In our conversations around supply chain disruptions in the packaging industry, the topic of material shortages has come up many times. While some businesses have struggled to source materials they need to support their product packaging, others have found the materials they need, only to encounter frustrations of significant delays and high costs.
The Logistical Bottlenecks That Come With Material Shortages
Product packaging may be the last stage of product development, but it’s a necessary step to get products safely off the manufacturing line and out the door. So when there is a shortage of packaging materials like plastics, papers and metals — as is the case today — manufacturers can find themselves struggling to meet the demands of current customers as well as get new products to the market on time. And as we all know, time is money.
Let’s think about these logistical bottlenecks in the context of a product launch. A 2019 Gartner survey reported that only 55% of product launches take place on time, with 45% experiencing delays of at least one month. In light of difficulties sourcing raw materials for packaging production (amid other modern supply chain issues), it can be assumed this percentage of delays will rise. And such delays, as management consulting firm OakStone Partners reports, come with a hefty price tag: a delay in product launch can cost a company anywhere between 15-35% of their net present value, which quantifies all of the potential cash inflows and outflows of an investment in present dollars.
The Initial Sticker Shock of Heightened Material Costs
As packaging materials have become rarer and more difficult to source, material pricing has subsequently gone up. Take plastics, for example. In a 2021 Industrial Packaging article, it was reported that many plastic packaging manufacturers planned to increase their prices by 3-12.5% — with further price increases anticipated over time. These rising costs were attributed in part to extreme weather patterns and the COVID-19 pandemic, two variables that place compounding demands on the supply chain for relevant supplies.
Historically, packaging has accounted for a significant portion of a company’s spend, with retailers spending anywhere from 10-40% of a product’s retail price on packaging solutions. With material prices on the rise, the total cost of product packaging is bound to rise, making it increasingly difficult to maintain profit margins without increasing the cost of the product itself. In the simplest terms, inflation lends itself to inflation.
Cases By Source Can Help You Navigate Material Shortages
Material shortages are a real concern for manufacturers in today’s supply chain. And while the market itself may be unpredictable, there are ways we can help you combat the impact these variables have on the packaging industry.
With an extensive network of offshore and domestic partnerships, we can help source packaging materials that align with your budgetary and product schedule needs — all while working around costly tariffs. We can also use these same connections, paired with our in-house design and manufacturing capabilities, to produce other components for your products so you can meet current demands and get products to market on time.
Having trouble sourcing the materials you need for your packaging or products? Connect with the team at Cases By Source.