The word “unprecedented” has received a lot of play in the last year and a half. It has been used repeatedly as the ongoing ripple effect of the COVID-19 crisis continues to jostle businesses. And while the industry works diligently to recover from the pandemic, that recovery is being hampered by an unexpected “perfect storm” of effects to the supply chain. While wide-format producers report orders being back to or near pre-pandemic levels, the challenges these producers face in sourcing the materials they need are adding extra miles to an ongoing and exhausting business marathon.
The problem is multi-tiered: Energy shortages in China are in some cases limiting the manufacture of raw, and some finished, materials. The severe freeze that affected Texas in February of this year limited oil refining, and thus, plastics production. The result of a general labor shortage has been that there are not enough people to run the machines that produce the materials graphics producers need. A shortage of truck drivers means that manufactured materials – generally shipped by LTL carriers – sit on loading docks, or must be shipped by overnight carriers, adding significant costs to print materials. Finally, printing businesses – including wide-format producers – are facing their own labor challenges, having to address an increasing number of orders in the pipeline with a reduced or inexperienced production team. Unprecedented? Yes, but here we are.
The Manufacturer View
It is important to point out that this specific problem – this shortage of materials for wide-format producers – is not unique to this industry segment. In the commercial printing segment, for instance, paper shortages are plaguing businesses. Similarly, a shortage of microchips has directly challenged automobile manufacturing.
According to Dan Ashmore, Director of Purchasing, Films and Graphics at Avery Dennison, the root cause facing the production of pressure-sensitive films is the lack of inventory across a majority of industries, and at every level of the supply chain. Inventory deficits, he says, were created because of “shifting consumer behavior driving dramatically higher demand in categories affecting printing supplies. This is compounded, Ashmore says, by “production and import disruptions resulting from weather and macroeconomic shifts in the balance of trade.” The results, he says, are experienced by customers as “stock outs” and increased costs.
Tim Bolton, vice president, sales at North American Plastics, describes current challenges as a “two-fold situation,” punctuated by the current crisis in shipping container availability – noting a 5x increase in the cost of shipping containers. Further, he says that the freeze in Texas “started a spike in pricing at a time when all the inventory built up during COVID was being liquidated.” He says that, across the board, manufacturers are working to catch up, though delays exist. As an example, Bolton adds that lead time for PVC used to be two weeks, but has now expanded to twelve weeks.
Asked how long it will take for supply in the industry to catch up with demand, Ashmore notes that the supply/demand imbalance is much broader than just the graphics industry. Basic raw materials are in short supply, he says, and “will remain so until demand softens enough to allow inventories to be rebuilt.” He says that even with extraordinarily high productivity on the part of producers, it will take several quarters to fully restock the supply chain. Bolton says that while some materials are being shipped via air freight to bypass the shortage of containers, “it’s not enough.” He sees shortages of some materials lasting through the first quarter of 2022, and freight and port delays continuing into the third or fourth quarters.
Bolton suggests that graphics producers may be able to address some supply chain challenges by removing spec from some jobs and working with materials providers to find viable alternatives to the materials they normally use. He also recommends graphics producers be as transparent as possible with their materials suppliers, and to give them the most time possible to get the materials they need. Delays, he notes, stand in stark contrast to graphics production, which generally relies on a “just in time” model.
The Printer View
Among the wide range of materials used in the wide-format segment, producers are beginning to experience shortages. Terry Corman, CEO at Firehouse Image Center (Indianapolis, IN) sees it as a problem that is only now unfolding. He reports having talked to all his major vendors, and that they are allocating materials to specific customers. “We’re on allocation,” he says, “so we should be fine, but those who are ordering directly from China are having a hard time.” While he says many shortages have yet to affect the broader wide-format segment, he is seeing some shortages: “Roll-to-roll stuff is getting harder to find,” he says. He also notes profound shortages of traditional photo papers.
Rick Mandel, president of Mandel Company (Milwaukee, WI), describes his business as a wide-format “job shop,” that uses materials for flatbed, roll-to-roll, and banner applications, in addition to fabric. His current materials acquisition challenges, he says, are in sourcing super-wide (10’+) banner vinyl. He’s able to find it, “but it’s not local, so we have to ship it, which is expensive.” He notes a similar reality for fabric media, saying shipping costs can be as much as the cost of the product. Even with express shipping of some materials, he says, delays can add two or three days, significantly crunching production times. Mandel adds that hardware for banners is getting more difficult to acquire on short notice. To his knowledge, he says, this is due to labor shortages instead of production delays.
Both Corman and Mandel believe current supply shortages stem primarily from transportation delays, which in term stem primarily from labor shortages. Both teamsters and stevedores are in short supply, leaving needed materials at sea, awaiting port entry; holding in warehouses, awaiting a container or trailer; or delayed in delivery, awaiting drivers.
Corman believes it will be “sometime in 2023 when supply will again meet demand.” He expects demand to dip, thus allowing the supply chain to catch back up. Mandel is hopeful the materials supply chain will be back in order in six months. He notes that demand in the wide-format segment has a seasonal ebb and flow, with reduced demand in the winter months. In the meantime, he is addressing current shortages by sending out quotes a lot more broadly. “Usually somebody has it,” he says. Corman says strong vendor relationships are helping his company get through via the allotment system. “We can get all the Corex we need,” he offers as an example, “but the vendors aren’t going to sell to those they don’t have existing relationships with.”
The Big Question
For graphics producers, who have weathered lockdown, cessation of events, and drastic changes in retail business, and are currently weathering profound labor shortages, do the current supply chain disruptions represent an existential threat to their businesses? For Mandel, the answer is no: “It isn’t hurting my sales,” he says, “we just have to work a lot harder to find the materials.” As a job shop, he says, he hasn’t been comfortable “cranking up inventory.” Corman also says no, saying he believes his company will have adequate allocations from vendors. “For others,” he says, “it may be tough.” He notes that vendors, through allotments, may be deciding today’s winners and losers.
For graphics producers of all stripes, the biggest question is what the future will hold. While the last year and a half has been…unprecedented, the road ahead is always uncertain.