A Permanent Wrinkle for Direct Mailers?
Whether in face-to-face conversations or on a CDP webinar, chances are you’ve heard us talking about how every direct marketer that utilizes mail has been challenged with supply chain issues and the rising cost of printable paper. But if you’ve ever wondered what the story-behind-the-story is, read on.
The issue
Like most sectors of the business world, the paper industry and supply chain have been impacted by COVID-19 related stresses, including increases in labor, transportation and materials costs. As a result, in late 2020, many paper manufacturers began raising prices by 10%, 20% or more.
What did CDP do?
While CDP hasn’t been immune to these pressures, the MSB Co-op model’s scale and purchasing power allowed us to make bulk paper purchase in advance to protect pricing and paper inventories during the worst of the pandemic. Working with vendors, we were able to hold off price increases for more than two years until just recently, when ongoing supply chain issues and continued rising costs forced vendors to begin to pass some of those increases through after they jeopardized the health and stability of their businesses.
How did we get here?
There are several reasons. Prior to the pandemic, there were many high-profile paper mill closures and of those that remained, many manufacturers shifted their focus to making paper boxes, moving away from producing printable paper and towards manufacturing cardboard to meet the rising demand created by increases in online shopping.
When the pandemic hit, online sales exploded and the demand for cardboard soared. This came just as American paper mills were struggling to deal with the impacts of COVID and the border shutdown with Canada limited paper imports from our neighbors to the north. This resulted temporary shutdowns, layoffs and outright closures at dozens of paper mills in North America in 2021.
And the closures didn’t end there: 2022 has seen the announcement of additional permanent closures of multiple paper mills in Maine, Ohio, Florida, Michigan and Wisconsin, creating even more strain on already struggling paper supplies. This has resulted in a continued increase in prices as well as manufacturer-imposed purchasing limits and very loose (if any) commitments to delivery dates.
What’S next?
There are glimmers of hope on the horizon including the recent announcement of the restarting of a key piece of equipment that produces printable paper at one Ohio facility. Still, the current situation will most likely continue well into 2023, if not beyond, and will require close monitoring, creative thinking and a fair amount of flexibility.
What can you do?
There is no question that when it comes to direct mail, it isn’t “business as usual.” Behind the scenes, the CDP team remains laser-focused on avoiding disruptions to the direct mail program and finding creative solutions to limit the impact of rising costs of the net revenue of our MSB Co-op partner stations. As you explore options at your own shop, in addition to fine tuning your digital and sustainer fundraising programs to relieve pressure on direct mail, there are steps you can take to protect this vital revenue source including budgeting for cost increases, resetting net revenue expectations, adjusting mail production schedules to allow for longer lead times for delivery of materials and being open to alternative printing options, formats, sizes and paper weights.
Just like many aspects of our personal lives, we all wish the cost of doing business wasn’t getting more complicated and more expensive, but we have to continue to adjust our thinking and adapt our practices to find continued success in our rapidly changing world.
Our fundraising programs are counting on it.