what you need to know to help your customers
SEPT 16, 2021 BY REBECCA OSTERMAN
It’s an exciting time to be in the label industry. Not only has the label business successfully weathered Covid 19 related shutdowns and uncertainty, but the pandemic and associated business trends actually increased, and continues to increase, demand for certain label products.
The demand is especially high for labels that help facilitate ecommerce or the movement of products throughout the supply chain. Additionally, as demand for essential products in the food and beverage, personal care and healthcare sectors continues to grow, so too does the need for labels to support these industries.
As a label distributor, this means increased opportunities for you to sell more labels and grow your business. But the high demand for labels, supply chain interruptions and an inflationary environment are also creating industry-wide challenges. It’s important that as a label distributor, you understand these challenges so you can better serve your customers.
As the U.S. economy continues to open, demand is exceeding supply in a host of commodity areas which affects products across many market spectrums—including labels. Specifically, supply chain challenges are leading to longer lead times and cost increases for label suppliers. There are several interlinked supply chain problems that are creating these cost and lead time issues including:
Freight constraints are causing disruptions in shipments both internationally and domestically. These problems have been created by a combination of high demand, covid-related difficulties, companies still playing catch up after the Suez Canal accident, and a lack of manpower. For materials that are produced overseas, shipping containers for ocean freight are currently very difficult to acquire, as well as very expensive. In some cases, the cost of container loads have increased by over 500%. Once containers reach US ports, there is a tremendous backlog, leading to an increase in time it takes to unload and transport freight to distribution facilities.
Additionally, domestic shipping companies are facing a shortage of trucks and drivers, along with increased demand for deliveries due to changing consumer behavior. This is leading to extended shipping times as well as skyrocketing costs.
Demand for label stock products is at record levels causing very high capacity utilization across the industry. Heavy demand, weather events affecting production, ongoing freight issues, and labor shortages have strained raw material suppliers. This has led to industry-wide shortages of raw materials including film, paper pulp and coatings, and adhesive chemicals and components. Raw material supplier backlogs are running double their normal amount, or more. Many suppliers have instituted sales controls on these materials—causing longer than normal lead times for most products. These material shortages as well as increased freight costs have also led to increased prices for these raw materials.
Additionally, packaging materials including corrugated, box board, roll cores and pallets are currently experiencing high demand with continuing inflation and shortages.
You can read more detailed information on the current state of the raw material market in our recent post.
Proactively provide your customers with information related to the current market conditions. Make sure your customers know in advance to expect longer lead times and potential cost increases due to the supply chain issues. Contact marketing@teamdls.com if you need help with this. We can provide email language, as well as links to supplier letters to help your customers understand.
There has been a huge surge in estimating activity by our distributors, necessitated by the price increases. This has increased our response times on new estimates or ones that require more detailed analysis. We are working on this as we know how important quick pricing is to your success (and ours). Right now, for single item repeat quotes, we are close to our normal 3 - 4 hour turn-around time, while for new estimates, we are running about 12 - 24 hours. Larger quotes are running longer as we are seeing delays in receiving special pricing from our raw material providers.
Before providing cost to your customers, double check that you are using the most up-to-date prices. The volatile market has already led to several price increases in 2021, and it’s possible that additional increases may be necessary. As a DLS distributor, you can always access our current stock catalog online. The link you should have to our stock catalog does not change, and will always take you to the most recent version. If you no longer have this link, you can request access here.
High demand for labels combined with the ongoing issues with raw material availability and increased freight time will continue to lead to longer than normal lead times. Production flexibility is greatly reduced right now. Avoid putting yourself in a position of trying to deliver product ahead of schedule. Keep motivating your customers to plan ahead.
We may be in crazy times, but we are committed to take great care of you and your customers. We have added over 40% more personnel to our team and increased our manufacturing equipment fleet by over 17% in the past year to accommodate the significant label growth we are seeing from you and your customers. We are in a great position to meet your needs once the supply chain settles down sometime around mid-next year. In the meantime, we will all need to work together closely to deal with material allocations, delayed shipments of materials, and disruptions in transportation.
As your business partner, we feel it is of the utmost importance to keep you informed on the state of our industry. Our DLS team is monitoring supply channels closely and will continue to update you with important information as it becomes available. If you are not already receiving our email newsletters, you can contact us to sign up. And be sure to add teamdls.com to your safe list to be sure you receive all of our important industry news and announcements.