Over the past week, we surveyed the Lumi Manufacturing Network to gather data about how exactly the global packaging supply chain is being impacted. You can check our status page and yesterday's webinar to see our report on those findings. We will continue to report as the situation evolves.
As China recoups and the US attempts to contain the pandemic, here are some immediate recommendations to mitigate the impacts of COVID-19 on your packaging supply chain.
Order early in expectation of longer lead times. Chinese manufacturers are not the only piece of the puzzle. Material shortages and decreased air space are causing congestion and delays, so you sooner you get orders in, the less likely those delays are to impact your deadline. In the US personnel shortages could begin to cause delays as early as next.
Order early to avoid air freight. Some of the biggest delays may actually come from lack of air space, due to flight cancellations. Meanwhile, orders from China are being shipped via air freight (instead of ocean freight) which is leading to a limited amount of cargo space.
Consider stock packaging if you're anticipating delays on your custom items. To customize blank packaging, consider adding custom stickers/labels or tape, both of which are easily produced domestically.
Consider switching to US-based plastic manufacturing. It's more costly, but could cost less than cost of air freight and the risk of delays.
Consider going plastic-free. Most plastic packaging is manufactured in China, so in packaging supply chains, those products are the hardest hit. Consider replacing poly mailers with kraft mailers.
Review vulnerabilities in current manufacturer agreements. Do you have Force Majeure clauses in any contracts that could be used?
Consider gradual price increases now. Do the math on possible cost of goods scenarios. What if freight costs 10-20% more for six months or more? What if you bought 20% of inventory from a second more expensive supplier? With your findings, consider incremental price increases so that your customers don't have to deal with a big hit all at once.
Leverage the Lumi network to diversify your supply chain and build in redundancies. Bringing new factories into your supply chain not only cuts down your reliance on single manufacturers or material streams, it also gives you the opportunity to manufacture closer to your various DCs. Lumi members can contact their account manager to discuss options.
For more recommendations from the founders of Lumi, watch our COVID-19 webinar.
