Interesting times are ahead for companies that purchase significant pulp and paper volumes, a group that includes virtually any manufacturer with packaging needs. According to the US Bureau of Labor Statistics Producer Price Index, from February 2020 to February 2021, pulp and paper prices increased more than 5%. Data published by the St. Louis Federal Reserve Bank shows that corrugated prices increased approximately 11.5% between September 2020 and March 2021. These price increases will soon show up in packaging costs...if they aren’t already.
Most of us were glad to see 2020 come to an end. Many changes brought about by the pandemic are becoming permanent, causing businesses to respond in new and innovative ways. Suppliers have had to react to pandemic-driven disruptions in creative ways, and the impact of demand shifts along the supply chain has caused procurement organizations to need to quickly adapt.
In today's challenging market environment, reducing packaging costs is essential. It may not occur to most companies to look at their corrugated supply vendor agreements for potential cost savings — but it should. Strategic Resource Management (SRM) understands these contracts, and we work with companies every day to locate and capture these savings. Working in partnership with our customers, we often reduce annual corrugated costs by double digits.
In our experience, whether it’s a packaging, transportation, temp labor, or a telecom agreement, saying “no changes, here’s my signature” is a classic blunder.
Staring down the barrel of budget planning for 2020? For many managers working with a calendar-based fiscal year, the dog days of summer also mean the advent of the annual planning cycle. Given all the uncertainties in the past few quarters, odds are that department heads are being asked to “do more with less,” or at least step up output at a faster rate than costs.
In any aspect of business, achieving a sense of efficiency—balancing effort, time, and money to achieve the best outcome—is hard work. This is a particularly unique challenge for packaging and transportation. From excess headspace to improperly scheduled routes, to simply being unaware of emerging shipping and packaging solutions, it’s easy for a business to unknowingly lose thousands of dollars and valuable resource hours per year.
Remember the days when ecommerce was just starting out and online shopping was viewed as the green option? Rather than idling on gridlocked roads belching exhaust fumes en route to the mall, consumers could complete a few mouse clicks from the comfort of their desk chairs and merchandise would magically appear at their doorstep.
Those promises of convenience have largely played out; the environmental benefits are a murkier picture, however. Look no further than curbside on recycling day for evidence of this new shopping model. Increasingly, instead of 30 widgets packed in one box going to retailers, 30 separate boxes are going directly to consumers – even when consumers place orders for multiple items. Does the carbon footprint of added cardboard and bubble wrap outweigh the reduced auto emissions? The answer isn’t as tidy as initially thought.
Negotiating new vendor agreements might be the part of the supplier contract process that garners the most attention, but it’s the careful attention to detail after the contract is signed that promises will deliver hard-fought savings. We don’t mean to say that vendors are always looking to pull one over on you after you have signed on the dotted line. Honest, human errors do occur on both sides of the contract, and maybe more often than we’d like to think.