David Savastano, Editor10.09.23
The past few years have not been pleasant for ink industry purchasing executives. Even before COVID struck, there were shortages of numerous ingredients, most notably titanium dioxide and photoinitiators. The COVID pandemic started a wave of price increases and shortages that ranged across pretty much the entire raw material spectrum, as manufacturing was shut down in certain locations and shipping became costly and unpredictable.
The good news is that while there are materials that remain challenging, raw materials have begun to improve in terms of cost and availability. Ken Klug, Wikoff Color’s director of purchasing, said that the supply chain has stabilized, although carbon black is the pigment that remains tight. Meanwhile, costs have started retreating from their peak pricing.
Jeffrey Shaw, chief supply chain officer, Sun Chemical, reported that from a supply and logistics perspective, the supply chain for raw materials has stabilized during the past year.
“Almost every raw material category has ample supply available,” added Shaw. “In some situations where demand has weakened dramatically, capacities have been curtailed but supply has not been impacted. As demand improves, there could be some challenges that develop if it happens rapidly since many organizations are operating with much lower inventories.”
Shaw noted that while many of the cost structures have stabilized at lower levels, a step change has occurred and not all market prices have rebounded to a pre-pandemic level.
“For example, step changes in energy values and capacity management initiatives have had an impact,” Shaw observed. “Crude oil remains over 60% higher than Q4 2020, which will always put pressure on many of our key chemistries. Also, natural gas in Europe, although much lower than the past couple of years, has stabilized two to three times higher than historical pre-war levels. Inflation and interest rates remain high. Any sustained increase in demand will apply pressure to prices again when global economies begin to recover.”
Anthony DeFrancesco, senior director of supply chain for INX International, said that the raw materials situation has seen improvement during 2023.
“Stablization of the supply chain is primarily driven by an overall reduction in demand,” said DeFrancesco. “The decline is across the board as the market overreacted to the prior year crises, then was hit by inflation and feelings of a possible recession. A combination of excess inventory and apprehension of actual demand allowed for a slowdown and stability. In today’s post-pandemic climate, our network of supply partners is more resilient and well-rounded than ever before.
“When demand slows, availability is not as much of an issue because overcapacity prevails until it is right-sized,” DeFrancesco added. “The concern is when demand increases, capacity will lag that demand and availability could again become an issue. At this time, we do not have any specific areas of concern. That said, we are staying current with market news and trends to stay nimble for any unexpected headwinds. The increases have decelerated and, in some cases, declined. However, we do not expect to return to where we were and much of the inflation impact on our costs is expected to stick.”
“Following significant disruptions in supply, packaging and freight costs, along with challenges across the entire value chain over the past few years, it is reassuring to note that in 2023, we are witnessing a noticeable stabilization in several of these critical areas,” said Arno de Groot, VP procurement for Flint Group. “There are always products that pose challenges which are dependent on a myriad of potential issues. That being said, the current situation is quite stable as it relates to product availability.
“While it might still be premature to provide definitive confirmation, we are seeing signs that indicate a gradual stabilization in raw material pricing whereby prices may increase within the bounds of typical inflation,” said de Groot. “However, the outlook remains fragile and a number of supply-side shocks could quickly destabilize supply markets once more.”
Shaw noted that sustainability is a priority and an integral part of Sun Chemical’s corporate and commercial culture.
“Procurement sustainability is a key pillar in achieving our comprehensive sustainability objectives as we drive industry compliance throughout our entire supply chain and continuous internal improvement,” added Shaw. “We recently elevated our corporate EcoVadis rating for 2024 to a silver level from bronze. In addition to sustainable procurement, Sun Chemical earned its silver rating through EcoVadis’ assessment in three other categories—environment, ethics, and labor and human rights.”
DeFrancesco reported that there has been commotion in the logistics space in 2023, and it has rightfully drawn large scale attention.
“There were looming discussions of strikes across ports and providers, and about one of the largest freight carriers possibly closing their doors,” he noted. “Despite it all, we have seen service levels meet or exceed prior trends.
“Recent FMSCA data shows the total number of trucks on the road is increasing, but the scale of their associated fleet is shifting,” DeFrancesco added. “Our view is that as personal lifestyles meet the road, the data suggests smaller independent owner/operator fleets will create a more entrepreneurial diverse freight landscape.”
Shaw noted that overall, transportation has stabilized.
“Ocean freight capacity has opened up a bit, helping to improve bookings,” added Shaw. “Over the road freight has also improved slightly; however, several bankruptcies with truck companies have kept capacity at bay.”
“Costs remain elevated for LTL due to capacity but ocean freight has returned to normal costs and transit times,” Klug observed.
“Costs from Asian suppliers remain lower that domestic materials,” he added. “Where possible, we ensure we have multiple suppliers for products originating from different geographic locations.”
