Here we go again!
It doesn’t seem to be getting better with the supply of linerboard and the raging consumption of this darling. We are witnessing a perfect storm in linerboard supply. Manufacturers are coming off a wild whipsaw holiday season, when demand for boxes skyrocketed and the industry, already dealing with input costs like run away transportation costs, rising OCC costs, and labor blasted with COVID-19, struggled just to keep up. Many of us failed our Clients during the last few months with on time deliveries. In many instances box makers had to inform their customers they would be late with their deliveries, only to contact them again and inform them deliveries would move out even further. The shortage of containerboard, and the increased demand for boxes, decreased speed to market as everyone was navigating this storm. This industry has been on apology tours for months with little let up in sight.
This time around, there was nowhere for anyone to go to get relief. The consolidation of our industry has left the large box manufacturers larger and the smaller players almost nonexistent. Many of the larger manufactures could not serve their Clients, who in turn had little to nowhere to go with their sizable orders. All of this was happening while the smaller manufacturers were doing everything they could to keep employees returning to work and their Clients supplied. There are just not many small and mid-sized box manufacturers left in the industry. They have been gobbled up or rendered useless. Many are niche players that do not make a market in the box business. Coupled with a supply shortage, a disaster took place and, in many ways, continues to do so. On top of that, transportation spikes, both in cost and delays all the way to COVID-19 call outs (calls from employees who are not sick but possibly exposed who cannot come to work), was not helping either. This was like a bad nightmare that would not go away. Still, today the situation continues.
West Rock, the second largest producer of containerboard and boxes in the US, was hit by ransom wear. This resulted in turmoil by operating manually to get containerboard and boxes manufactured and delivered. They have done exceptionally well managing the madness of working without a computer system. Some estimate that they are running at 10-15% less capacity on their mill side, which throws a nice big wrench in to the supply chain. We just learned that paper and packaging manufacturer Atlantic Packaging was recently hacked as well. Georgia Pacific (GP) is rumored to have troubles with one of their mills in the west. To top it all off, International Paper (IP) is entering scheduled downtime with some of their system. It is nearly impossible to switch planned downtime as it must be scheduled sometimes over a year in advance.
All of this is setting us up for the next price increase. IP notified the world with a $70 per ton increase. The other large players are out with $60-$70 a ton increase as well. These are real increases as tight supply and rising input costs have no end in sight. Labor, transportation, and base materials are marching forward. Supply is limited from the mill - and the converting side. Sheet feeders, if they have paper, are oversold. Convertors with flexos or box making machines are way out in delivery as well. Some, even in Los Angeles, are 4 weeks out!
At Bay Cities, we are working staggered shifts with staggered breaks and lunches with the goal of keeping our employees healthy. Since March 2020, we have had only one transferable case of COVID-19 at Bay Cities. We have been very fortunate to have that small of an experience with this pesky virus. We have worked Saturdays, and even Sundays, to make sure product is flowing to our clients. Our relationship with the new Indy Mill, which is 1000 feet away from our corrugator and powers it with its steam and electricity, has kept us in good shape with most liner grades. Some heavy weights and some white liners were the exception. This has been a bit choppy as we have been hitting capacity levels at the corrugator. Yet at least we do have paper where many, even in Los Angeles, have none. In many different spots of the country, converters simply ran out of paper. This could happen again with some anticipated supply shortages.
Bay Cities is transitioning out of a long relationship with our transportation group and into a much more user-friendly relationship. That has proven successful with more readily available equipment and drivers. This is going to help quickly. Having the right equipment available, the manpower and the communication skills to orchestrate shipments will prove very valuable. This will add cost to our offerings, but we recognize the importance of this part of our service offering. Bay Cities continues to develop and install software systems to ease the pain of doing business and speed the process entirely. The implementation of all this technological wonder has not been without flaws. It is quickly getting on track and off to a formidable race. Our latest move is installing a digital printer on one of our highspeed flexos so we can quickly run jobs that need basic BMCs and simple idents or part numbers without building printing dies. The other advantage of this process is the ability of variable printing or printing unique numbers on each box during the run. In this way, we can reduce pirating of products and enhance lot traceability at no additional cost. We are increasing our service levels with people, custom software solutions and anything we can think of to keep our Clients whole with demand.
Wash your hands, wear your mask and keep it separated!