Industry Update: Universal Manufacturing Challenges For Direct Mail Marketers

Jeff Tarran
Industry Update: Universal Manufacturing Challenges For Direct Mail Marketers

Key Takeaways:

  • Paper shortages will impact timing and costs.
  • Labor shortages plus other raw material price increases are putting additional pressure on the industry.
  • These issues are universal across the industry and the country and will take time to resolve.
  • Mailers should be prepared for potential cost and timeframe disruptions.
Direct Mail Can Now Join The List Of Industries Beset By Supply Chain Issues Likely To Impact Production Capabilities And Timelines.

Paper Shortages Will Impact Timing and Costs

Starting in Q2 of 2021, unprecedented demand for paper along with paper mill manufacturing challenges began affecting paper sourcing. The double whammy impacting paper supplies is:

  1. Conversion of mills to more profitable heavier weight stocks used for packaging (thank you ecommerce), and
  2. Reduced industry capacity due to mill closings as paper demand in general declined during the COVID lockdown before rebounding as the economy gears back up.

This has led to increasing lead times to acquire paper and paper prices have gradually risen. Both trends are likely to continue in the coming months. One major supplier has already announced a round of price increases for August.

Paper suppliers are also dealing with the situation by putting printers on allocations — limiting the amount of paper any one printer can purchase each month. Printers are ordering popular stocks in advance to hedge against shortages and price increases, but paper companies are showing signs of resisting those efforts by shorting deliveries due to lack of supply.

The most immediate help is likely to come from overseas producers who will play a role filling the gap between U.S. paper supply and demand. Currently however, overseas mills are having a difficult time getting their paper into the U.S. due to a lack of shipping containers and busy ports, so we’re not there yet.

Beyond Paper — Labor and Materials Shortages

Labor shortages plus other raw material price increases have put additional pressure on the industry. We are seeing longer lead times and shortages for printing essentials such as inks, varnishes, UV coating and glue. Printers are lacking trained pressmen and are forced to cancel shifts due to short staffing, resulting in scheduling delays.

In the last couple of weeks, we have been in the position of reporting delays to our clients due to one or more of the above unforeseen issues. Direct mail takes planning and coordination, so it is especially frustrating to have to report delays to clients who have established goals that depend on mail to generate significant lead flow. The above situations are changing weekly, requiring printers, clients, and agencies like us to navigate dynamic conditions we have not had to deal with before. The implications are felt on timing, costs and even the ability to produce a mailing as originally spec’d.

How Gunderson Direct Is Working Through This Issue

We will continue to survey industry partners to keep on top of the situation. Importantly, these issues are universal across the industry and the country. Past strategies to overcome production complications are not a guaranteed solution and most every mailer is likely to experience some level of disruption.

The strategies we are employing to address the current reality are:

  • Planning — We are working with our clients to predict mail volumes and plan client production requirements with printers as far out as we can. This allows us to pre-order and hold paper for mailings planned months in advance. Clients willing to ante up in advance for paper will benefit. Planning is especially important in the case for envelope production, which requires multiple production steps and vendors. We are prioritizing the release of envelope art over other creative elements. Some mailers may want to move to an off-the-shelf envelope to reduce timing and costs.Printers are looking for commitments that protect their profit margins. In the past, most printer estimates were valid for a 30-day period. That is being reduced to as little as one week, requiring quick approval to proposals by clients.Beyond paper and cost concerns, we are asking printers to work with their vendors to plan for gluing and other special services, and to assure (best they can), that labor resources are available.
  • Flexibility —Clients may need to consider alternative paper stocks, perhaps moving mail quantities between packages based on paper availability. Coated stocks are likely to be in shortest supply, so be prepared to shift to more readily available stocks if necessary. In some cases, creative will need to be altered.Clients also need to be prepared for changes to approved production schedules. We are staying nimble and will move jobs between printers to meet our client needs but given the universality of the issues facing the industry options could be limited.
  • Expanding resources — Our team is always looking for new resources to improve all aspects of production. Nowadays, we are expanding our efforts to include resources that can meet timing and fulfill obligations if existing resources can’t. This includes adding smaller, more nimble production facilities. This could impact cost, and we foresee situations where clients will need to choose between pushing a drop date or paying more to an alternate printer willing to step in to get the mail out.
  • Information — As stated above, we are regularly surveying our manufacturing contacts. We will continue to monitor the industry on behalf of our clients and provide industry intelligence as we deal with the issues.

Bottom line is that we are not anticipating a return to the predictable pre-COVID timeframes and materials availability very soon. The is uncharted territory that will require a new level of agency/client decisioning. We see it as our role to stay informed with the very latest changes in the industry and to work with our clients and partners to keep programs moving forward in what, for the time being is one more post-COVID “new normal.”

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Jeff Tarran

Jeff has been with Gunderson Direct since 2017 and has played a significant role in the growth of the agency’s client base while helping to manage growth across agency departments.

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