cardboard crisis of covid9 March 2021
The increase of online shopping as brought a cardboard shortage affecting from the packaging to the retail and delivery industries. Commenting on this issue is Chris Liddell, Product and Purchasing Director at RAJA UK who explains in more detail; the impact this shortage is having on the pacakaging industry, when the sector might recover from this shortage of supply and how the company is handling these challenging times.
RAJA have seen and the market has seen unprecedented levels of demand for packaging suitable for ecommerce applications, because of the recent lockdowns; the key driver closure of stores and retail outlets has led to that spike in demand. The industry has seen this shift and we have experienced this change too because we are targeting ecommerce customers and are a specialist packaging provider for ecommerce customers. We have seen a big uplift in demand across our broad customer base but more so in one of our key areas of expertise (ecommerce).
This was obviously a trend that was happening to move from bricks and mortar retailers to e-commerce but what last year has done is accelerated that process. Therefore because of that it has meant that all our suppliers for those products have seen substantial growth and therefore the production of all of their products has had to speed up production to try and keep up with the demand. And I think the point linked to both of that is that although when things open up, lockdown ends we're expecting a little bit of the amounts to drop, actually all the research that we have seen suggests that the levels of ecommerce business will remain much higher than they would have done without the pandemic. So it will still remain at an elevated level and shows the natural change in the people’s behaviour.
What that increased of demand has led to is paper and pulp shortages across Europe because everyone's struggling to obtain that material to meet that increased demand. The lead times are maybe three times if not more than the normal lead times for this time of year. Volumes have risen about 30% across the business marketplace.
Predictions for when shortage might ease
The shortage links to the increased demand, and this will stay for the remainder of the year, as of February the manufacturing leads times are up to May/June already, so the shortage is not going anywhere anytime soon.
The capacity available of the papermills will be tough, as we are still going through this shortage the market conditions for 2021 will be challenging. But this is where the value of distribution holds weight and can help ecommerce business through such a time, we have increased out stocks by at least 30% and increased our stock by 1.2 million pounds vs this time last year.
Which means have to worry about this (shortage) so our customers don’t have to. That's why people are moving much more from direct manufacturers to businesses (distributors) like us that are able to add value, able to hold their stock and offer a broad range of products, able to supply with next day delivery. This is this is why we're seeing the increase in sales that we're seeing is because we had value in these market conditions.
Handling the crisis
It could just be that we are using our position in the market and customers are finding that as a great solution. And because we do have the advantage that we already hold the stock and we're not just waiting for it to manufactured and delivered. It's there (in our warehouse) and it's available because we have the ability to hold additional stock (in our bigger new warehouse space allowing us to hold 30% more stock that we moved into June 2020); therefore that's an advantage for our customers.
We are currently holding stock that we forecasted we would hold in 2024 because of the increase, because of the projected demand that we've seen. We are already building more racking in our warehouse to hold the extra levels of stock, so that our customers do not feel the pain in their supply chain. This has attributed the success of RAJA and the value we add; we take away the challenges (by holding their stock).
Brexit has led to additional stress on the market with businesses seeking to build stocks prior to the January 1st deadline and many companies have chosen to maintain higher safety stock levels since January 1st in order to cope with potential upcoming supply chain issues.
These elements which were already visible during the last quarter of 2020 have led to extreme pressure on paper availability within the European market’