Shaw said he believes there has been an effort to nearshore more volume as organizations are more sensitive to the challenges of long supply chains, but cost remains an issue.
“There is an on-going temptation to stay engaged with off-shore suppliers, primarily Asian-based, due to price advantages especially with lower transportation costs,” Shaw added. “The key is having a diversified supply and technical portfolio across all raw material categories so that regional supply contingencies can be developed and remain viable.”
“A major supply chain change is now having the ability to readily access alternative supply, with an emphasis on geopolitical risk and proximity,” said DeFrancesco. “Another post-pandemic emphasis is strategic sourcing, so INX is ever-expanding our network of global supply partners while enhancing an already robust logistical framework.”
“In our commitment to deliver maximum service performance to our customers, we utilize pragmatic strategic sourcing approaches across the globe which carefully consider the merits of sourcing from one region versus another,” de Groot noted.
“We are communicating more with our supply chain at many different levels,” added DeFrancesco. “We have learned much from these efforts and have developed a stronger trust. Enhancing the cohesion within our integrated supply chain is a primary focus, what I refer to as the ‘Supply Chain Pentagon of Opportunity’: Demand Planning, Inventory Management, Production Planning, Strategic Sourcing and Logistic Operations.’ The more predictive each of these pillars can become to their respective movements, responsiveness and service will follow.”
Flint Group’s de Groot also said that maintaining robust partnerships is of paramount importance, underpinned by transparent and effective communication with both valued customers and trusted suppliers.
“To achieve this, it is imperative that we not only understand our customers’ requirements but also convey our expectations clearly to our vendors,” de Groot added. “Cultivating an environment of open dialogue throughout our supply chain is fundamental to ensuring we deliver the highest quality and service possible.”
Shaw noted that successful supply chains need to be flexible and agile when crises develop for any reason.
“We have a very efficient and dedicated global supply chain function and will continue to drive process improvements focused on servicing our customer base,” Shaw said. “Our strategies will always have a global focus while remaining cognizant of potential supply chain challenges. We strive to optimize our internal cost structure and overall performance to satisfy customer requirements. Emphasis will always be to develop and maintain a well-diversified supply base with contingencies.”
The good news is that while there are materials that remain challenging, raw materials have begun to improve in terms of cost and availability. Ken Klug, Wikoff Color’s director of purchasing, said that the supply chain has stabilized, although carbon black is the pigment that remains tight. Meanwhile, costs have started retreating from their peak pricing.
Jeffrey Shaw, chief supply chain officer, Sun Chemical, reported that from a supply and logistics perspective, the supply chain for raw materials has stabilized during the past year.
“Almost every raw material category has ample supply available,” added Shaw. “In some situations where demand has weakened dramatically, capacities have been curtailed but supply has not been impacted. As demand improves, there could be some challenges that develop if it happens rapidly since many organizations are operating with much lower inventories.”
Shaw noted that while many of the cost structures have stabilized at lower levels, a step change has occurred and not all market prices have rebounded to a pre-pandemic level.
“For example, step changes in energy values and capacity management initiatives have had an impact,” Shaw observed. “Crude oil remains over 60% higher than Q4 2020, which will always put pressure on many of our key chemistries. Also, natural gas in Europe, although much lower than the past couple of years, has stabilized two to three times higher than historical pre-war levels. Inflation and interest rates remain high. Any sustained increase in demand will apply pressure to prices again when global economies begin to recover.”
Anthony DeFrancesco, senior director of supply chain for INX International, said that the raw materials situation has seen improvement during 2023.
“Stablization of the supply chain is primarily driven by an overall reduction in demand,” said DeFrancesco. “The decline is across the board as the market overreacted to the prior year crises, then was hit by inflation and feelings of a possible recession. A combination of excess inventory and apprehension of actual demand allowed for a slowdown and stability. In today’s post-pandemic climate, our network of supply partners is more resilient and well-rounded than ever before.
“When demand slows, availability is not as much of an issue because overcapacity prevails until it is right-sized,” DeFrancesco added. “The concern is when demand increases, capacity will lag that demand and availability could again become an issue. At this time, we do not have any specific areas of concern. That said, we are staying current with market news and trends to stay nimble for any unexpected headwinds. The increases have decelerated and, in some cases, declined. However, we do not expect to return to where we were and much of the inflation impact on our costs is expected to stick.”
“Following significant disruptions in supply, packaging and freight costs, along with challenges across the entire value chain over the past few years, it is reassuring to note that in 2023, we are witnessing a noticeable stabilization in several of these critical areas,” said Arno de Groot, VP procurement for Flint Group. “There are always products that pose challenges which are dependent on a myriad of potential issues. That being said, the current situation is quite stable as it relates to product availability.
