As a result of global paper & resin shortages, events affecting the manufacturing market, freight increases, labor shortages and COVID-related challenges still plaguing the country, we’ve seen unprecedented price increases. Prices globally continue to increase, with many manufacturers enforcing force majeure, whereby even written contracts have been canceled and allocations have begun.
E-Commerce Growth and Corrugated Prices
The global pandemic has driven e-commerce growth to record levels. Consumers spent $871.03 billion online with U.S. merchants in 2021, up an incredible 14% year-over-year, according to Digital Commerce 360 estimates. This growth is less than the pandemic-fueled 2020 gains, however it’s noteworthy that the industry maintained steady improvements.
As a result, the demand for corrugated packaging and manufacturers’ backlogs for corrugated boxes are at record levels. Today’s prices for what is now being called “beige gold” reflect that, with even higher price levels being anticipated as e-commerce demands increase.
Due to supply chain shortages and increase in corrugated demand, North America’s largest containerboard producers have announced a price increase effective in March 2022. Korpack is actively monitoring the situation and will provide updates as they become available.
Creative Solutions That Uncover Savings
Knowing the problem is one thing; identifying solutions is another. At Korpack, we’ve always believed that we’re our customer’s partner, that two heads are better than one. Our promise is to provide solutions that drive long term cost reduction of your packaging operations.
Let’s look at some things we can do together to keep costs low as we work through the supply and pricing challenges:
1. Right-Size Your Boxes
Move from stock boxes to custom sizes. Many companies have the perception that custom runs are more expensive when in reality, custom boxes use less material and reduce costs because they’re built to fit your product perfectly. If you use more than a pallet of a specific size in 30-60 days, a custom run can deliver cost-savings for you.
2. Increase Your Order Volume
Increase your run quantity to save on per-box cost. Box runs have a flat machine setup cost associated with each run. When you increase your run size, you increase the number of boxes over which that flat setup cost is spread, which reduces the overall per-box cost of your run. Since corrugated material is purchased by square feet, the higher the square footage of your order, the lower the material price is. Korpack’s just-in-time inventory program allows us to run larger quantities, hold, and release product as needed. This enables our customers to benefit from the higher volume order cost savings, without them having to warehouse the full inventory or deal with extended lead times. We work with our customers to store their products for up to 90 days at no charge. You can take in as little or as much as you need, and you only pay for the product you receive.
3. Optimize Your Board Grade
Look at changing board grade combinations. There are over a hundred different combinations of corrugated material. In there, you’ll probably find a handful of solutions that can save you money while still providing great performance and protection.
4. Machine Automation
Customized automation solutions can help you achieve both growth and savings. By increasing your volume and output, you’ll be decreasing costs per order without additional labor.
5. Re-design for Material Efficiency
Products are often over-protected using too much material; we can take a fresh look at a new solution. For example, we can change the box style from Kraft to Oyster. Making a style change can significantly reduce the cost of a box or the labor involved in assembly and pack-out.
6. Long-term Inventory Stocking
Korpack can help with inventory management. One of the services our customer’s value is on-demand warehouse space for their products. Our expert inventory management services help our customers increase efficiency, reduce waste, and keep costs low.
While price increases can be challenging, they can also drive improvement and innovation to your current packaging methods and produce overall positive outcomes. We are here to support you by helping you make smarter business decisions that will save you valuable time and money.
Contact us today to schedule a product review and/or a plant audit.
