So, what is happening?…
Paper mills are closing or converting to alternative products
Paper allocations remain very strict through at least October. On-the-floor inventory at most suppliers is depleted. Paper producers are eliminating some paper grades and transitioning to packaging grades in some instances, while other mills are closing permanently. Meanwhile increased demand, increased shipping costs and ongoing staffing shortages are driving up prices.
Environmental-spec papers like Forest Stewardship Council (FSC) and Sustainable Forest Initiative (SFI) stocks are limited. Clients that require these environmental certifications on their mail pieces limit alternative paper sourcing options. Some organizations are dropping their logo requirements temporarily to allow more flexibility in substitute stocks.
There has also been a sharp increase in the use of tissue and ivory board globally. Tissue demands are being driven by COVID-19 and ivory board demand has increased as consumption of single serve meals has transitioned from plastic containers to board for sustainability.
Raw material demand continues to rise
Suppliers are also seeing rising costs for other materials, including pigments and chemicals used in ink, polybag substrate, fuel and freight. Cost increases of at least 5% are expected in 2022 across these categories of materials.
Many mills in North America and some in South America were delayed maintenance in 2020. Because demands for products escalated so extremely, mills delayed typical shutdowns for preventative maintenance. Regulations put into place because of COVID-19 limited access for specialized maintenance teams, mechanics, and suppliers. These mills are now taking extended downtime to remedy deferred maintenance, further exacerbating the restraints of the pulp supply chain.
Despite shortages and cost increases, demand for printing is high. Many suppliers are operating at capacity.
Rising fuel and freight
Over the past year, ocean cargo prices have skyrocketed up to 4 times the amount they previously were. These prices have affected 40-foot containers, a common size used for shipping products. Costs to ship to and from China have exploded within only a year’s time.
Reduced labor resources
In 2019, of the 14 million job postings for drivers, only 1.9 million hires were made. There has been a 40% decrease in commercial driver’s license (CDL) training due to capacity restrictions from COVID-19 and outright closures of CDL training schools. Fewer drivers mean fewer goods moving across the country, not only stretching out lead times but unfulfilling demands for necessary products.
Labor shortages and the threat of Covid/Delta Variant outbreaks could further impact schedules and lead times.
Mail delivery issues and rising costs from USPS
On August 6, the Postal Service announced its plan to move ahead with lengthening the service standards for almost 40 percent of First-Class Mail and 7 percent of Periodicals Mail beginning next month. Deteriorating service will most likely have a negative impact on mailer volumes and USPS revenue. Through pressure from Alliance of Nonprofit Mailers, The Nonprofit Alliance and other industry groups, we hope this misguided decision will be reversed.
So, what can you do?…
Despite this myriad of challenges, which will most certainly hit the nonprofit sector particularly hard, all is not necessarily lost. There are steps that can be taken and for organizations that are prepared, and flexible, there is a path forward.
Plan: start planning now for the remaining months of 2021 and as far into 2022 as possible. It is important that we provide a forecast to our suppliers into March and April 2022 to help source materials and set schedules. If you are expecting any potential volume increases, it’s critical we know in advance to source alternative materials. Paper availability and prices change daily—the sooner orders are confirmed the sooner we can work with suppliers to ensure delivery of materials.
Be Flexible: please consider alternate paper stock during this time. Any flexibility will be helpful as certain stock selections may not be available or may have a significant price increase.
Review: a design review for your direct mail or custom project may uncover areas where you can reduce cost or accommodate supply issues. Also consider the USPS Informed Delivery Promotion where you can save 2% on postage (effective September 1-November 30, 2021).
Understand Postage: the USPS has recently updated its service standards increasing time-in-transit standards by 1 or 2 days for certain mail that are traveling longer distances. Businesses are asked to plan accordingly.
Go Digital: consider digital services and a multichannel approach to supplement your printing needs. Direct mail is a long way sanfrom being replaced by digital fundraising and/or membership efforts in the nonprofit industry but if you are not already employing an integrated multichannel approach, now would be a good time to start!
Anything you can do to be prepared and get a head start on 2022 is going to pay off!
Sincerely,
Alicia M. Lifrak
Executive Vice President