“While it might still be premature to provide definitive confirmation, we are seeing signs that indicate a gradual stabilization in raw material pricing whereby prices may increase within the bounds of typical inflation,” said de Groot. “However, the outlook remains fragile and a number of supply-side shocks could quickly destabilize supply markets once more.”
Shaw noted that sustainability is a priority and an integral part of Sun Chemical’s corporate and commercial culture.
“Procurement sustainability is a key pillar in achieving our comprehensive sustainability objectives as we drive industry compliance throughout our entire supply chain and continuous internal improvement,” added Shaw. “We recently elevated our corporate EcoVadis rating for 2024 to a silver level from bronze. In addition to sustainable procurement, Sun Chemical earned its silver rating through EcoVadis’ assessment in three other categories—environment, ethics, and labor and human rights.”
Logistics
Logistics have been a crucial concern long before COVID, as the trucking industry has seen a wave of retirements and few new drivers coming into the ranks. Meanwhile, ports have long needed improvements.DeFrancesco reported that there has been commotion in the logistics space in 2023, and it has rightfully drawn large scale attention.
“There were looming discussions of strikes across ports and providers, and about one of the largest freight carriers possibly closing their doors,” he noted. “Despite it all, we have seen service levels meet or exceed prior trends.
“Recent FMSCA data shows the total number of trucks on the road is increasing, but the scale of their associated fleet is shifting,” DeFrancesco added. “Our view is that as personal lifestyles meet the road, the data suggests smaller independent owner/operator fleets will create a more entrepreneurial diverse freight landscape.”
Shaw noted that overall, transportation has stabilized.
“Ocean freight capacity has opened up a bit, helping to improve bookings,” added Shaw. “Over the road freight has also improved slightly; however, several bankruptcies with truck companies have kept capacity at bay.”
“Costs remain elevated for LTL due to capacity but ocean freight has returned to normal costs and transit times,” Klug observed.
Nearshoring as an Option
Nearshoring was a topic of interest during the COVID pandemic, as companies considered the possibilities of sourcing materials closer to home after enduring shortages of materials. Klug said there has been little movement in terms of nearshoring key ingredients.“Costs from Asian suppliers remain lower that domestic materials,” he added. “Where possible, we ensure we have multiple suppliers for products originating from different geographic locations.”
Shaw said he believes there has been an effort to nearshore more volume as organizations are more sensitive to the challenges of long supply chains, but cost remains an issue.
“There is an on-going temptation to stay engaged with off-shore suppliers, primarily Asian-based, due to price advantages especially with lower transportation costs,” Shaw added. “The key is having a diversified supply and technical portfolio across all raw material categories so that regional supply contingencies can be developed and remain viable.”
“A major supply chain change is now having the ability to readily access alternative supply, with an emphasis on geopolitical risk and proximity,” said DeFrancesco. “Another post-pandemic emphasis is strategic sourcing, so INX is ever-expanding our network of global supply partners while enhancing an already robust logistical framework.”
“In our commitment to deliver maximum service performance to our customers, we utilize pragmatic strategic sourcing approaches across the globe which carefully consider the merits of sourcing from one region versus another,” de Groot noted.
Takeaways from the Pandemic
After the rough times they have seen over the past few years, there have been a number of changes in how purchasing executives handle their planning. DeFrancesco said that one takeaway for purchasing executives after the pandemic is the importance of communicating more effectively throughout the supply chain.“We are communicating more with our supply chain at many different levels,” added DeFrancesco. “We have learned much from these efforts and have developed a stronger trust. Enhancing the cohesion within our integrated supply chain is a primary focus, what I refer to as the ‘Supply Chain Pentagon of Opportunity’: Demand Planning, Inventory Management, Production Planning, Strategic Sourcing and Logistic Operations.’ The more predictive each of these pillars can become to their respective movements, responsiveness and service will follow.”
Flint Group’s de Groot also said that maintaining robust partnerships is of paramount importance, underpinned by transparent and effective communication with both valued customers and trusted suppliers.
“To achieve this, it is imperative that we not only understand our customers’ requirements but also convey our expectations clearly to our vendors,” de Groot added. “Cultivating an environment of open dialogue throughout our supply chain is fundamental to ensuring we deliver the highest quality and service possible.”
Shaw noted that successful supply chains need to be flexible and agile when crises develop for any reason.
“We have a very efficient and dedicated global supply chain function and will continue to drive process improvements focused on servicing our customer base,” Shaw said. “Our strategies will always have a global focus while remaining cognizant of potential supply chain challenges. We strive to optimize our internal cost structure and overall performance to satisfy customer requirements. Emphasis will always be to develop and maintain a well-diversified supply base with contingencies.”
