Procurement professionals across industries have been scrambling to deal with never-ending challenges over the past several years—and those in the packaging industry are certainly no exception.
As one individual described it in a Fastmarkets article, “Private Papers: Confessions of a packaging procurement professional,” the need to continually adapt to ongoing changes has been “like running to stand still.”
Here, we’ll take a look at some of the dynamics involved in packaging shortages and recommended strategies from Gartner for dealing with them—including the importance of effective collaboration.
The Ripple Effect of Packaging Shortages
Shortages of various materials have created enormous obstacles for both manufacturers and the companies they count on to package their goods.
A Modern Retail article described the dynamics like this: “Over the past two years, raw materials have proven to be some of the most important — but hard to procure — slices of the supply chain. With a shortage of these basic components, brands cannot deliver inventory to customers on time. But commonplace items like paper and plastic — basic materials that retail companies previously never had to give much thought to — have been in scarce supply. And businesses have had to become nimble to deal with these shortages.”
Cases By Source concurred in its description of the ripple effect of packaging shortages:
“Product packaging may be the last stage of product development, but it’s a necessary step to get products safely off the manufacturing line and out the door. So when there is a shortage of packaging materials like plastics, papers and metals — as is the case today — manufacturers can find themselves struggling to meet the demands of current customers as well as get new products to the market on time.”
And as Supply Chain Dive put it, “Packaging constraints are the latest supply chain wrinkle for companies as the pandemic, weather events and increased demand for sustainable materials stress supply.”
3 Strategies to Deal with Packaging Shortages
In April, global consulting firm Gartner, Inc. published a resource to help companies deal with packaging shortages. A press release described three recommended strategies in this context.
“Chief procurement officers (CPOs) dealing with supply instability for packaging material should use three tactics to navigate rising costs, delayed deliveries and sustainability concerns,” the statement said. “They should centralize packaging specifications, collaborate with suppliers, and segment the different packaging types.”
Quoted in the release, John Blake, senior director analyst with the Gartner Supply Chain practice explained the challenges involved.
“Shortages of packaging materials such as pallets, plastics, corrugate, metal and glass are wreaking havoc across supply chains, and it remains unclear when – or if – these constraints will subside,” Blake said. “Packaging procurement is highly complex, as it requires coordinating many different suppliers. To further complicate matters, there has been a lack of investment in technology that would allow for seamless collaboration across the supply chain.”
The following provides further explanation regarding Gartner’s three recommended strategies, according to the press release.
Centralize Packaging Specifications
“Packaging specifications are traditionally linked to a stock keeping unit (SKU) or bill of materials (BOM),” Gartner said. “However, this practice prevents CPOs from being aware of all the packaging specifications across the organization. A better way is to centralize all specifications across the organization. This allows CPOs better visibility and enables improvements, such as harmonizing similar materials, establishing more sustainable alternatives, and fluidly switching suppliers in the event of a shortage.”
“Ultimately, procurement teams need to build a packaging supply ecosystem, but they must first obtain full transparency of packaging specifications across the enterprise. Currently, we still see very limited adoption of advanced SaaS applications that would enable such a step. This is a massive investment gap for CPOs to close,” Blake said.
Collaborate with Suppliers
“As packaging suppliers operate at maximum capacity – either from demand or due to availability of raw materials – they are now in a position to select which customers and orders they choose to fulfil,” Gartner said. “CPOs must establish a close collaboration with suppliers and make it easy for them to fulfill orders.”
“Suppliers with limited capacity will prioritize customers with the most favorable commercial conditions. CPOs must align the interests of the suppliers with the internal requirements of manufacturing and R&D to chart the best path forward,” Blake said.
“When CPOs have a holistic view of all packaging requirements in the organization, they can use packaging segmentation to break down silos and identify the possible opportunities and risks that each segment presents,” Gartner said.
“Each level of packaging has its own set of risks that CPOs must factor into strategies to mitigate supply shortages. Segmenting packaging across the organization provides a better base for decision-making,” Blake concluded.
Collaborating to Navigate “A Perfect Storm”
Quoted in the Supply Chain Dive article, Blake described packaging constraints that have added to supply stresses as “almost like a perfect storm,” and predicted that packaging supply would “remain tight through the holiday season,” according to the outlet.
Also cited in the article was Derek Mahlburg, director of North American paper and packaging at Fastmarkets RISI, who described the different types of challenges involved with obtaining “forest-related products—such as corrugated boxes, non-corrugated boxes and folding boxes.”
Mahlburg said that until production of corrugated boxes catches up with demand, “buyers will probably have to continue to explore all the ways they can to source paper and packaging products.”
In this context, he “suggested that managers speak directly with mills to find out what they are already producing,” according to Supply Chain Dive, “instead of calling around to see who can actually fit in an order of this special grade.”
The importance of effective collaboration cited by Gartner and others is also underscored in “Private Papers: Confessions of a packaging procurement professional,” as captured in the following snippets:
“I spend a lot more time on supplier relationship management – we call it SRM.”
“I used to talk to key suppliers just once or twice a month in normal times. Now, I’m meeting suppliers once or twice a week, with daily contact by phone and email. Communication is key. I want to make sure their inventory levels and production plans are in line with ours, especially where it’s a managed inventory arrangement and they’re keeping minimum and maximum levels on allocation in their warehouses.”
“Several times, because of production downtime and logistics disruptions, inventory levels have fallen below the required levels – when that happens, I want to know as soon as possible, so I can find alternative suppliers.”
“Top-to-top meetings – where one of our VPs will meet with a VP on the supplier’s side – are more critical and more frequent than they’ve ever been. Good rapport between executives is the closest thing to leverage that we have right now. It’s all about creating high-level communication and partnership. It also helps keep the channels of communication open, so I’ll be more likely to find out if disruption is heading our way.”