Supply Chain Disruption, Inflation Causing Challenges for Packaging Companies
Sourcing packaging has become more difficult given the myriad of issues including supply chain volatility, inflation, labor shortages, and increasing sustainability pressures. A study Unpackaging Reality, recently released by R.R. Donnelley & Sons Company found the market’s most pressing challenges forced packaging decision-makers to shift priorities and rethink operations, with 90% changing how their packaging is sourced.
Surveying 300 packaging decision-makers in the U.S., the study found that material price hikes and supply shortages presented the biggest hurdles for the industry over the past year, with over half of respondents reporting they have been strongly impacted. These challenges, among others, forced organizations to reprioritize packaging materials (68%), budget (52%), packaging design and aesthetics (49%), and sustainability goals (45%). Despite the many challenges brought on by the pandemic and downstream issues, the report found that overall, the packaging industry proved resilient and continued to track toward a more sustainable and innovative future.
“There’s no disputing that rising costs, supply chain snares, and talent pinches have posed major challenges to the packaging industry, but that doesn’t mean this reality is all doom and gloom,” said Lisa Pruett, President, Packaging, Labels and Forms, Retail Solutions at RRD, in a statement. “These challenges actually transformed the industry into a more innovative, agile, and environmentally conscious sector. Organizations responded with diverse strategies as there is not a one-size-fits-all approach to tempering disruptions.”
Some key findings from the report include:
Supply Chain Challenges Lead to Innovation
To navigate the market challenges, organizations have been willing to explore a wide range of solutions to their supply chain issues. Specifically, 62% diversified suppliers, 42% outsourced manufacturing and fulfillment, 39% consolidated suppliers, 30% substituted specs, and 26% reshored their manufacturing to the U.S.
There is a broad willingness to pivot to different packaging materials in light of supply chain sourcing challenges, with over one-third (36%) saying they were extremely willing to use alternative materials. As for guidance and information, 78% of respondents looked to suppliers, vendors, or direct manufacturers.
Ecommerce Ignites Packaging Demand
Packaging needs have skyrocketed in recent years, in part due to the acceleration of online shopping amid the pandemic, and this has created both strain and opportunity for the packaging industry. The majority of respondents (57%) experienced an increase in e-commerce orders in the past 1-2 years and, for nearly all of them (92%), this resulted in an increase in packaging needs.
Packaging professionals responded to the growth in ecommerce orders by increasing inventory (55%), expanding warehousing (53%), changing materials (52%), and increasing staff (51%).
Surprising Strides in Sustainability Despite Cost Pressures
Survey findings contradict the sentiment that sustainability initiatives fell to the back burner as companies grappled with other pressing priorities, with almost all respondents (94%) agreeing that sustainability is a key consideration in packaging and label decisions. Further, two-thirds of packaging professionals shifted to more sustainable packaging than what they used previously. When considering sustainability, budget is the top influencing factor – more so than external regulations or consumer preferences – suggesting that cost-effective eco-friendly materials are in high demand.
Of note, the majority of packaging decision-makers (55%) believe recent supply chain disruptions moved their companies closer to their carbon emissions goals, suggesting sustainability initiatives may prove versatile and resilient.
