow moulding, roto moulding thermoforming, and combinations of thereof, is needed to keep permanent in business. Margin pressure is high at processors level and processors try to offer more than processing plastics. Additional activities include part design, mould design and construction, and secondary operations such as painting and assembling. Processing companies need to handle certain processing details with perfection (for example right dryer for hygroscopic polymers to obtain high quality parts).

5. Equipment and tooling

Machine and equipment manufacturers play an important role in the whole plastics industry puzzle. In the past two decades, consolidation of machine manufacturing took place, triggered by three major economic crises (2001, 2009, and 2020). Bigger and consolidated companies can better spread their overhead and allow themselves to be more resilient during economic downturns.

Key factors

Technology is vital for equipment, machine and tooling manufacturers. New machines need to process new materials more efficiently, as well as withstand the new compound formulation with improved properties. Also the finished part needs to be properly measured, so that these improved properties can be shown too.


The plastics industry has five major industry sections and is not limited to those. Each of the industry sections play an important part to make the whole industry successful. Currently, each sub-segment is also in transformation due to Industry 4.0 and digitalization. New jobs and new platforms will emerge, helping to bring this industry into the future.

Thanks for reading and #findoutaboutplastics



#PlasticsIndustry #HerwigJuster

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[1] Roger Jones – Strategic Management for the Plastics Industry

1 comment:

  1. Thank you for sharing insights into your Plastic Manufacturing Company. It's great to see a company committed to transparency and environmental responsibility. Keep up the excellent work.