The 2020 global pandemic will have a “deep and enduring effect” on packaging supply chains, according to a new dedicated study on the topic from Smithers.
The Impact of Supply Chain Disruption on the Packaging Industry to 2026 report finds the disruption of 2020 continuing into 2021, with soaring prices for polymer resins and other raw materials creating a new imperative for businesses to reappraise their supply chain, purchasing and logistics strategies.
As resiliency has become the watchword for the future, Smithers’ brand-new study charts how these networks will evolve over the next five years.
The analysis examines each phase of the supply chain for different packaging materials, and considers this within the context of changing consumer and brand owner perspectives for the future.
This leads it to identify five short-term challenges that will need to be negotiated as the packaging industry looks to move beyond Covid.
Firstly, the reports finds that overall, the world packaging demand fell across 2019-20, but sales of food, medical devices and pharmaceuticals held up well. Other industries, like personal care and consumer goods, were found to see a much sharper fall-off in demand.
Smithers suggest suppliers should prioritise and protect these essential channels, while being flexible enough to aid those worse effected segments to rebound quickly in 2021.
The second challenge highlighted has to do with the closures of raw material supplier facilities in 2020 leading to a shortage of some materials into 2021, and necessary maintenance work postponed during Covid has to be rescheduled for H1 2021.
Thirdly, for plastics, the report found resin prices have risen to record levels, as the post-Covid surge in demand has combined with increased shipping costs, and temporary weather-related shutdowns of US crackers in February-March. This has led in the short-term to force majeure announcements.
Smithers says stability will return in the medium-term, but cheaper imports will continue to pressurise EU polyolefin manufacturing.
The fourth priority has to do with the re-emergence of sustainability concerns in packaging, including new legislative targets for minimum recycled content in plastic formats. The report finds that this is prioritising the sourcing and processing of post-consumer recycled (PCR) resins, in place of virgin feedstocks.
And finally, Smithers sees the increased consumer use of e-commerce channels in 2020 and beyond as a positive for the industry, and corrugated board companies in particular, but the report says e-commerce sales also call for compact, sustainable designs and alternative materials.
Once stability returns, there will be direct changes in supply chains for packaging in the medium-term, and among the most important identified by Smithers’ report are:
- Reshoring supply of raw materials and greater inventory to protect against future demand shocks;
- An emphasis on sourcing sustainable materials, with a higher priority given to recycled and recyclable packaging generally, and post-consumer recycled PET, and other plastics in particular;
- For larger packaging companies, there will be an impetus towards more vertical integration to give them better oversight of supply chains and greater control over material supply, to enable them to achieve future sustainability targets; and
- The need for packaging to complement the post-Covid trend for consumer-packaged goods brands to emphasise a more personalised user experience, in online and conventional sales.
For more on Smithers’ latest definitive business strategy guide, it is now available to purchase from this link for $6500.
