What Will It Take to Survive?

In tough economic times, survival is a strategic objective for many companies in the package-printing industry.

March 2009 By Kevin Karstedt

multipage

Events during the last six months have made research for this article a real challenge. It’s almost like writing an article on the state of the commercial airline industry for the November 2001 issue of “Your Aviation Monthly Magazine.” 

The global economy is not what it was just a year ago. At that time, we had our share of business challenges to contend with—among them increasing energy prices, with related increases in manufacturing and raw materials costs. The clouds on the horizon, while looming large at the time, were just the leading edge of the economic tsunami that was building up steam just out of sight a short year later.

Just like manufacturers, when consultants can leverage their investments in two projects at the same time, there are economies and efficiencies. I am currently working with State Street Consulting to write a study titled “Global Trends in Packaging Affecting North American Converter and Supplier Markets” for PRIMIR (Print Industries Market Information and Research Organization, www.primir.org) that is scheduled for completion this summer. So leveraging the double opportunity to talk with contemporaries all through the packaging supply chain has helped on two project fronts and has led to some interesting insights. While conversations were candid and often confidential, most of those interviewed were as eager to give their perspectives as they were to see what others think about the state of our industry. As a matter of fact, most reflected that the state of our industry runs parallel to the state of our global economy.

Managing volatility 

If there is a silver lining on the economic front it is the cost of oil coming out of the stratosphere to a more rational price. As of this writing the price of crude oil is $37.90, down from a high of almost four times that value, with www.oil-price.net showing a one-year forecast of $44 per barrel. 

This reduction has finally begun to have a positive effect on packaging raw material costs, with resin prices falling substantially from the high levels they have been at for the last 3 to 4 years. This downturn in resin pricing is resulting in customers asking for price reductions or even putting off buying decisions, and instead, waiting to see if prices will go down further. 

Managing the extreme economic and raw material price volatility is a challenge converters in every packaging sector said they would need to work through. Price volatility is affecting raw materials from resin to paperboard, and inks and coatings to silicone. Successful companies in any industry should try their best to understand how their customers are going to manage the economic volatility and how that will affect the rest of the supply chain. 

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• BUSINESS MANAGEMENT
• SUSTAINABILITY