We’ve all justifiably spent a lot of time over the last year focusing on the issues our industry is facing in keeping supply chains intact and running smoothly in the face of unprecedented demand and disruptions stemming from the pandemic. Amid all the shortages, delays and price changes, and like an exclamation point on a very memorable year, we also had a global shortage of containers due to the blockage of the Suez canal.
But in both good times, bad times, prosperous times or economic recessions, one thing that still gets overlooked by too many warehouse facilities is the humble and industrial label.
Like many other industries, the shortages, production disruptions and backlogs have now come to the production of the basic warehouse label.
Here is what you need to pay attention to in the next six months and our recommendations on what to do right now.
Warehouse Label Cost Increases
Over the last month, multiple label manufacturers have communicated that price increases are coming soon, and they are going to be significant. Asia Pulp & Paper, one of the world’s largest paper manufacturers, announced price increases of $100/ton in January and again in February and by ANOTHER $150/ton in March. Yes, that’s an increase of $350/ton!
Label, packaging and specialty paper suppliers have passed on those increases too, with announcements of price inceases ranging from 7-20% in Q1.
In addition to the cost of paper, film and adhesives have been impacted both by higher worldwide demand and shortages stemming from the shutdown of Texas in February where many polyethylene (PE) and polypropylene (PP) producers in shut operations because of the winter storm and cold that shuttered the power grid. Increased prices of polymers resulted directly and impacted the cost of label films and filmic labelstocks ranging from 12-25%.
While nearly all manufacturers are communicating about the increases, Zebra Technologies put it into very clear language:
“Over the course of the past month Zebra has received notification from most of our raw material suppliers regarding industry-wide price increases. These increases are being announced to the market as high as 10%.
What are some of the raw material drivers causing these price increase?
- Pulp paper cost increases
- Polypropylene supply shortages
- Adhesives, cores, and packaging cost increases
- Crude oil and freight cost increases
- Hourly wage increases”
Zebra’s increases are effective from June 14th, and others like Repacorp announced a 6% increase from May 3rd.
Delivery Delays Can Impact Peak Season
While it seems early to worry about it, we’re only three months from what would be the start of our normal “peak season” with receiving bays getting busy from August with the imports that start to peak for the holiday season.
The same shortages that are driving price increases are impacting delivery times. Manufacturers are recommending ordering an additional 4-6 weeks AHEAD of your normal lead time in order to be fully stocked as needed. Given how prices may continue to increase during that time, it may make sense to think about acquiring your peak season stock right NOW, and not only avoid the next increase, but perhaps even get the benefit of a larger volume discount you may normally not be getting to avoid carrying too much inventory.
Repacorp’s March 31st email to customers tied some of the delays directly to the “limited availability of acrylic emulsion adhesives”
Cheap Labels Won’t Help You
While the prospect of both delays AND price increases might make some facilities look to the potential of cheaper stock labels that are easier to acquire without the lead time, here is why you would NOT want to do that, especially now.
If you haven’t had the experience of using low-quality labels, Summer is the time to find out how they’ll create more problems than they solve. Now, if you need a basic 4x6 label for shipping that will be applied and delivered to a customer in just a week or less, then they will perform as needed, especially if you are using them to support your expansion into Ecommerce fulfillment.
Here is what happens in Summer when you use low-quality labels to save a few dollars:
- The thinner paper stock has a “memory” that leads to faster curling as the fibers try to rebound into the shape it held while on the label roll.
- Summer heat will speed the deterioration of adhesives, and humidity will speed it even more (especially problematic in East Coast and Deep South facilities).
- If your cartons are made from low-cost cardboard with poor-quality recycled content then the adhesive on your labels will have even more difficulty staying on.
If you are planning to store your cartons for any length of time in your facility you’ll want to get a professional review of your labels before ordering a larger quantity for peak season to ensure you will get something that won’t lose integrity while in storage.
Audit and Order Now
With a 4-6 week lead time OVER your normal delivery time, it would make sense to look ahead and prepare for peak season NOW. If you are unsure about the quality of your existing labels or doubts about your ability to source new stock for H2, then ask a label pro to do a quick review or audit of your current label solution.
If your facility is like most others, there are many varieties of labels, and most of them were sourced one at a time as they were needed and are probably not part of a comprehensive solution that incorporates your entire end-to-end workflow.
In other words, if you are going to look at potential changes to your label supply, then NOW is the time to do it so you can have everything tested out and updated BEFORE peak season starts in the Fall. Not sure where to start? Call us today – we have the questions you need to ask to decide what your best option would be.
When was the last time you did a thorough audit of your labeling solution? AMG can help you get free printheads and even free die costs for custom labels too.