September 8, 2022
The Economic Impact of the Supply Chain Disruption and Inflation
By Jill Cantrell
The following article was originally published by Packaging Impressions. To read more of their content, subscribe to their newsletter,
Since the Covid-19 pandemic, printers have been fighting an uphill battle when it comes to their supply chain and rising costs. As the first quarter 2022 State of the Industry Update showed, the unknown week to week and future availability for materials, substrates and consumables coupled with increasing costs has made a significant impact on the bottom-line for many and has been a major business concern for nearly all.
To better understand the current state of the supply chain and the economic outlook, the second quarter 2022 State of the Industry Update focused solely on measuring evolving supply chain dynamics, how printing companies are responding to them, and what can be done to prepare for an economic downturn. The nearly 300 participants include commercial printers, graphic and sign producers, apparel decorators, functional printers and package printers/converters. The findings, however, translate across all segments of the printing industry. No one segment is immune from current economic situation; the issues and solutions are shared results.
The second quarter 2020 State of the Industry Update, published by PRINTING United Alliance and NAPCO Research, concludes that supply chain conditions in the printing industry are getting worse, the costs of materials are continuing to rise, and many have seen a direct negative impact to their revenue. Economic indicators point strongly to a downturn in the economy that looks very close to a recession. The crisis, however, has not affected all equally and some, who attribute their success to strengths gained long before the crisis started, have experienced increases to their revenue.
Material shortages and inability to acquire the materials needed topped the list of concerns in the first quarter 2022 State of the Industry Update, with 92.3% citing it as a significant concern. Three months later, the second quarter 2022 State of the Industry Update shows that companies are still experiencing significant challenges with sourcing supplies with the majority, 70.1%, saying the situation has gotten worse.
Figure 1: Supply Chain Conditions
Q. Overall, what’s happening to conditions in your supply chains?
Substrate availability and costs are both serious issues for the printing industry. Companies were asked if they have seen substrate availability and prices increase, decrease, or stay the same over the last 60 days. Very few reported increased availability for ANY of the substrates measured and virtually none said prices were lower. For each substrate measured, at least 3 in 10 respondents said that availability over the past 60 days had decreased and over 7 in 10 respondents said that they were seeing cost increases. The top three substrates shown to have decreased availability and higher costs, coated and uncoated paper and vinyl, are shown below in figure 2.
Figure 2: Substrate Availability and Prices
Q. For each substrate you purchase, how on average have availability and price changed over the last 60 days?
According to respondents, consumable availability remains mostly unchanged over the past 60 days, however prices, similar to substrates, have increased and continue to be a concern. Like substrates, companies were asked if they have seen consumable availability and prices increase, decrease, or stay the same over the last 60 days. Very few reported increased availability for ANY of the consumables measured and none said prices were lower. For each consumable measured, at least 6 in 10 respondents said that availability over the past 60 days had decreased and over 5 in 10 respondents said that they were seeing cost increases. The top three consumables shown to have decreased availability and higher costs, coatings, plates and ink, are shown below in figure 3.
Figure 3: Consumable Availability and Prices
Q.For each consumable you purchase, how on average have availability and price changed over the last 60 days?
When companies can’t find the supplies to produce their goods, many areas of their business can be affected, and the result can often be a hit to the bottom line. The data in this study shows this to be true for many printing companies, nearly half say it has affected their revenue negatively.