We published “Supply Chain Disruption: How It’s Affecting Your Marketing and What To Do About It” in August of 2021, and predicted that supply chain issues would potentially continue throughout 2022. Now 9 months later, direct response marketers across the country are continuing to experience supply limitations, production delays and price increases. Some of the goods and services that are impacted have changed, but the potential negative impact on your organization’s acquisition and retention goals are still the same (and are still very real).
WHAT SUPPLY CHAIN CHALLENGES ARE MARKETERS FACING IN 2022?
MCA’s Production Director, Connie Boeshans, interviewed MCA’s leadership and two trusted material and service providers: Chris Clemens, CEO & President of Focus33, and Ryan Wenning, President of Priority Envelope. Here are their first-hand accounts of the materials and services being impacted now.
Q: Chris & Ryan, which products manufactured by your companies are being impacted by supply chain issues?
A: Envelopes are the biggest bottleneck currently, requiring long lead-times of 9 months to a year which is completely unprecedented. Other printed materials like brochures and inserts also have longer than normal lead times, and paper stock availability changes daily. Materials used in the manufacturing of specialty items like labels and mylar decals are also impacted and are sometimes just flat-out unavailable.
Q: In MCA’s August 2021 supply chain article, we explained that shortages were caused in part by paper mill closures as well as mills transitioning from paper to board stock used for packaging materials (to support the increase in online ordering).Weather events also impacted petroleum-based products such as PVC (used for membership cards and keyfobs) and the remoist glue and window film used for envelope production.
It’s 9 months later. Has anything changed that is causing shortages?
A: This is a complicated answer with several factors having an impact on the raw materials used in what we produce (envelopes, brochures, inserts, etc.).
The transition of mills from paper manufacturing to board stock is still a factor in the reduced availability of paper.
In addition, over the past 15 years a large percentage of the paper market moved offshore, and this offshore sourcing is complicated by a shortage in shipping containers. Empty containers clutter US ports with no source to return them back overseas. In addition, the expense associated with moving containers within the US has skyrocketed. For example, before the pandemic, costs were approximately $2,500 per container, but today costs are averaging $25,000 per container.
The trucking industry is also impacting the procurement of our raw materials. The current shipping truck load ratio is 11:1 (meaning 11 trucks for 1 driver). There just aren’t enough drivers to keep up with demand.
Workforce limitations continue to be an issue in 2022. There has been a workers strike at one of the largest paper manufacturers, UPM in Finland. And a general labor shortage continues in all aspects of the print industry. As a result of fewer workers, those who are working often log overtime hours (and overtime pay). In addition, some facilities are paying bonuses to keep employees working. All of this is contributing to increased labor costs for our industry.
Unfortunately, more recent developments impacting our industry include economic inflation and the war in Ukraine.
Q: So with all of these factors in play, what is happening in terms of price increases that suppliers like yourselves are having to pass along to your clients?
A: Since MCA’s last supply chain update in August of 2021, the cost of paper has continued to increase at regular intervals. Recent price increases include a 10% hike on coated stock effective April 24th and a 5-6% increase on uncoated stocks which was effective May 1st. The cost of cartons used to ship materials has also increased 14% since the beginning of 2022. And the freight cost to ship materials to lettershops and warehouses is up dramatically due to the 50% fuel surcharge that is currently in place.
Because things are changing so quickly, there are often price increases that occur after a purchase order for materials is secured. For example, the paper mills will provide a quote at the start of a project, but by the time the paper is shipped to us, the costs might have increased. Those incremental stock increases are passed along to the recipient.
Another factor that marketers need to be aware of is an upcoming postage increase. The USPS has submitted a request for a mid-year (July) increase to postage rates for marketing mail of 6.15%.
Q: What about turn times on projects within the lettershop facilities? Is it taking longer to get the mailing packages personalized, assembled and mailed?
A: Lettershop services are still having capacity issues requiring longer than normal lead times for projects through 2nd quarter of 2022. But the good news is that as we move into the 3rd and 4th quarter of 2022, this will likely be less of an issue.
Q: Chris and Ryan, any predictions on how long these supply chain challenges might last for the direct marketing industry?
A: Looking into the future, these issues will last through 2023 and quite likely into 2024.
WHAT CAN MARKETERS DO NOW, TO SAFEGUARD THEIR MARKETING STRATEGY?
In light of these ongoing challenges, here are MCA’s recommendations to help mitigate the risk for your own marketing efforts.
- Examine your marketing budget and priorities to understand if you have any flexibility to change those priorities. For example, if you have very rigid acquisition and retention goals for the next 12 months — and absolutely must get those members regardless of cost — you will need to budget accordingly, recognizing that your cost-per-member acquired or retained will be higher. Include increased expenses on print material, lettershop services AND increased postage costs.
- Think strategically and consider buying your materials more efficiently. Combining print buys for multiple mailings continues to be a solid strategy because it secures the paper up front AND gets you a better cost per thousand because you’re buying in larger volume.
- Continue to consider alternate production methods that can help alleviate higher costs. Be flexible about the type of paper you specify for printed materials and use what is available. This might mean running uncoated instead of coated stock, dull finish instead of gloss finish, or changing the weight of the paper. Another option to consider is printing just one version of a letter and changing the messaging using unique laser personalization.
- Consider scaling back on big tests like all-new creative packages, which can be expensive and more difficult to produce in today’s environment. While MCA is a big proponent of testing, testing, testing, this might be a time to mail your best performing packages only. This will allow you to maximize efficiency, control costs, take less risk by mailing your “tried and true” (and still meet your acquisition goals).
- Build extra time into your production schedule because you will most certainly face longer lead times. You will likely need to commit to making decisions MUCH earlier than you normally would in order to secure paper availability, printing press time, and lettershop resources. And understand that if you do buy ahead, there will still be a need to remain flexible with paper choices because vendors continue to be limited by allocations from the mills.
AS ALWAYS, HEALTHY VENDOR RELATIONSHIPS ARE SO IMPORTANT
Mail continues to be an effective channel of communication for acquisition and retention. Now more than ever, we strongly encourage using a multi-channel marketing strategy, including email and paid search, to maximize your efforts.
MCA will continue to procure materials and produce millions of pieces of mail on behalf of our clients. The trick is being flexible, nimble and open to new ways of looking at things — and calling on the help of your trusted friends in the industry to keep the direct marketing boat afloat during these temporary but turbulent times!