Major paper mills have announced paper cost increases of approximately 8 – 10% effective May 1, 2022, according to our key suppliers. Envelope window film, adhesives, cartons and freight costs are also increasing. Fuel surcharges from carriers are the highest our suppliers have ever seen. Another paper cost increase is expected this fall.
Paper allocations remain strict and many suppliers believe this will continue through 2023. Paper producers are eliminating certain paper grades and transitioning to packaging grades in some instances, while other mills are closing permanently. Meanwhile increased demand, increased shipping costs and ongoing staffing shortages are driving up prices.
Envelope suppliers are still operating with 12 to 15 week lead times, and offset and web printers are seeking orders for paper six weeks to three months in advance of when art files are due, depending on the type of materials and quantity.
The ongoing Finnish Paperworkers’ Union strike at several UPM mills in Finland, a major global supplier of label materials, continues to have a serious impact on direct marketing programs. Domestic suppliers of label stock are unable to make up for the demand and are on strict allocations. Currently the strike is expected to end April 30th but manufacturing could take up to three months to reach pre-strike levels. Our suppliers are requiring four months or more lead time on label orders. Given the dire situation, The PMG Family production teams are working with our clients to explore alternative package components and formats.
The PMG Family provides its clients with continuous guidance on budgets, schedules and changing lead times. In certain situations, we’re able to purchase materials or components (such as envelopes) for multiple months at a time and maintain inventories to help keep printing costs down. This approach may be easier to accomplish with smaller to medium-sized print runs. Clients with larger mailings may have difficulty securing the amount of paper necessary for multiple months.
More Practical Tips
Streamline client review processes to enable earlier art and data approval times and more timely delivery.
Clear direction and insisting on regular QC steps reduce the risk of errors and delays in this high pressure environment.
Include your production partner in your annual program planning to anticipate challenges, and to find efficiencies and cost savings.
Also involve your production team in the initial strategy and creative development of each project – they can advise on the best formats, processes, and stocks – and what to avoid – given current industry trends.
On April 6th, as expected, the Postal Service filed new mailing rates effective July 10, 2022 which use the full authority granted by the Postal Regulatory Commission (PRC):
July 2022 Price Increases for Nonprofit Mail:
- Marketing Mail: 6.791%
- First Class: 6.793%
- Flats: 8.826%
The PRC is expected to officially approve these proposed prices before they go into effect.
Save money through postal logistics to combat ongoing postage increases.
Increasing commingling volumes to achieve the lowest rates possible is one of the easiest ways to save on postage. Commingling combines your letter mail with other mailers to increase volume to the intended Zip code and delivers mail deeper into the mail stream by skipping postal facilities, achieving significant postage savings and more predictable delivery.
The PMG Family and its MailSmart Logistics team recommend a free Postal Logistics review to uncover potential costs savings in your direct mail program.
The Alliance of Nonprofit Mailers (ANM) and other industry groups continue to pressure the PRC to reduce postage rates. This week the ANM filed a petition with the PRC requesting that the regulator immediately start a new review of the USPS rate system and end above-inflation postage increases. This is a longer term goal, however, with no short term relief in sight.
Logistics and Overseas Production
Diesel fuel prices have risen above $5/gallon and with the ongoing war in Ukraine will probably remain at elevated levels for some time to come. Fuel prices effect the cost of all freight, be it ocean, rail, or trucking, and impact all steps in the supply chain, as noted above with paper costs.
The door-to-door delivery times from China to the Port of Los Angeles have dropped from an average of 40 days to an average of 30 days which is good news for organizations that use premium-based mailings.
The U.S. Trade Representative has a deadline of July 6, 2022 to review the China Section 301 Tariffs. Unless they take specific action to renew them, the tariffs will expire and will no longer be applied to China products.
With chronic paper shortages, postage increases, inflation and ongoing supply chain pressures, a strong production management partner advocating for you every day is essential to your success.
The PMG Family team continues to keep our clients’ direct marketing programs on track, despite all the challenges facing our industry.
Please contact us if you have any questions or concerns. We’re here to help!