All these products require a label, which puts the onus on material suppliers to meet these challenges. UPM Raflatac, a global substrate provider, has worked diligently to meet supply chain demand.
“Our supply chain has remained robust throughout, validating our sourcing and raw material strategies,” explains Tim Kirchen, senior vice president, Americas, UPM Raflatac. “The label industry has a lengthy supply chain. In unprecedented times like these, if even one supplier is unable to operate or deliver on orders, it could mean critical products, like medicines and food, are not able to get to those who need it most. What I think everyone’s realizing is that relying on a single material source exposes you to risks that become very evident during times of crisis. Multiple source qualification and contingency planning has always been our approach to mitigating this type of risk, although you never really know how strong these contingencies are until you’re faced with a crisis. I can’t deny that certain materials are definitely hard to come by, but to be honest, our sourcing team has done an excellent job of maintaining stocks to keep up with weeks of extraordinary demand.”
In mid-March, UPM Raflatac realized a 50% spike in orders. However, that demand receded at the end of April. Consumers’ decision to stockpile essentials, such as foods and cleaning products, played a significant role in this trend. Packaging deliveries also soared during this time. This sudden demand led to increased lead times, but UPM Raflatac was able to manage the surge of orders. Acting on early contingency plans allowed the supplier to see efficiency and an increase in productivity.
UPM Raflatac was quick to communicate with suppliers and customers, while also taking measures to ensure safety throughout the supply chain. The company banned all work travel and shifted to a remote selling model, which meant virtual customer meetings via phone or videoconference for its sales team. Social distancing actions were implemented at its factories and terminals, and shift changes are now isolated. Operators have to stay at least six feet apart whenever possible, including in the break rooms.
According to Kirchen, UPM Raflatac believes most of the pressure sensitive labels sold during the last six weeks were consumed.
“We were able to cope pretty well and are now reducing lead times amidst the higher demand,” he says. “I think we are seeing the beginning of normalization as far as labelstock demand is concerned in May and June.”
Even as demand normalizes, UPM Raflatac still expects an influx of orders in the coming months. “We do believe that overall demand for label material will remain fairly robust, driven by package delivery, home/personal care and food safety labeling. However, what we have yet to see is the possible impact of the high unemployment claims and possibly a looming recession. I don’t know if we can accurately say what things will look like a year from now, as there is no way to predict the ‘new normal,’ but we will continue to do everything we can so that our supply chain remains as robust as possible.”
Kirchen further describes the label industry as “resilient.” Many of these products, up to and including COVID-19 test kits, can literally save lives. The industry can expect a greater reliance on e-commerce, as many consumers complete the bulk of their shopping from home. Another trend, especially as consumers rely on takeout food deliveries, is safety. Products will increasingly use tamper-evident labels to ensure the utmost premium on health.
This pandemic has also provided time for reflection, where suppliers and converters alike can evaluate their contingency plans and response strategies.
“Relying solely on single sourcing simply isn’t a good idea, and I think this crisis has shown how import and robust supply chain strategy is for business continuity,” notes Kirchen. “This is certainly an opportunity for our industry to reflect on supply strategies, but also for brand owners to evaluate their specification approach for label materials.”
As the label and packaging industry continues to navigate an uncertain future, collaboration will remain key throughout all levels of the supply chain. “I am happy to say our customers have praised our frequent, transparent communication about our strategies as the situation’s unfolded,” explains Kirchen. “We’ve been sending email updates to all customers in the region on a weekly basis, and our commercial team and management have spent their days talking with customers to ensure we’re doing all we can to address business-critical needs. We realize we’re all in this together, and the entire UPM Raflatac staff shares this sentiment.”
For more information from UPM Raflatac’s Tim Kirchen and Jeff Buchanan, listen to a L&NW-produced webinar here.