Material Shortages In The Packaging Industry: Is There an End in Sight?
The virus was the big story last year. But in 2021, material shortages, labor shortages, and price increases are taking over the headlines. Here at PSG, we’re also experience packaging material shortages thanks to the pandemic fallout. Unfortunately, we’re all in this one together. Material shortages are a global challenge many industries and eCommerce ventures are facing.
So, is there an end in sight to our supply chain woes? Let’s explore the reasons for flexible packaging material shortages and how long we can reasonably expect these packaging supply chain kinks to last.
Why is there a shortage of raw materials?
When the coronavirus pandemic hit, fear of the virus and government-initiated lockdowns kept people at home. This shifted and increased demand from services to goods and home delivery.
Workplace outbreaks and quarantined employees, lead to shutdowns at manufacturing plants and material suppliers. Now add a massive fiscal stimulus to the recipe, and we find ourselves with raw material shortages in many industries, including flexible packaging.
Force majeure events are also stressing the supply chain. The Texas power grid failure in February, the Suez Canal freighter bottleneck in late March, and a severely understaffed freight and distribution industry and increased freight costs are all creating a perfect storm that’s constraining the supply chain.
Why are prices for goods and raw materials rising?
There’s a significant demand for raw materials but a constrained supply right now. The result is price increases across the board.
Prices are likely to come down once production increases and supplies catch up with demand. But until then, volatility in pricing and frequent cost changes will continue. Unfortunately, what we’re seeing is a highly upside-down supply chain market for the foreseeable future.
How is the shipping container shortage from China and Asia impacting the supply chain?
Without shipping containers, global trade comes to a grinding halt. From food packaging to cardboard boxes, polymers, and converters, every product travels in a shipping container. But, surprise, surprise, these critical shipping containers are in short supply too. And, price hikes for shipping containers have almost doubled from the past year.
So, even if retailers can obtain the goods and materials they need to meet consumer demand, they may not get them delivered thanks to issues obtaining the necessary shipping containers. Unfortunately, it’s a perfect storm that will continue to rage for sometime.
Because of the 2020 lockdowns in the US, American consumers increased their demands on Chinese-made factory goods. To make matters worse, millions of shipping containers were sent all over the globe to deliver pandemic-related supplies, like face masks. On top of that, the containers were stuck in port, since unloading was delayed from worker shortages and quarantines.
Additionally, the Suez Canal fiasco in March 2021 further blocked ships from reaching their destinations. For reference, the Suez Canal is a significant thoroughfare for up 12 percent of global trade.
China also shut down a massive container port in Shenzhen — one of the country’s leading industrial centers — in May. For weeks, the port didn’t operate, creating an even bigger backlog in global trade.
In mid-August, the country shut down another container port near Ningbo city, after a single employee tested positive for Covid-19. Unfortunately, Chinese authorities have made it clear that shutting down more shipping container terminals in the future over a single positive case is likely.
Material shortage are abundant across the flexible packaging industry, but it’s especially prevalent with high-barrier films such as EVOH. (for meat and cheese)
Is there a cardboard shortage right now?
Increased demand for home goods from eCommerce retailers, such as Amazon, has led to corrugated cardboard supply chain crunches. This also is problematic for packing all the above raw materials and converted film and labels.
What does a packaging material shortage mean for businesses and consumers?
The packaging industry has been hit particularly hard by supply chain and material shortages, especially when it comes to plastics and polymers needed to produce common packaging materials. For example, polyethylene (polyurethane) has become up to 50 percent more expensive since January. Shortages with plastic granules are also a serious concern for packaging manufacturers.
Other challenges include:
- Bottlenecks in packaging availability — Empty warehouses and delivery failures are causing postponements and cancellations.
- Extended delivery times — Materials aren’t getting from A to B as quickly as before. Packaging sits in transit longer.
- Reduced margins — Rising prices for raw materials mean lower profit margins. Less investment capital is available for business development.
Fortunately, there are alternative applications companies can explore to meet their packaging design needs until the supply chain is fixed.
Is there a packaging solution that isn’t as impacted by material shortages?
All packaging materials, resins, and films are in short supply at this time. Unfortunately, pressure sensitive labels are no exception to this. While they can be printed faster than flexible packaging projects, labels are experiencing shortages and price increases just the same. If you feel like labels could be a viable temporary solution, let us know. Our PS labels carry the same SQF standards as our film and can be applied to food-safe packaging.
What can be done to fix material shortages?
We’ve seen forecasts that predict improvements in the supply chain by the end of 2021, but there are no guarantees. In addition, with the Delta variant and cold and flu season in the US just around the corner, supply chain disruptions may carry over into the first half of 2022.
Challenging times will test anyone’s patience, but we can only play the cards we’ve been dealt. The PSG purchasing team has spoken with our vendors about keeping our supply chain filled.
We’ve forecasted to the best of our ability and have ordered months ahead to keep lead time disruptions to a minimum. But some materials and components’ lead times have slowed enough to impact our customers, and for that, we apologize.
Because of these issues with the supply chain that will most likely continue until the end of the year, we highly recommend ordering earlier than usual, so there’s enough time to procure the needed materials. But, as always, we’ll continue to push through, avoid delays as best we can, and keep lines of communication open with our customers.
Please contact us online or call us at 847-801-3100 to learn more about our flexible packaging and pressure sensitive labels offering. And, if possible, place your orders early to ensure you hit your deadlines.