Since the start of the year, unprecedented marketing conditions mean the packaging industry (like many others) has seen costs rise significantly and substantial pressure on supply chains. And as we approach the seasonal peak, the perfect storm of supply chain challenges continues to influence raw material prices, meaning the unit price of packaging is still on the rise.
So, what’s happening in the market and how can you reduce the impact of rising costs?
The perfect storm continues – current market conditions
Earlier in the year we wrote about a combination of factors that have been influencing raw material prices and supply chains globally. These included how pandemic life changing the way we shop, the impact of Brexit, quicker economic recovery in China, as well as raw material and logistics shortages, which have resulted in a huge demand for packaging that outstrips manufacturing capacity.
This “perfect storm” of market conditions continue to affect the cost of packaging materials, including corrugated cardboard, timber and wooden products, and plastic based packaging like polyethene, tape and stretch wrap. For example, in the European corrugated market paper stocks are down 18% vs. 2020, whereas production is conversely up 8% year on year.
The resulting imbalance of demand exceeding supply also means manufacturing and lead times are significantly extended, so packaging isn’t as readily available as it was pre-2020.
Ultimately, stretched availability combined with greater need means price fluctuations and extended lead times are expected to remain throughout 2021.
What can you do to safeguard against rising packaging prices?
Whilst you might see the unit price of your packing materials going up, it probably only represents a fraction of your total packaging costs. In fact, 90% of your packaging could be hiding in key areas like damages, transport, admin, productivity, storage, and customer experience.
- Consider a total packaging review – reviewing your entire packing operation will give you the best chance of identifying areas for improvement and cost optimisation
- Review key packaging lines – if you don’t have time for a full review, you could assess an isolated area of your packing function, such as the packaging product you use the most volume of or the pack line for your most popular goods. Where you’re using stretch film is a good place to start as analysing this are can offer up to a 50% cost saving. Click here to learn more.
- Invest in automation – packing automation can seem expensive but it can reduce your operating costs by helping increase efficiency, controlling material use and managing labour effectively. Click for a blog that explains 3 ways automation can save you money.
What can you do to ensure continuity of supply?
Market pressures mean lead times for packaging products, like boxes, are longer than usual. This means advance planning is crucial for maintaining continuity of supply. To make sure you’ve got the packaging materials you need, we suggest you:
- Review and forecast your packaging use in advance
- Use a stock holding service so you’ve got packaging supplies to call off when you need them
- Place orders earlier than usual to allow for extended lead times
An online order management system, like our e-trading platform Simplicit.e, could also hep you get ahead and save time. It offers a full reporting suite that can help you monitor your packaging spend so you can fine tune inventory and improve efficiency.
Speak to us about controlling your packaging costs
Our team are working with businesses like yours every day to help them save time and money when it comes to packaging. Simply email email@example.com to book a packaging review and see how we can help you control your packaging costs.