Uncovering the global packaging supply crisis
It’s no secret that the packaging industry has endured significant issues in the global supply chain for a sustained period.
Understanding the origin of these challenges and the precise affects they are having on the industry now isn’t a simple task. Many factors remain deeply intertwined, affecting logistics on a global scale. In addition, while many of these challenges have either been caused by, or exacerbated by the coronavirus pandemic, a number of non-Covid related factors have also further amplified issues. We’ve highlighted some of the most significant issues as well some of the top tips for how to best overcome these challenges.
ONLINE SHOPPING SURGE STRAINS CARDBOARD SUPPLY
We’re all familiar with the consumer trend in the ever-growing popularity of online shopping – a trend was only accelerated further by the pandemic. This placed a significant major on the supply of cardboard and packing resources. As the BBC commented, “The boom in online ordering during the pandemic has also meant rocketing demand for cardboard, as consumers have started taking delivery of everything from bicycles to houseplants”(1).
OVERWHELMING DEMAND FOR SUSTAINABLE PACKAGING
The strong consumer demand for sustainability has been one of the core strengths for the packaging industry over recent years. However, this major boost in popularity for materials such as cardboard and Kraft has created a level of demand that many manufacturers have simply struggled to keep pace with. US-based ‘Hawke Media’ comments, “Due to environmentally-friendly policies around the globe, many brands – especially in eCommerce – now use paper packaging …Over time, paper mills’ demand for raw paper materials has reached the point where demand begins to exceed supply”(2). This imbalance between supply and demand has also certainly not been helped by the pandemic. As the world returned to more regular businesses activity following lockdown restrictions, suppliers were faced with a global surge in demand for cardboard, Kraft and other paper-based packaging – further straining their manufacturing capabilities.
RAW MATERIALS
A number of key raw materials have been in increasingly limited supply internationally. While lockdown measures are partially accountable for this trend, there are also a number of other contributing factors. For example, there has been widespread reporting on the prevalence of ‘force majeure’ events affecting supply. Such events have been attributed to a range of factors including extreme weather and storms in the United States as well as the much-publicised Suez Canal ship blockage. Increased demand from some of the largest nations in the world has also been linked to the material shortages faced elsewhere. These shortages have, in turn, led to a sharp increase in prices which is further affecting the industry. More recently still, we have also seen the effects of increase energy costs on production facilities. Paper mills, for example, are known for their energy bills comprising a significant proportion of their overall operating costs.
SPIRALLING SHIPPING COSTS
The Coronavirus pandemic has had a profound effect on the global shipping industry both during the height of the pandemic as well as creating a lasting issues which continue to hamper international logistics. The current situation has come to be widely seen as defined by two major issues – rocketing shipping costs and widespread container shortages. The urgent delivery of PPE equipment required during the early stages of the pandemic had a long-term affect. As Forbes highlights, “Many containers that carried millions of masks to countries in Africa and South America early in the pandemic remain empty and uncollected because shipping carriers have concentrated their vessels on their most profitable Asia-North America/Europe routes”(3). The effects that these issues can have on shipping prices for certain routes can be stark.
HGV DRIVER SHORTAGES
Once shipping containers do eventually reach their destination, we have also felt the effects of the shortage of HGV drivers. The driver shortage has of course been widely publicised in the UK, largely to the fuel crisis which led to swathes of people queuing for petrol and diesel. The HGV driver shortage is an issue that pre-dates the pandemic but has certainly been worsened by Coronavirus and, arguably, also by Brexit.
THE INDUSTRY’S BIGGEST PLAYERS
Another major factor to consider is the shape and structure of the packaging industry. A number of major global brands being able to continue their packaging supply will inevitably cause shortages elsewhere when the international supply starts to be limited. For example, many international fast food chains and major home-delivery online retailers are of course for the vast scale of their operations and the enormous packaging supply that this requires.
TOP TIPS
While there is no single course of action that can eradicate the supply challenges businesses are currently facing, there are still best practices to minimise the effects of these issues. Firstly, and perhaps most importantly, we would urge businesses to plan and order as far in-advance as possible for their packaging supplies. By giving themselves as much time as possible, they are minimising the damage of any potential delayed lead-times from across the industry.
Secondly, it’s important for businesses be open to identifying secondary, alternative preferences for packaging materials and carefully consider all relevant sustainability implications. For example, while a material such as Kraft might be able to offer a great range of sustainability benefits, other materials (which offer other sustainability credentials) may be more readily available due to not being quite so highly in demand.
We would also encourage businesses to simplify the ordering process as much as possible and think about avoiding amendments that could further lengthen packaging lead-times. This could include avoiding implementing new corporate branding and revised graphics.
Author: Chris Fiander, Marketing Manager, Westpak Group Ltd
For more information on Westpak visit https://westpakuk.com/
(1) www.bbc.co.uk/news/business-55878062
(2) hawkemedia.com/insights/paper-and-packaging-pricing-in-2021/
(3) www.forbes.com/sites/garthfriesen/2021/09/03/no-end-in-sight-for-the-covid-led-global-supply-chain-disruption
