Is It Time to Optimize Your Cardboard Packaging Buy?
It’s been a rough time to be a buyer of cardboard packaging. Corrugated paperboard prices have been rising rapidly – up nearly 40% in past 20 months. Cardboard supply lead times have been painful, with some suppliers selectively firing customers to ensure they can fulfill their most profitable orders. And demand is expected to continue increasing through 2026 based on sustained e-commerce growth.
But there are signals that the tide is turning. We recently held an Executive Roundtable where manufacturing purchasing executives shared their thoughts on the state of the cardboard packaging supply market. Here are some of the highlights:
- Suppliers are now listening more rather than dictating price increases without justification
- Cardboard packaging lead times are decreasing
- Suppliers who don’t currently have the business are quoting more aggressively
- Demand for cardboard packaging appears to be softening
- A billion tons of manufacturing capacity is coming online in the next year
They also reported that their customers are beginning to ratchet up pressure for cost downs based on lower feedstock prices (or at least the perception that costs should be going down). The consensus was that there is a need to optimize pricing everywhere, including cardboard packaging.
It’s pretty clear that packaging suppliers have maintained or increased margins during this period of constrained supply. If your packaging costs weren’t optimized prior to January 2021, there is likely ample opportunity to consider alternative sources and commodity strategies now that supply seems to be catching up with demand.
Some of the best practices for optimizing your cardboard packaging buy include:
- Update your commodity strategy and supply base to reflect current needs and the supply market
- Consider options for reducing cardboard usage through packaging redesign
- Use index-based pricing agreements to ensure you get immediate cost reductions as feedstock costs decline from recent peaks
- Optimize total costs by selecting suppliers within 100 miles of manufacturing locations
In an upcoming webinar on September 28th, we will share lessons learned from a recently completed strategic sourcing project that achieved 9% savings on top of 10% cost avoidance on cardboard packaging.