From groceries to gas, it seems like the pandemic has put the squeeze on the almighty dollar. According to PBS News Hour, “In the U.S., inflation rose to 5.3%, as measured by the Labor Department’s consumer-price index in the 12 months through August 2021, after averaging about 1.7% for the past decade.”
Unfortunately, it doesn’t look like we will be receiving any relief in the near future. “The annual inflation rate in the U.S. accelerated to 8.5% in March of 2022, the highest since December of 1981 . . .” based on a summary by Trading Economics.
What Are the Reasons Behind These Rising Costs?
The cause for this spike in inflation is widely debated by expert economists. However, they all agree that a combination of reasons are to blame for the rising costs of most consumer goods, including the pinch on the cost of packaging:
- Labor Shortages: During the height of the pandemic, many workers were out of work – either because they tested positive for COVID-19 or the businesses they worked for shut down after months of stay-at-home mandates. According to the Bureau of Labor Statistics, “total unemployment, as measured by the Current Population Survey (CPS), rose by 8.6 million in the third quarter of 2020 . . . .”
Labor shortages = fewer people harvesting trees for papermaking, fewer dock workers unloading containers, fewer truck drivers transporting paperboard to packaging facilities, and fewer employees manufacturing your packaging cards and inserts.
- E-commerce: I was an avid online shopper prior to the pandemic, but e-commerce skyrocketed during the pandemic. According to Digital Commerce 360, “E-commerce was growing fast before COVID-19 hit…. But the pandemic contributed an extra $218.53 billion to e-commerce’s bottom line over the past two years.” And all of those e-commerce products need packaging!
Think back to Economics 101. Remember the Law of Supply and Demand? At this point, we have millions of people ordering products/packages online (high demand) and very few people manufacturing packages (low supply). What happens to the price of packaging when you have high demand and low supply? It goes up. There’s the pinch.
- Cost of Materials: What materials are used to create your packaging? Paperboard? Plastic? A combination of the two? How has the pandemic affected the cost of raw materials? If we look at paperboard, for instance, a rise in the price of pulp has made it challenging to obtain paper for packaging purposes. According to the Bureau of Labor Statistics, the Producer Price Index (PPI) for wood pulp, including pulp, paper and allied products increased 28% from March 2021 to March 2022. As the price of pulp rises, the price of blister/index cards also rises.
Are There Any Ways to Offset These Rising Costs?
Yes. Finally, some good news, right?! There are a few ways to counterbalance the pinch on packaging costs:
- Plan Ahead: Rohrer’s sales/customer service team can help you develop a comprehensive plan for packaging production on a quarterly basis. That way, we can work together to make any adjustments to your package design, materials, or order quantities ahead of time and develop an innovative packaging solution that meets your time to market and your budget.
- Be Flexible: If you’ve always used a certain recycled or SBS-2 paperboard for your packaging that is difficult to come by right now, let’s look into other options. The experts at Rohrer can help you find a reasonable alternative that is more readily available and may be a more affordable packaging material.
- Consider ezCombo®: Rohrer’s ezCombo® program may help you save time and money. With ezCombo®, the designers and engineers at Rohrer create a shared tooling arrangement for customers with common quantities. This helps increase the number of printed or thermoformed parts per run, while reducing the start-up costs and set-up times for everyone. We also offer the most convenient combo quantities in the market with the ezCombo® program: 5,000 / 10,000 / 20,000 / 25,000 / 50,000 / 100,000. It just may make the pinch on packaging a little EZ-ier.
Unfortunately, Rising Costs are a Reality.
We’ve seen how the pandemic, labor shortages, the increase in e-commerce, and the cost of raw materials has put a pinch on the packaging industry. But there are ways we can work together to counterbalance those rising costs.
At Rohrer, we believe that true partners make the perfect package. Are you ready for Rohrer to help you develop a creative packaging solution that meets the needs of your brand and your bottom line? Then, contact us today!