Paper Shortages – Partner or Perish
The challenges in securing paper for printing and mailing are very real. The confluence of factors creating the challenges in paper supply are not likely to improve until the second quarter of 2022. In my last article I explored the perfect storm contributing to the challenging situation including:
Supply
Demand
Manufacturing cost
Distribution/transportation cost
To get perspective on the daily impact of the situation, I spoke with several print-mail service providers about their strategies to handle the challenges of longer lead times, price increases and lack of inventory. From the trenches of daily buying and managing paper, input for this article was provided by:
Jeff Matos, Senor Director of Operations, Broadridge
Fred Van Alstyne, COO, Content Critical Solutions
Dave Janecek, Operations Director, CSG
Bob Schimek, Director Postal Affairs, Quad
Managing paper allocations
Allocations are here to stay. Buyers with established relationships directly with mills or paper merchants are now subject to paper mills restricting orders based on contractual allocations. Since mill inventories of most graphic papers used for transactional and direct mail are at a 30-year low, allocations will continue to be a factor. Everyone I spoke with indicated they attempted to place orders for large quantities and their orders were subjected to quantity reductions and allocations. You may want a railcar of paper, but you may only be able to order half a railcar.
Where’s your crystal ball?
Everyone I spoke with indicated they are working hard to do better and more detailed forecasting of the volume of paper they will need for the rest of the year. Merchants and mills are requesting buyers to place orders further in advance. As we all attempt to predict future needs for paper, buyers are experiencing stress in managing longer lead times that have nearly doubled from 4 – 6 weeks to 8 – 10 weeks. Inventories are depleted and North American mills are expected to operate at maximum capacity for the next six to nine months. Mill operating forecasts above 90% will not allow for replenishment of inventories. Tight supply is expected through the second quarter of 2022.
No Surprises
1918 Newspaper Advertisement - Observer Publishing Co.
More communication, more frequently. Every service provider indicated they are spending more time communicating internally with customer service teams and externally with customers and suppliers to manage expectations, orders, and shipments of paper. Several service providers have taken an approach to keep paper types as generic as possible to support onboarding new customers and insuring adequate supply of paper and envelopes.
For service providers with defined SLAs for print and mail, not having sufficient paper for daily and weekly jobs isn’t acceptable. Procurement teams are tasked with tracking every order to keep the paper and envelopes flowing into their production facilities to avoid any surprises that will impact production schedules. Schimek indicated they were receiving requests for new projects from clients because their prior print service providers were unable to secure sufficient paper on time.
Van Alstyne and Janecek shared that managing paper orders and shipments has become significantly more challenging, but they have not yet had any delays impacting clients’ SLAs.
Transportation Challenges
Shipping cost for containers from Asia to North America has skyrocketed from an average of $2000 per container in 2019 to over $9000 recently. The average cost for a shipping container has increased 360% in one year. The significant increases in shipping costs and delays in both shipping, rail, and truck transportation are impacting for the entire supply chain. The projected shortage of truck drivers in North America will only exacerbate transportation challenges for the next decade.
Several service providers indicated they are dealing with delays for rail cars of paper that have been stuck for weeks in Chicago. Due to the challenges with transportation delays and significant price increases for shipping containers, some service providers have stopped using papers from South America and Europe. Several indicated they are leveraging their supplier relationships to find additional North American sources. Yet, the demand for imported papers has never been higher. Mills are expected to be operating at 94% capacity for the balance of the year. Operating rates exceeding 90% are not sustainable, resulting in ongoing demands for imported paper.
It Isn’t Easy to Swap
With paper shortages, some service providers are switching paper types or weights to get available inventory faster. While switching to a similar paper seems like a reasonable alternative, Schimek indicated alternative papers were not approved by the USPS for mailing due to lower thickness. And Matos shared that some of his customers requested changes in papers, but due to mill allocations and limited availability, the mill could not meet Broadridge’s change requests.
Finding 9-point postcard stock has been very difficult. Janecek shared how CSG is working with their clients to find alternative stocks for some postcard applications. Schimek also shared how Quad is assisting clients with strategies to mitigate cost increases for both postage and paper while mailing similar volumes to achieve a return on investment for planned mail campaigns
Service providers have seen more paper price increases in the last 18 months than in the previous 10 years. The entire print mail industry is now living with the reality of reduced supply, increased transportation and distribution costs, and dwindling inventories for many stocks. The situation reflects the cumulative impact of global mill closures and conversions in the last 7 years and the supply chain disruptions of COVID-19.
Partner or Perish
All of the service providers communicated that they were managing multiple suppliers – both directly with mills and paper merchants for their mix of rolls, cut sheet paper and envelopes. Several shared how they have expanded partnerships with additional suppliers to insure adequate inventory. Janecek and Van Alstyne indicated their strong partnerships with merchants was making the difference in finding alternative sources stocks to meet demand. Knowing your buying power with your suppliers is critical to meet operational demands for paper. Strong reciprocal partnerships matter. Mills and merchants are asking for longer lead times to fulfill orders. Service providers are asking for active order management and more frequent deliveries to meet their production timeframes.
What makes a difference in a true strategic partnership? Having strong relationships and solid contractual agreements is a foundation. Open lines of communication and active participation with senior leaders fosters relationships build on trust and mutual purpose. Cultivating true strategic partnerships means they are mutually beneficial, enable creative problem solving, and are defined by managing risk to meeting customer requirements. In these dynamic times, these types of strategic partnerships are now priceless.
This article was originally published on Inkjet Insight.
