Prepare for Third 2010 Corrugated Price Increase

by: Dennis Salazar

26 Aug 2010

With sincere hope and belief that our readers are not going to shoot or even blame the messenger, I have to let everyone know that we received our first price increase notice (this round) earlier this week. Yes, this follows two previous increases earlier this year in March and June, and I will not attempt to justify this unprecedented third increase in one year, but rather deliver an advance warning and perhaps some cost-reducing options.

How to Minimize the Impact of this Increase

First and foremost, buy ahead of the rush and before the increase takes hold. All indications point to this increase being implemented the third or fourth week of September. If you are in a position to do so, I suggest ordering the boxes you will need through the end of the year, ASAP. For many of our e-commerce customers, this increase comes before the busiest time of their year so getting ahead of it may really help your year-end profitability.

Is available space an issue? Talk with your suppliers about holding product for you to minimize the space required and maximize the cost savings. For example, we have been known to hold stock product for future release and have even agreed to hold custom (customer specific) product under the right conditions.

Other Ways to Reduce Your Corrugated Costs

1. Use less corrugated by downsizing your shipping boxes. If you have not reviewed and right sized your packaging, there is no better time to do so. Please see this ISP post on downsizing your shipping boxes

2. Are you using the most efficient and cost effective style of box for your application? RSC versus die cut mailer, RSC versus tray or sleeve, are just a few of the options available to you. Many people use RSC style boxes even though they may not be the lowest cost option.

3. Replace corrugated shipping boxes with other options such as paper or plastic mailer envelopes. Here is another ISP post about mailer envelopes.

4. This could be a great time to consider reusable packaging options, especially if you are in a “closed loop” scenario where it is easy to justify the initial higher cost. Here is an ISP post discussing several reusable packaging options.

What Can We Look Forward to in 2011?

Like most of our lives and businesses these days, it will all come down to the economy. If the economic signs are improved, you may see this trend of higher prices continue. “Get while the getting is good” appears to be the new strategy so you may see another small increase in early 2011.

On the other hand, if holiday spending is a bust and if the economy tanks after the holidays, you may even see a small price decrease as a hungry corrugated market attempts to create tonnage rather than margin.

Bottom line: no one knows for sure, but I can pretty much guarantee that paper based packaging is NOT going to become less expensive in 2011. How much more expensive it becomes is the big unknown but every shipping box used will be more expensive than it has been.

Please contact us if you have any questions or a desire to develop a cost containment strategy for your packaging materials.

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