Does it feel lately that all your orders and we mean all - business or personal, are taking forever to arrive? You wouldn’t be wrong.
Since this summer the headlines have all been about the widespread disruption to supply chains both in the UK and globally. Lockdowns, labour shortages, and disruptions to logistic networks have all lead to this significant disruption causing the delayed deliveries you are currently experiencing as well as higher prices and gaps on supermarket shelves. Crisps anyone?
A ONS survey suggested that some supply chain issues have been going on much longer than they have even been in the news.15-20% of businesses reported issues getting supplies from the EU since February 2021 and around 10% repeatedly reported issues within the UK since June 2020!
Stock levels among firms were at their lowest levels since 1983 according to a survey from the Confederation of British Industry. With lockdowns lifted, the demand for products has rocketed and due to this, supply chains that were already disrupted are struggling to bounce back. It is the perfect storm.
So, what does this mean for your packaging? Read on to find out exactly what is going on with supply chains and why it’s causing delays and price increases.
What is the global supply chain?
Let’s cover some basics first and talk about what global supply chains actually entail. Supply chains are like a massive web of components that work together to manufacture and deliver most of the world’s goods and services to consumers. This includes:
- Sourcing raw materials such as rubber, cotton, foam, nylon, or other synthetics
- Transporting those materials to the factory where the product is manufactured
- Processing materials to turn them into parts and fixing them all together (e.g: parts of your shoe- the sole, the outer sole etc.)
- Packaging into the final product
- Transporting finished products overseas to distributors, stores, warehouses, or even your front door
If one link in the supply chain breaks, it slows everything else down. Right now, the global supply chains are experiencing not just one broken link, but multiple broken links which ultimately means ongoing disruption.
What are the actual supply chain issues?
The global supply chains that have run relatively smoothly for decades were suddenly seriously disrupted by a number of issues including:
Global shortages of semiconductor chips
Since the Covid-19 pandemic, there has been strong demand for electronics as consumers and businesses started buying new laptops and servers to cater for staff working from home and children being homeschooled. This lead to semiconductor sales rising to 6.5% in 2020, which then continued into 2021. In fact, the Semiconductor Industry Association revealed that the sales for May 2021 were 26% higher than during May 2020!
However, we can’t blame it all on the pandemic as the situation has been developing for years. All the below factors have had a part to play, and the pandemic was just the last drop in the bucket:
- The adoption of new technologies such as 5G or autonomous driving
- The decision of the US to prevent the sale of semiconductors to Huawei
- A boom in demand for lower cost chips in a variety of consumer products
- A winter storm in Texas shutting down semiconductor factories
- A fire at a plant in Japan – the pandemic was just the last drop in the bucket
The shortage is having a strong impact on the automotive and tech industries. For example, the new PS5 console being impossible to get hold of, increased waiting times for the new iPhone, and halted car production lines.
Unfortunately, it is predicted that the global chip shortage will continue into next year and IBM fears it could last another two years.
Energy supply crisis
Europe and Asia are currently facing an energy supply shortage that has had ramifications on prices for fuels and minerals. This ultimately impacts households as well as manufacturers.
The most prominent example is China implementing power restrictions in at least 20 provinces, affecting more than 66% of the country’s gross domestic product as well as remaining concerns over blackouts.
In Europe, there are struggles with natural gas prices at record highs according to Statista. This has been due to an accumulation of:
- Increased demand during the hotter months,
- Wind energy generation being unusually low
- Reduced gas supplies from Russia.
In the UK, catch up maintenance work in Summer 2021 meant that the supply chain has yet to catch up with demands for some segments, forcing a spike in energy prices. It has been said that energy bills in the UK could rise as much as 30% in 2022, if this energy crisis continues.
Altered shipping routes
As you have likely noticed, the container shipping market was frequently appearing across headlines over the summer as freight rates and port congestion levels continued to reach record highs. This was due to port closures caused by covid-19 outbreaks on the export side, as well as capacity problems on the import side.
The distribution of containers around the world is still currently imbalanced. The pandemic altered shipping routes and caused staff shortages that meant containers could not be processed or were processed incorrectly with products stuck in the wrong places.
With the holiday’s fast approaching, the container ships are even more jam-packed and have gotten stuck in traffic at ports. This is further choking the economy as delayed containers have become both a symptom of and a contributor to the global supply chain issues.
The fall in HGV drivers and driving tests being suspended during lockdown also meant a lack of new drivers entering the market, and this does not help the situation with delayed packages.
The Office for National Statistics showed that the number of people working as HGV drivers has fallen by 53,000 (16.5%) in four years- from 321.000 in 2017 to 268,000 in 2021. The HGV driver shortage is expected to last for a year, meaning it will continue to threat supply chain disruption and shortages.
Bottle necks at ports
With altered shipping routes and a lock of drivers, another domino effect is created with bottlenecks at ports. Ships have been forced to wait at sea in some queues of more than 50 ships. The transportation bottlenecks still show no signs of letting up either as high levels of freight congestion are expected to continue well into 2022.
Supply chain disruptions and bottlenecks have held back growth in Britain and there have been backups at British ports and difficulties distributing goods. The changes to migration and trade because of Brexit, including fewer European Union workers and a stricter customer regime, have only exacerbated the supply bottlenecks more according to the Office for Budget Responsibility.
Recently, industry experts told a UK parliamentary committee that container ports have been working at levels described as 95% full. They even agreed that ports were anticipating continued pressure in 2022, showing that the issues we face will not be disappearing anytime soon.
What is the impact of the supply chain problems?
In short, the impact are delays, shortages, and price increases.
The problems have created a domino effect that doesn’t only affect the packaging. Some American manufacturers have even been waiting a record 92 days on average for parts and raw materials.
Throughout this year you would have probably noticed gaps on supermarket shelves, lengthy queues at petrol pumps, shortages of goods from cars, fridges, and construction materials, as well as lack of McDonalds milkshakes! Yes, this is all due to the same problem – the global supply chain crisis.
The global supply chain crisis is now affecting haulage across Europe, leading to increased costs and lower availability. This has resulted in a significant cost pressure on both raw materials and finished goods.
What is the impact of the supply chain problems on the packaging industry?
The domino effect has reached the packaging industry and there are quite rightly so concerns over the potential for further delays, conflict over responsibility, and most importantly customer dissatisfaction.
Pulp prices have increased by more than 50% and the prices of paper for recycling have more than doubled. The European Carton Makers Association warned that high costs and unstable supply of raw materials, along with the surge in consumer demand for fibre-based packaging has seen lead times for carton board mills rise to 12 to 20 weeks!
In fact, it has started affecting the paper mills industry too as the situation has caused paper allocation from mills to be restricted, causing lead times to be extended and further price increases on your boxes.
What do the supply chain issues mean for my packaging and deliveries from Swiftpak?
Supply chain issues and more recently paper mills closures have resulted in unavoidable increased lead times that is unlike anything we have seen before. This growing pressure will only continue to put upward pressure on prices going into 2022.
While at Swiftpak we have built a secure supply chain over the last 40 years, we are still impacted by delays and price increases. These are unfortunately completely unavoidable in the current climate. We are doing everything we can to support our customers with a steady supply chain and transparency on lead times.
Please contact us today for further information and we will be happy to help as much as we possibly can.