Disruption in the supply chain affects all areas in the labelling industry – from manufacturing to global logistics. As the demand for paper and filmic products is still high, carrying on in the same direction is no longer feasible, particularly due to skyrocketing energy costs. However, moving forward, brand owners do have options for navigating supply chains in a highly uncertain market.
Since 2021, several external factors have impacted supply chain operations, well into 2022. The labelling industry in Africa has, up till now, depended on goods and raw materials from Europe. Both the aftermath of the pandemic, the conflict in Ukraine, and now the energy crisis, have therefore played a large part in the disruption of supply chains.
Regarding labelling, there are particularly two product areas where the supply chain has been impacted greatly: paper and filmic products.
Paper products
A large portion of the world’s paper capacity comes from Europe. The main issue within the supply chain now is the continuous cost increase impacting several areas of paper production and distribution.
Energy costs
Energy is one of the most significant costs in paper and pulp production. Due to the extreme prices, energy cost surcharges are being applied by paper manufacturers across Europe. In turn, this makes it hard to produce and distribute at the same quantity and frequency as earlier.
Logistics
Inland transportation and logistics are facing shortages, caused by increasing freight costs in Europe. There is a shortage of trucks and lorry drivers. Also, waiting times at factories are much longer, leading to delays in deliveries and further adding to already high costs.
Chemicals
The cost of chemicals has increased overall. Subsequently, it is leading to higher costs for ink and varnishes.
Read more: Supply Chain Resiliency for brand owners in 2022
Filmic products
When it comes to filmic products, everything is tied to the price of petroleum. This refers to several types of labels, such as self-adhesive, BOPP wrap around, In-mould, and Shrink Sleeves.
Crude oil prices have reduced slightly after the highs that came with the invasion of Ukraine. However, further cost reductions have been offset by higher energy costs in Europe. Also, the challenges within logistics are affecting filmic products as well.
Navigating the supply chain in 2023
Starting now and moving forward into 2023, the most important step is trying to reduce consumption from Europe. This means looking at alternative sources of supply for purchasing paper and filmic products.
Turning towards Asian markets first, followed by U.S. markets, will hopefully aid in stabilizing the steps throughout the supply chain. At least compared to the volatility experienced now in 2022.
Finding and establishing new supply chain routes will increase the availability of materials. At the same time, we are beginning to see a global recession due to high interest rates. A recession should lead to downward pressure on pricing as well.
Read more: Africa’s troubled market: Challenges, Possibilities and Changes
As a label manufacturer, we at Skanem Africa are eager to provide brand owners with visibility and transparency, on both availability and pricing. We carry a large number of stocks, from various places around the world, which means that we do not rely solely on Europe. Feel free to contact us for advice on optional routes or any other inquiries about supply chains.
