Top 4 due diligence actions before entering an agreement with new scrap plastic companies
The scrap plastic trading business is built on trust, open communication and easy exchange of information.
Like so many commodities, the price of scrap plastic fluctuates based on volume, time-sensitive deliveries, global market changes, the cost of inputs and the shifting demand for finished goods made from recycled plastic.
In this fast-moving business where every shipment has the potential to either make a big profit or create big headaches for your company, it’s important to have a strong level of confidence in your trading partners. Conducting due diligence on scrap plastic companies is an essential step in the process of making deals for scrap plastic.
Before you commit to buying massive quantities of scrap plastic bales, it’s important to know that you’re dealing with a reputable scrap plastic trading partner. You need to have strong reassurance that they can keep their promises, so that you can keep your promises to your customers.
Here are 4 essential actions you can take to conduct due diligence on scrap plastic companies, ensuring more efficient transactions and bigger profits for your business:
- Pay a visit: The absolute best way to conduct due diligence on scrap plastic sellers is to visit the supplier’s location, onsite. A site visit gives you a chance to see the supplier’s operations, view the storage conditions, and get a sense for the volume, consistency and quality of the scrap plastic coming in and out of the supplier’s facility each day.
- Ask for samples and/or photos: If your scrap plastic supplier is located far away from you, it’s best to ask for physical samples of material or ask for loading photos. A good scrap plastic supplier will be able to provide samples and photos so you can get a sense for the quality of the materials and the consistency of the supplier’s operations.
- Call the references: Every scrap plastic supplier should have a list of testimonials and references from trading partners who would be happy to recommend them. Make sure you’re not dealing with a “fly by night” operator by talking with other people who have successfully done business with them already. Don’t be afraid to ask tough questions: did this scrap plastic supplier keep their promises? Were they on time, accurate, knowledgeable, reachable and reliable? Was there anything about the deal that didn’t go as efficiently as expected?
- Listen to your gut: If you’re talking to a scrap plastic supplier, broker or trading partner and something just doesn’t “feel” right about what they’re saying to you…then you should probably walk away from the deal. If someone is making big promises, saying they can get you prices that are well below market values or make particularly impressive turnaround times, then chances are they might not be trustworthy. Or if someone sounds unfamiliar with key shipping terms and other basic terminology of the business, this could also be a sign that they aren’t a good trading partner for your plastic recycling business.
Avoid pitfalls, disappointments and costly delays by spending some more time upfront to verify the claims of your prospective scrap plastic trading partners and make sure they can deliver what they promise. If done right, due diligence can pave the way for an efficient, profitable long-term business relationship.