Right now across Canada, supplies of certain paper grades are so tight that many commercial printers simply can’t get the paper they need to complete jobs on time. On Wednesday, October 20, the DIA (Digital Imaging Association) brought together three experts from different sectors of the printing industry supply chain to discuss the causes of the current chaos that’s forcing unprecedented shortages of some substrates, and escalating prices of others. The timely online webinar also recommended steps that commercial printers could take to mitigate these challenges. The helpful webinar – Supply Chain Chaos – What’s a Poor Printer to do? – was one of the most well-attended in the DIA’s history, attracting an audience of over 500. If you missed it, here’s a link to a recording of the hour-long event. (https://youtu.be/H9kN6mCthrs).
Speakers included James Tovell, Vice-President of Sales and Operations in Central Canada for Spicers; Stéphane Dagenais, Domtar’s Region Manager for Canada; and Warren McCaffrey, President of Trinet Global Logistics. Spicers is a major distributor of paper and specialty products for the printing industry, Domtar is a huge pulp, paper and packaging company, and Trinet Global Logistics is a leading provider of worldwide freight-forwarding services. The moderator was Stephen Longmire, DIA Past President and General Sales Manager at print-finishing specialist Sydney Stone (Mississauga, Ontario).
According to logistics experts, a “perfect storm” of supply-chain issues is taking place right now across the globe – and more chaos is on the immediate horizon – due primarily to the lingering economic effects of the Covid-19 pandemic. Millions of tons of product reaching international ports cannot be delivered, and delays are increasing by up to 425% each year. The supply-chain crisis off of California’s coast is a typical example. Dozens of cargo ships are anchored there, waiting several weeks in many cases for their cargo to be off-loaded. In the past this usually took mere days! Most importantly, commercial printers across the industry have already become casualties of this global chaos.
Supply-chain issues are causing delays, resulting in higher costs for manufacturers and suppliers to our industry. As a result, price increases for consumables such as coated and uncoated paper, must be passed along to commercial printers, who in turn pass them along to their end-user customers. Many paper suppliers are also among those waiting for materials from overseas. What used to take one week for them to receive, is now taking one month or even longer. All this is creating a “ripple effect” that’s now being felt by virtually every sector of the printing industry – as well as a print provider’s customers.
But product delays aren’t the only factors leading to current paper shortages and price increases. For example, as paper manufacturers and suppliers wait for machines (or for parts to re-purpose their existing machines) to produce paper, cardboard, etc., these suppliers are delayed in using that machine to produce product – which in turn means a shortage of that specific product for printers to buy. So right now, a limited supply of specific paper products is the norm. Plus, wages for transportation workers continue to increase. In addition, what it costs to bring a barge from overseas to Canada has increased substantially over the past year and a half. Many paper manufacturers are also working hard to complete products that have a contractually fixed price. However, during the time in between selling those items for that agreed low price and now, costs for imported raw materials have also gone up considerably. As you can see, it’s a complex situation with complex solutions.
Aside from the bottlenecks at major ports, many suppliers are also suffering because of the lack of truckers to deliver goods via land when they are off-loaded. In many regions of the globe, truckers are still staying home, refusing to work because of possible lingering health risks to their families due to the Covid-19 pandemic. Rising demand for packaging and printed books (the school year began in September) during the pandemic has also drastically reduced paper supplies across North America. The bottom line in all this is that turning raw materials into finished goods, and bringing them to businesses across the world, involves a myriad of inter-dependencies – which most of us took for granted in the past. Logistics has also reached a point where current software and other tools to maintain the smooth, timely flow and delivery of products, are seriously strained. Challenged supply chains are now experiencing never-before-seen delays that add to ever-increasing costs. The good news (we’ll see) is that most experts predict that current supply-chain issues should begin to ease by Q2 or Q3 of 2022. But that doesn’t necessarily mean that they’ll end by then, as experts remind us that this is a global crisis in every respect.
Here are some key takeaways from the webinar, along with some suggestions for printers on how to get ahead of the “perfect storm” and avoid or mitigate some of the damaging effects:
The issues and the challenges
• It’s now much more expensive to move goods from anywhere to anywhere in the world.
• Paper inventories across Canada are currently at an all-time low.
• Skyrocketing demand for large-format posters/POS/POP, packaging and printed books during the pandemic has also drastically reduced paper inventories.
• Some mills are scrambling to make more cardboard to meet rising e-commerce deliveries.
• In the past, paper suppliers looked overseas for product, but soaring logistical costs as well as suppliers’ own regional packaging demands have limited that traditional option.
• Retail demand for school books in late summer further reduced paper supplies.
• Experts now worry that all this chaos, coupled with higher prices and delayed deliveries to clients and end users, will erode future demand.
• Some suppliers are being forced to convert or re-purpose their existing machines to meet specific demands for specific products and/or to boost overall capacity within their plants.
• People gradually returning to their physical offices has also increased demand for paper.
• In some cases, containers of paper waiting to be off-loaded at ports, have increased in price from $1,500 to $8,000 per container, with some larger shipments rising from $5,000 to $30,000.
• Some orders placed as long ago as April of this year are still waiting to be delivered.
• Labour shortages and wage increases, especially among truck drivers, is a contributing factor.
• Rising freight costs are now part and parcel of the overall cost of buying coated and uncoated paper in Canada, and won’t likely “ease up” until Q2 or Q3 of 2022.
• Many paper mills can’t currently provide 100% of what commercial printers want, so they must decide which products are in highest demand and where shortages are most acute, then re-allocate their resources accordingly – all while managing rising costs.
• Even if inventory of print consumables is available, it’s not getting to customers in time.
• In many regions, truck drivers aren’t delivering to less desirable (i.e. low-profit) locations.
• Copy paper imports from Asia, in particular, are decreasing, while their costs are rising.
• Mills are now making major investments in new equipment or re-purposing older machines to increase capacity.
• Some companies are trying to hold their inventory longer. But even warehousing space costs are increasing while this happens, in turn making the price of what they’re storing escalate.
What can a commercial printer do right now?
• Get out in front of these supply-chain issues by explaining them clearly to your core clients and assuring them that you’re there to help.
• Talk to your core clients first, find out what print projects they’re planning down the road, then chat with your suppliers to check the availability of the substrates required for these projects. Eventually, you can go back to your customers and suggest paper substitutions based not just on creativity but availability.
• Prioritize all your customers’ yearly projects, then predict what consumables will be needed.
• Place your print media orders as far in advance as possible. For example, is a tradeshow on the horizon for a customer? When is it and what printed display materials will be needed?
• Be wary of new business coming to your door right now. Find out why your competitors couldn’t serve them properly. It may be due to the same supply-chain issues that you also can’t avoid or control. Avoid this no-win situation.
• Never switch suppliers in a panic. Instead, work with them to predict what your needs (and the needs of your customers) will be in the immediate future and well into 2022.
• Create a yearly ‘calendar’ of key print projects for each core client so you can deal with any paper, ink or other consumables’ issues in advance.
• Work with regional printers (even competitors) and consider outsourcing specific jobs to them as a strategic move to retain the loyalty of your core customers. Be a true partner and not just a commodity provider.
• Ask your customers who their own freight partners are, take charge, and partner with them to create workable solutions on their behalf.