Written on: March 15, 2022 by Ruben Morales
Let’s start with the proverbial elephant in the room—COVID-19. This pandemic has created many issues for all manufacturers in every industry, starting with a shortage of personnel to run manufacturing facilities, both on the manufacturing line and in administrative offices. This created closures that helped keep COVID-19 from spreading.
As an industry, we were affected by the personnel shortage and continued to have issues as the new variants spread. With the COVID-19 variants surging, we were forced to create a hybrid work-from-home schedule while rotating personnel as needed at the facilities. These closures and disruptions included suppliers of packaging, raw materials, metal, plastics polymers and chemicals.
Domestic packaging suppliers, who had, over several years, reduced inventories and switched to Just in Time (JIT) manufacturing were caught with a shortage of raw materials. This trickled down to the all the packagers, including the aerosol industry. Lead times started to increase; packaging materials were placed in allocation. Most, if not all, packagers started sourcing materials from overseas, from whomever had inventory or manufactured it. This became a necessity as U.S. suppliers struggled to get raw materials and manufacture packaging.
At first, lead times were relatively normal, from order placement to delivery at the dock. As more manufacturers sourced from overseas, there came a shortage of shipping containers and the ports were overwhelmed by the numbers of ships arriving to unload. Then there was the shortage of truck chassis and drivers for the containers. The railroads, which once had plenty of capacity, were also overwhelmed by the demand to ship and a 10-day delivery became several months. All the while, the cost of container shipping exploded with an increase of 1,250% from 2019.
Packagers struggled to package their products; consumer demand did not ease. The increased demand created further pressure to source more materials; further strain on the shipping industry caused many packaging suppliers to declare Force Majeure and not honor vendor agreements. Then came the increased costs of raw materials; steady increases in the cost of goods have become the new normal. Some raw materials suppliers are not quoting until day of shipment. If manufacturers don’t want to accept the cost at time of shipment, raw materials suppliers then go to next packager on the list and offer the material.
The increased cost of raw materials and shipping has affected the bottom line and increased the cost of finished goods. In general, most packagers had believed that the supply chain would improve in the first or second quarter of 2022, but this will not be the case. Now, most suppliers believe that supply will not improve until the first quarter of 2023.
All of the internal and external supply issues caused by the pandemic have challenged our manufacturing teams to be creative, flexible and adapt to the challenges of the day, week or month to meet customer demands. We have been able to review and refine many of our processes and find incremental improvements. When this crisis is finally over, the manufacturers and packagers who adapted and found improvements within their facilities will be much stronger.
Ruben E. Morales
Technical Services Director, Technical Chemical Co.
President, SATA (2021–2023) • southernaerosol.com