Supply Chain, Labor Challenges Continue to Consume Attention

Global manufacturers, including most all AICC Associate and General Member companies, are feeling unprecedented pressure as we crawl out of a post-pandemic world. Components shortages, compounded by surging raw material prices, has created a feeding frenzy as we battle global supply chain lockdowns. Furthermore, supply shortages are tempting to cut off economic recovery in many regions of the world and when coupled with labor and logistics shortages, the challenges appear to be piling up with no end in sight. Just this morning I heard from a box maker who stated his normal lead times for customers was 4 days, but supply and demand issues have forced him to quote four weeks out.

Fortunately demand for corrugated remains strong and global recovery was beginning to exceed pre-pandemic status. Good news is on the horizon too as borders reopen. Manufacturing operations and retailers in the western economies have emerged from lockdowns and are ready to resume imports from many international countries. In early October there were almost 500 large container ships waiting to dock outside ports in Asia, Europe and North America. However, OEMs that have successfully shipped containers to North America are being blocked at sea and delayed by weeks waiting to be allowed entry. In some instances, these delays are made worse by the fact some ports don’t have enough labor to unload the waiting ships and move products to the hauler or rail yard for the next leg of their journey. As a result, ocean freight rates have increased two to five times from 18 months ago, depending on what lanes you are shipping – creating an actual bidding war to secure shipping container spots.

OEMs in Asia are certainly feeling the brunt of the downturn more than those in Europe and North America due to COVID restrictions. Seeking goods from regions still in lockdown is virtually impossible. Additionally, while some are able to export machinery, they are unable to send technicians to perform installs. As a result, several OEMs have had to rely on video conferencing or other solutions to remotely walk box plant customers through the install process. Others are relying on domestic partners to install equipment on their behalf.

With labor shortages likely to continue, mitigating these issues is ever more challenging. According to the Labor Department, just last August over 4.3 million workers voluntarily walked off their jobs. And at the time of writing this report, there were strikes ongoing at both Kellogg’s and John Deere by employees feeling the upper hand in negotiations and demanding more of their employers.

Many employers have also expressed great difficulty finding qualified and willing applicants to fill the growing void caused by the upended labor market. State officials have also been unsuccessful in attempting to limit additional U.S. federal benefits over the summer and the current White House administration has done little to mitigate these growing challenges. A lackluster performance illustrates this further as only 194,000 jobs were added in September.

Given all this, we must leverage the hand we have been dealt. It will require renewed effort and a steadfast approach but the opportunities for success are there. If you have not done so already, I strongly recommend: building up inventory and creating emergency plans, identifying potential new suppliers, conducting a supply chain vulnerability audit, and partnering with companies who have logistics expertise. Any of these strategies will help you have a successful, healthy, and prosperous 2022!

 


Greg Jones is the Executive Vice President of SUN Automation Group. With a pulse on corrugated market demands, Jones is Vice Chairman of AICC’s executive board. Prior to joining SUN in 2012, he spent over 15 years in the manufacturing and packaging sector focused on delivering equipment and material load containment solutions to clients across various sectors.

Originally published in AICC Box Score January 24, 2022