You’ve just received yet another price increase notification from your packaging vendor…you’ve been a loyal customer, so why are they trying to take advantage of your business? The truth of the matter is that the packaging industry is a volatile market, especially when it comes to resin-related items (i.e. stretch film, poly bags, etc.). A best practice for packaging distributors is to wait until they’ve received a pricing notification from more than one manufacturer before notifying their customers. They want to be sure it is an industry-supported increase before unnecessarily worrying their customers and if it is not related to a market change, they will push back on manufacturers to rescind it. More often than not, you will see a ripple effect on packaging products when there is a market increase. For example, when there is a resin increase, you will find that your stretch film is hit first, but that your tape is affected by that same increase a few months later. The same thing occurs when there is an industry increase on paper because it directly affects boxes, cornerboard, mailing tubes, etc. Because packaging items are so inter-related, it may feel like there is a constant wave of increases, but it is usually the same increase affecting products at different times.
Alright, so you may know why the increases occur, but do you have to just move forward and accept it (albeit with some grumbling)? Despite their frustration at a price increase, some companies continue purchasing the product at the higher price because they are unaware of the ways to manage those increases. So what options do you have to limit the effects this increase has on your bottom line?
- Sourcing: It’s the age-old answer – source from multiple companies and determine who has the best price on that particular product. One issue that may come up with this is that you’re sourcing right in the midst of an increase, so some suppliers may be providing a pre-increase price and others a post-increase price (just be sure to clarify which one it is).
- Stock Up: Although you may only use half a skid of stretch film a month, would it hurt to have 2 skids available on the floor? If you have the space available in your warehouse and it isn’t too high of an expenditure, a good way to avoid an increase is to stock up on the product (assuming the manufacturer is not placing a limit to orders). A couple of months’ worth of stock will ensure you have pre-increase pricing, but also may allow you to hold off on ordering more product until there is a market decrease (yes, they do happen).
- Test Different Specifications: When was the last time you evaluated the product that you are using and reviewed new technology or options in the market? You can often make a switch to a product with slightly different specifications that will provide you with a larger savings. For example, with water-activated tape, you might switch from a 72mm width to a 70mm width – a small difference with better savings. Changing to a different width, mil thickness, gauge, etc. will likely have minimal effects on the quality of your packaging, but greater effects on lowering your packaging spend.
- Find a Better Way: Maybe a lot of paper market increases have been affecting the prices of your corrugated boxes, but have you considered whether any of your regularly sold products can use a poly mailer instead? Sometimes, it takes reviewing an application with fresh eyes to be able to determine if there is a better way to accomplish the same thing and at a better price.
Most of these options for battling increases require a bit of work and exploration, but this is when you can rely on your packaging partners to do the legwork. Your account manager should be able to source from different manufacturers, help determine the right amount to order, present various styles of the same product, as well as explore alternative methods to your packaging process. They are immersed in all things packaging, so why not let them find the possible solutions and you make the decision that works best for your company. Price increases are a frustration that you can’t always avoid in the packaging industry, but you can definitely have these tricks up your sleeve to help combat them.