I know the national news is beating the supply chain issues for computer chips and food shortages to death, but I’m yet to see a news outlet talk about supply issues affecting thermal papers. I hope that this article helps put into perspective what we, paper people, are potentially facing soon.
First, we all know about the rapid-fire increase announcements from the paper mills, over the past few months. To recap, this was essentially based on a huge increase in demand, a chemical shortage for thermal coatings, lack of coating capacities, base paper shortages, and distribution interruptions.
There is no doubt that this is not a fun time for printers, converters, and those selling these items. We are all exhausted from the pricing conversations and not being able to meet delivery requests.
I fear that we are reaching a breaking point where companies may not be able to honor pricing from a quote to delivery basis. In my 22 years in print, I never would have imagined this thought may have crossed my mind. However, after lots of research and conversations with fellow industry experts, my fears may inevitably become a reality.
Here is my logic. When a client requests a quote, pricing is compiled based on “current” or “known” costs. These quotes rarely turn into actual production orders immediately. Once an order is received, materials must be allocated for the job. This is where things are getting crazy! It seems like more times than not; certain components must be ordered from suppliers. This may include paper, ink, dies, glue, cores, cartons, etc. The issue is that all these base component suppliers are having issues in their supply chain and maybe experiencing labor issues as well. In other words, delivery of the needed components may be delayed or extended deliveries are offered. Items that in January 2021 took 1-2 weeks can/are taking 8-15 weeks to receive. Yes, you heard that correctly; 15 weeks or almost 4 months! These companies are experiencing huge increases in costs and are passing them on, in the form of percentage price increases.
Looking forward to an example, the printer orders paper today is acknowledged with a delivery of 10 weeks. In 2 weeks after this order is placed and acknowledged, a nice 10%+ increase is announced by the mill. Many of these increases are based on when the product delivers and not when the product is ordered. This means that the printer must re-issue purchase orders for already ordered products. If they choose to simply cancel the order, there are often no other sourcing options.
For example, if a project is quoted at $10.00 msf and the order is received immediately. The paper is not currently on hand and must be ordered from the mill at $10.00 msf. The paper order is received and acknowledged by the mill at $10.00 msf. Fast forward 2 weeks to an announcement of an immediate price increase of 10%, the printing company must now re-issue the Purchase order for $11.00 msf, to keep the order alive. When the paper arrives and the job is printed, there is already a 10% paper price increase applied to the job. Printing companies can only continue to absorb these unexpected increases for so long.
I fear that eventually, printing companies will have to contact clients, weeks after accepting an order, with news of price changes and have Purchase orders re-issued to cover the unexpected increase in costs. This is a big blow to a stable pricing methodology as well as a big ding to the manufacture’s reputation with the client. Neither of which have been deemed “good business practices” over the past century.
Where does this leave me today? This leaves me with feelings of uncertainty, anxiety, frustration, and fatigue. I am always looking for the “light at the end of the tunnel” but currently, we must be going around a sharp turn, because the only lights I see are the ones we can turn on ourselves through positive dialog, positive memories, and positive thoughts that this too will end.
For comments/ideas/suggestions contact Brandon Kent firstname.lastname@example.org