E-Commerce Demand and Corrugated Cost Pressure Push Experts Toward New Packaging Strategies

Persistent consumer purchasing and expanding e-commerce are lifting corrugated packaging costs and pushing shippers to rethink how they pack their products. As the recovery progresses, online buying habits formed during the pandemic remain robust, while packaging expenses continue to climb—pressuring companies to find more effective ways to pack and deliver orders moving through their facilities.

Across the spring, corrugated product prices continued to climb, with several of the largest U.S. containerboard producers announcing increases of $50–70 per ton. Government data and industry groups tracking packaging demand show that packaging supply costs have also risen broadly, in many cases by double digits. John Blake, Senior Director Analyst at consulting and research firm Gartner, says pandemic-related shifts in packaging demand, combined with volatile supply chain activity last year, are fueling the increase and drawing attention to better procurement and packaging process management.

Blake explains that the pandemic triggered unexpected changes in material use, creating peaks in demand for corrugated and other materials. In many ways, this is part of adapting to the post-pandemic recovery, he says. A key way for companies to reduce risk, he adds, is to identify where they rely on a single packaging source, since that can create supply chain exposure.

Gartner research from late 2020 also points to the surge in direct-to-consumer sales and related last-mile delivery demand. When more than 400 supply chain executives ranked strategies for controlling last-mile delivery costs, packaging optimization landed in the top three.

Companies are recognizing that conventional packaging practices are inefficient and that there is room to cut costs, he explains, and the past year has reinforced that point. Blake and others recommend starting with smaller moves, such as reassessing the types of packaging a business uses, and evaluating more advanced approaches like packaging on demand.

1. Strong demand opens the door to new strategies

Data from the Fibre Box Association (FBA), the trade group representing corrugated product manufacturers, shows that corrugated material shipments reached a record 407 billion square feet in 2020, up 3.5% from 405 billion square feet in 2019, which was the previous record. Rachel Kenyon, Senior Vice President at the FBA, notes that global recession in 2009 pushed shipments down to 345 billion square feet, but the industry has grown steadily since then.

She explains that several factors drove the record growth in 2020. Steady e-commerce expansion over recent years played a role, but it was not enough on its own to accelerate corrugated packaging. When the pandemic hit last year, e-commerce growth strengthened further, and that was when the industry truly began to recover.

Robust e-commerce sales removed the usual year-end volume decline in the industry. After a slight drop in January, corrugated packaging shipments resumed their climb and reached an all-time high by this spring. Blake says this has brought more attention to packaging. The shift from physical stores to online sales has already forced companies to review their packaging protocols, especially at the last mile, but the past year has created an opening to sustain those efforts and develop packaging processes best matched to the application.

One of the biggest challenges is the wide range of logistics options, he explains. Retail now spans traditional stores, growing discount formats, and e-commerce, and each route to market and consumers comes with different packaging requirements—adding supply chain complexity.

Product protection sits at the center of the issue. In traditional retail, goods move on pallets and remain protected until the pallet is broken down at the store and items are placed on shelves; consumers then handle safe delivery. E-commerce and direct-to-consumer shipping changed that model by making brands responsible for packing individual items so they can travel safely from a warehouse, distribution center, or retail store through the last mile to the customer’s door. Most brands responded by adding extra packaging to protect goods in transit, but rising costs and environmental concerns are reshaping those strategies.

In e-commerce, there has long been a tendency to use more packaging to protect goods during transport, Blake explains. Yet companies face growing pressure to reduce packaging volume or ensure the materials they use are recyclable. In many areas, optimizing packaging also delivers economic benefits.

1. Right-sizing to match demand

Strategies for cutting parcel waste include padded envelopes, plastic mailers, and better-sized cartons—anything that avoids placing items in oversized boxes that require void fill. Such adjustments can reduce the amount of paper and board companies consume and free up space in warehouses and delivery trucks, while also addressing cost and environmental concerns.

More advanced solutions include on-demand, right-sized packaging systems that let shippers produce correctly sized parcels on site. Blake says these solutions are best suited to high-volume operations, but they represent an interesting and exciting market opportunity.

Salt Lake City-based Packsize provides this type of solution through a combination of hardware, software, materials, and services for on-site box making. Hanko Kiessner, Executive Chairman of Packsize, says right-sized packaging directly addresses the capacity tightness and rising costs the market is experiencing simply by reducing the total volume of packaging material companies use. On the size of the opportunity, Kiessner says Packsize research shows shippers typically use 30% more packaging than needed.

Kiessner explains that these price increases are largely self-inflicted by the industry because shippers rely on large packages that are often too big. If every parcel were sized correctly, the market could save 30% of total packaging material demand, he says.

Kiessner and Rod Galloway, CEO of Packsize, say that as the economy fully recovers from the pandemic and online purchasing behavior becomes entrenched, these issues are likely to persist, prompting more companies to review their packaging needs and sourcing strategies. Demand will continue to increase, they believe, making supply and supply security critical. Many companies did not receive all the corrugated packaging they needed in 2020, and they expect a repeat in 2021.

This article is based on content from China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-377891.html