As a business owner, your priority is to earn a profit, but increasing supply costs can derail the achievement of this goal. Today’s market has seen a rise in prices overall, and you may find that your packaging costs have increased as well. What you pay for your resealable pouches today can be significantly more than you paid a year ago. These are reasons for cost increases and how you can adjust.
Inflation is always a consideration when you see prices increase. However, today’s inflation is at a 40-year high. This increase has a negative effect on prices across industries, from fuel and energy to labor and raw materials.
Inflation occurs when demand outpaces supply, and the last few years have seen increases in the number of eCommerce deliveries, resulting in increased packaging needs, in addition to a reduced supply of raw materials, including paper products. Today’s buyers order food deliveries, subscribe to monthly food deliveries, order crafting supplies online and receive wine in the mail every month. Therefore, the last 18 months have seen significant increases in packaging and shipping costs.
Energy Price Increases
Today’s energy is more expensive than it has been in the past. Not only are electricity and natural gas prices on the rise, but so are fuel prices. Some of this increase is due to various governments’ implementation of energy policies that reduce carbon emissions. Even using machinery to convert wood products into boxes and cartons is more expensive due to higher energy costs.
Industries that use plastic packaging have also seen an increase due to taxes on petroleum-based products in some areas. Raw material costs are at an all-time high. Some of this cost increase is due to shortages, while others are due to added taxation or inflationary pressure. Your costs aren’t the only ones going up, however. Consider the packaging companies, such as stick pack manufacturer, who now has to pay more for lumber, paper or other raw materials. Those costs are often passed on to you.
Effects of Global Chain Supply Disruptions
All of these factors have had a significant impact on the supply chain. Disruptions in the supply chain increase the scarcity of goods, causing increases in the price. For example, fewer tractor-trailers are on the road due to driver shortages and new laws that don’t allow independent contractors to work in some states, so it takes longer to move products from one location to another.
Choose an Optimal Packaging Solution
You can avoid some of the cost increases by choosing the right packaging for your products. Poor packaging leads to inefficiencies, and excessive packaging, especially secondary packaging such as shipping boxes can increase your costs exponentially. Therefore, choose optimal options for your products, such as customized stand up pouches.
Review Your Packaging Process
Look for tasks that can be automated and evaluate your current waste. Make sure your team is fully trained. Also, audit your packaging supply process. Consider alternatives that have lower minimum orders or can help you take advantage of economies of scale.
Packaging is a necessary part of product sales, but price increases can tighten already slim margins. Therefore, learn about what causes these increases and find ways to reduce the burden on your company, including testing new suppliers.