The worst of the COVID-19 pandemic seems to be behind us, but the economic after-effects may be just beginning. Even as vaccination rates ramp up across the globe and governments roll back restrictions, global shortages from electronic components to lumber continue to hamper economic recovery.
But while electronic components may not be a major issue in your industry, there’s at least one supply crunch that’s likely to affect everyone: the global paper and ink shortage. An array of factors, from consolidations and closures to fuel prices, have combined to create significant pressures on suppliers and printers in the industry. And even the most digitally-focused businesses are likely to be affected. Here’s what global printing and ink shortages mean for your business.
The printing industry has been affected by shortages in both paper and printing supplies. For paper, there are many factors contributing to this shortage, including:
Paper is a commodity market item that is subject to significant boom and bust cycles under the best of circumstances. Even before the COVID-19 pandemic, the market was seeing disruption and reduction of supply.The pandemic exacerbated these issues, affecting several major U.S. printers. During the pandemic, Quad had to shut down three of its plants, and LSC was forced to declare bankruptcy after a 40% loss in sales.
These developments have been so disruptive that even publishers have been unable to completely cope, leading to multiple delays in new book releases and reprints. But it isn’t just publishers who are affected; any company that uses commercial printing services — for example, to produce direct mail — can potentially feel that crunch.
The paper industry has been impacted by what one paper manufacturer referred to as “a perfect storm” of converging market forces.
A major factor is the way COVID-19 reduced demand for paper as retail businesses found themselves forced to close or drastically curtail business. This accelerated the decline of printing paper production, with graphic, and printing and writing paper production declining about 18%, and newsprint production falling almost 21%. As consumers were staying at home and ordering more purchases online, many paper mills switched production to cardboard packaging, further limiting the available supply.
Pressures on the supply chain have also been major contributors to increased paper and ink costs. At the height of the pandemic, the same decreased consumer demands that slowed paper production also led to layoffs and reduced operations in the transportation industry. When the world began to emerge from COVID-19, the supply chain was not prepared to meet the increased demand.
Companies are struggling to hire enough truck drivers as businesses rush restocks to meet the consumer demand surge, logistics channels have become bottlenecked and overloaded, exacerbating shortages and increasing costs.
These supply chain issues have been compounded by increases in oil prices, which recently hit their highest point in over two years. At the height of COVID-19, oil demand drastically fell, leading to major cuts in oil production. While OPEC+ has begun to increase production to meet rising oil demands, they’ve been slow to reverse cuts in order to support prices, resulting in higher transportation costs.
Printing ink has been affected by many of the same factors leading to paper shortages. Higher transportation costs, supply chain bottlenecks, and huge swings in demand caused by the pandemic have already led to price increases, with major ink manufacturers like The Flint Group and Sun Chemical announcing surcharges to meet their own increased costs.
This has been compounded by changing environmental policy in China, a huge global producer of the raw materials that go into ink manufacturing. To reduce industrial pollution, the country has closed down plants, reducing global supply in the short term.
The paper and printing shortage will likely pose significant additional costs to your internal direct mail workflow and other paper-based workflows for some time. However, because this and other post-COVID shortages affect your entire industry, they also pose opportunities for companies that can adapt quickly and effectively.
In some ways, the printing crunch is really just one more reason to do something you should be doing anyway: modernizing your internal direct mail processes. As we discussed in our recent article on lowering your direct mail costs, there are opportunities to save money through modernization throughout the direct mail process.
Unless your volume of direct mail is very small, you can save money by adopting a provider with flat monthly rates for mailing pieces. For example, a company signing up for Lob’s Growth Plan will save an estimated $1,680 on just 6,000 postcards.
Legacy direct mail processes are extremely complex. Companies typically either work with an array of partners to design, edit, print, bundle, and send their mailings, or attempt to handle the process internally, despite lacking the resources to print and send at scale.
Finding one provider who can handle the entire workflow will more than offset any increase in printing costs. Additionally, it will accelerate your direct mail processes, leading to quicker communication and better reliability. That yields benefits across every direct mail use case, from happier vendors, customers, and partners, to faster cash flow, to more effective marketing and operations.
Upgrading your capabilities through automation is another way to make your direct mail more cost-effective. Lob’s direct mail automation can unlock a range of capabilities that improve ROI, including:
These methods can increase efficiency at every stage of the direct mail process, helping you build a direct mail system that’s more cost effective than what you had before the pandemic.
To learn more about unlocking the power of direct mail, check out our Direct Mail Tactics Playbook.