The fallout from COVID-19 and the worldwide supply disruptions that began in earnest in 2021 continues to have significant impact on the pressure-sensitive label industry.
When the pandemic led to a surge in at-home shopping and changes in consumer packaging, the label market as a whole experienced record growth from 2020 to 2021. But as these demands continued to rise, we started to feel the pinch of raw material supply chain shortages and extended lead times. The industry hoped these would be short lived, but a variety of events have created a perfect storm that has upended our industry in a way that has never been seen before. Most notably have been the worldwide material shortages in paper and film facestock, especially semi-gloss paper face and paper used for liners.
Shortages are happening as well in other components including adhesives, coatings, rolls and corrugated packaging. Most recently, the Finnish Paperworkers’ Union initiated a strike beginning January 1st at a major supplier’s pulp and paper mills in Finland after the company and the union did not reach an agreement. On January 20th, the union announced it was extending the strike until at least February 19th. Shortages are projected to continue through at least the end of Q2 2022, and quite possibly will extend even further. It has now become so difficult that the world’s largest material supplier to our industry has just announced they are treating this as a force majeure event.
So where do we stand now?
Material Suppliers Are Restricting or Shorting Order Quantities
Our raw material suppliers are informing us that they are severely restricting order volumes and allocations on existing and future orders. In addition, orders and shipments from our suppliers to us are sometimes shorted, meaning we don’t receive what we expected to receive. Order acknowledgements are being extended up to 48 hours so the suppliers can review inventory vs. demand and adjust order fulfillment accordingly.
Lead Times For Materials Are Being Further Extended
Raw materials that we were accustomed to receiving in 3-4 days now take 5-6 weeks at a minimum. We now don’t receive a committed date until well after the raw material order has been placed. And even then, the date provided it is not a "committed" date - rather, it's when the supplier hopes to ship. Our purchasing team has to follow up on each order every day to determine when we will actually receive the material, and even then it’s a constantly moving target. This is not expected to improve in the near future.
New Business Is Not Being Accepted Or Quoted By Material Suppliers
Material suppliers are informing us that they will not quote or accept any new business or new customers for the foreseeable future until the supply chain and labor issues improve.
Significant Inflation Is Causing Pricing Pressures
Inflation is causing severe pricing pressures on all components of label manufacturing, including the price of raw materials, supplies, transportation costs, and labor. We will continue to keep you informed of any potential price increases as they happen.
The Bottom Line
The bottom line is that we are all working in the most challenging environment our industry has ever experienced. We understand the impact that this is having on your business, and we appreciate your flexibility and partnership as we navigate this global supply situation together. Some actions we are now taking – and recommend you take – include:
- At the present time we have limited control over material availability and their lead times. Please place label orders with the expectation of a minimum 40 business day lead time whenever possible. We will continue to try to accommodate all orders as best we can, but understand that we are severely constrained by material availability.
- We will continue to suggest alternative materials and constructions with better availability and shorter lead times when and where possible. In many instances, these alternatives provide equal or better performance for the application.
- We will continue to serve our customers with new projects and designs, but please understand the current environment we are working in, and allow for a much longer cycle time for these projects.
We are very fortunate to have a dedicated customer service team who has and will continue to work with you to solve issues during this unprecedented time. We will all continue to work diligently on managing these challenges and minimize the impact on your business. Thank you for your understanding and support.
