It goes without saying that the past 18 months have been fraught with volatility and turmoil. The ongoing pandemic has been a driving source for change in all our lives, of course, both personally and professionally. But other factors, from severe weather to shipping failures and beyond have made an already hectic situation all the more difficult.
Many different factors have impacted manufacturers, most critically at the market level for raw materials, which has led to major price fluctuations, supply shortages, issues with shipping and other impacts that have driven up costs across the board. Let’s look at some of what has brought us to this point to fully appreciate the challenges faced not just at Caplugs, but across the manufacturing industry when it comes to delivering the products you rely on every day.
Not Just a Pandemic
While the impact of COVID-19 has certainly affected operations, with required changes to production, personnel and protective equipment requirements, it is not just pandemic-related causes that are driving increased costs and shipping delays.
Supply and Demand
The raw material supply chain has been dramatically impacted, and not only by the well-understood changes to production dynamics that came from the ongoing pandemic. While many operations shut down or saw reduced capabilities at the height of the pandemic, this loss in production tells only part of the story. As operations began to resume in the summer and fall of 2020, manufacturers quickly outpaced the available product supply or production ability of suppliers, beginning a run on prices as demand rose faster than availability. This has only continued as producers of raw material struggle to keep apace with demand, leading to a steadily bloating increase in costs as businesses struggle to secure the volume of material needed for their operations.
On top of higher prices and lower volumes of available material, shipping and transport became the next concern. Simply getting raw material on site and finished parts to customers has become a growing issue, both in terms of on-time delivery and rising costs. Truck driver shortages have led to a backlog of shippable product and increasing prices for shipping, further exacerbating what was already a growing problem before the pandemic. As Supply Chain Dive notes, from Q2 2020 to Q2 2021, average freight spending increased 44 percent, per U.S. Bank data.
That doesn’t even consider the international freight and container shipping markets, which have been further battered by incredible port congestion – exacerbated by reduced port staffing and a lacking availability of truck drivers. This has led to a 466 percent increase in rates for a 40-foot container since July 2020 to now, according to Freightos reporting. Shipping times have only continued to grow with the notable major closure of the Suez Canal earlier this year and ongoing delays in getting ships to berth and offloading on both sides of the Pacific.
Of course, there are always the unknown impacts of Mother Nature, which often strikes at the most inopportune times. True to form, two major weather-related events have affected the manufacturing industry – and particularly the plastics market – over the last 18 months.
First, fall hurricanes in 2020 raged across the South, causing damage from rain, flooding and high winds that slowed or closed producer operations while repairs were made. Only a few months later, incredibly inclement and uncharacteristic winter weather hit Texas and Louisiana, bringing severe winter storms to an area already ill prepared for the cold and ice. The damage from this event was even more substantial, causing some plastic raw material producers to go offline for a month or longer, further driving down materials availability. In fact, Bloomberg reported that this winter storm event alone is expected to reduce the production volume of polyethylene in the U.S. by 12 percent for the year.
Manufacturing – and many other industries – are also facing some of the toughest hiring climates labor in decades. Companies large and small and across nearly every market are facing challenges in attracting and retaining staff for both skilled and unskilled positions amid an incredibly competitive market. While this is not a new problem, it is one that has grown worse with even fewer people looking. IndustryWeek also notes in its reporting, 38 percent of manufacturing companies in the U.S. reported problems finding talent for skilled positions before COVID-19 which has worsened to 54 percent now.
Reasons for the decline are varied, as Axios reports. For some, pandemic-related changes to home-life balance have driven more workers to seek different positions or remote work options. Others cite an ongoing worry about COVID-19 and want to wait for increased vaccination rates and reductions in cases. Families with children have also faced a scarcity of secure child care, which became all the more critical with school and child care facility closures and the advent of remote schooling at the height of pandemic restrictions. This led to some parents dropping out of the work force or moving to a remote position to handle care responsibilities.
The Impact on Markets
Any one of the above factors alone would cause headaches and hiccups in workflows and cost. But with them all combined, it has created a perfect storm that has turned normalcy for manufacturers on its head.
You’ve no doubt noticed higher prices in your personal life as inflation drives costs up with rising manufacturing costs, shipping costs – and delays – and growing demand. This drove prices for some items sky high – perhaps most visibly, lumber, which saw prices surge almost 350 percent from March 2020 to April 2021, as Business Insider reported.
All the same factors have driven up costs for businesses. In plastic manufacturing alone, the lost production capability and surging demand has caused prices for some raw plastic materials like polypropylene or HDPE to dramatically increase, in some cases nearly tripling. These increases aren’t limited to just raw plastic materials, however, as we’ve seen costs grow for colorants used to tint plastics, corrugated cardboard for packaging and shipping, and even the lumber for pallets.
Working to Keep You Working
Since the start of the pandemic to now, Caplugs has worked to maintain production and product availability to ensure that the parts you need are available when you need them. We’ve adjusted workflows, increased stocking of raw materials and worked to sustain production volumes, all while maintaining our high-quality standards that we know customers trust and count on in their operations.
We’ve also been proactive throughout the pandemic to ensure a consistency in operations. Caplugs implemented a series of changes that allowed us to remain fully operational throughout the COVID-19 pandemic, including adjusting our working environments to accommodate social distancing, personal safety, enhanced cleaning and increased testing to keep our employees safe.
As we look ahead, there remain many unknowns. The impact of rising concerns around the delta variant, vaccination rates and even predictions for an above-average level of hurricane activity this fall could pose even more challenges, but we stand ready to take them on. At Caplugs, we strive to be your partner in product protection, and through whatever is ahead, our promise is to continue to deliver the parts you need when you need them.