How Does the Global Supply Chain Crisis Affect Packaging?
Supply chains around the world are in crisis. From groceries to warehouses and farms, many of these facilities experience massive shortages in their supply chain management. A combination of factors is responsible for this disruption, including COVID-19 restrictions, understaffing, container shortages, and congested shipping ports.
Like many other industries, the packaging industry is vulnerable to these disruptive forces. Navigating the supply chain crisis means facing various hurdles such as material shortages, increased costs, or fulfillment challenges. These issues may also require changes in your company’s packaging operations, making it crucial to know how to efficiently respond, adapt, and maintain business continuity.
This article will delve into the background of the supply chain crisis and its effects on the packaging industry.
How the 2022 Supply Chain Crisis Came to Be
The current supply chain crisis has led to a global shortage of just about everything—food items, retail products, electronics, and raw materials. But where did things go wrong?
When COVID-19 broke out in 2020, major ports had no choice but to shut down or minimize operations to prevent the virus from spreading. The majority of these businesses reduced the number of workers coming in. This shortage in staff affected the labor supply at a critical time when consumer demand for essential products and online shopping activities rose to record-high levels.
Space shortage also compounded the problem, as full-capacity shipping yards made it challenging for workers to organize the goods for dispatch.
A ripple effect then took place, causing bottlenecks in the supply chain. Today, COVID-19 restrictions—albeit less stringent—remain in effect across industries, preventing the supply chain from fully recovering. Hence, the crisis continues.
8 Ways the Supply Chain Crisis Has Affected Packaging
What does the supply chain crisis mean for the product packaging industry? Here are the possible effects.
- Packaging materials in short supply
The supply situation of different packaging materials has not improved since the pandemic lockdowns, where manufacturers of paper, cardboard, and plastics have paused operations. In the U.S., extreme weather conditions have also reduced production levels at plastic manufacturing plants.
With these kinds of limitations, there is the risk that raw material suppliers cannot meet your demand for custom product packaging or food packaging materials. You should, therefore, be ready to switch to other packaging materials or suppliers to distribute your finished goods to the market without further delays.
- High raw material costs
Disrupted production cycles create an imbalance: a low supply of packaging materials that is not adequate for the high demand for these materials.
And when there’s a surge in demand, price increases are likely to follow. The price of raw materials such as polyethylenes and polyurethanes goes up 50% year over year, causing the product packaging cost for plastics to soar.
The same scenario of increased costs applies if you choose to shift to alternatives such as cardboard envelopes, boxes, and padding since producers of these materials also deal with the supply-and-demand mismatch.
- Slow fulfillment challenges
With the shortage of packaging materials, retailers and consumers bear the brunt of longer lead times, delays, and stockouts. These challenges will become even more noticeable as e-commerce continues to grow in popularity and adoption.
It’s in your best interest to find other creative ways and expand your network of supply chain partners to overcome the challenges and stand out in the retail space.
- Retailers, manufacturers, and consumers resorting to over-ordering
Because of the supply chain crisis, various stakeholders take desperate measures, such as the excessive ordering of raw materials and finished goods, to protect themselves from rising inflation or availability issues. However, this does not get to the underlying cause and only adds to the number of unfulfilled orders in the whole supply chain.
- Logistics constraints
Community lockdowns and border closures still prevail in several locations around the world, potentially increasing your logistical expenditures, as well. These constraints may force you to rethink your strategies, including product packaging, so you can continue offering your products to customers without burdening them with the high costs of business operations.
- Labor shortages
Due to the pandemic, businesses are hesitant to hire workers. Employees in several industries, including transportation and manufacturing, are also quitting in what’s known as the Great Resignation phenomenon.
Meanwhile, the consumption of retail goods and services is not letting up, making it more difficult to solve the gaps in supply chain management. You can only be more proactive in handling the areas of your business that you can control while waiting for the crisis to settle down.
- Lack of a level playing field for businesses
One of the unfortunate truths about the supply chain crisis is how major retailers with big financial reserves can continue shipping their products using high-quality packaging materials. Meanwhile, small- and mid-sized brands settle for inferior wrappers or containers.
However, there’s no shortage of alternative packaging solutions that you can adopt to elevate your competitive edge. Selecting recyclable packaging over single-use packaging is an example.
- Force majeure cases on the rise
In Europe, the global supply chain crisis has created a flood of force majeure cases. Raw material suppliers can no longer deliver plastic sheets to companies that need this specific material. In this scenario, sourcing packaging materials from local suppliers is an ideal solution to importation problems.
Take Better Control of the Supply Chain for Your Business
Disruptions in supply chains are inevitable, and it’s just a matter of how businesses can better manage all processes and areas that were made vulnerable through the crisis.
Changes serve as a challenge for businesses to rethink their packaging solutions and make them more flexible and scalable moving forward. This can be made easier by seeking a reliable packaging provider, such as Meyers. Get in touch with us now.