Steve Katz, Contributing Editor04.04.24
Like any global industry, the label and narrow web sector relies on the efficient movement of goods and a robust and reliable supply chain. Timely deliveries of substrates, inks, coatings and a wide range of parts and consumables are critical for converters achieving customer satisfaction and retention. However, recent years have seen significant disruptions and challenges in the sourcing of these materials, prompting a closer examination of the current state of affairs.
Labels play an indispensable role in a wide range of industries. From food and beverage to pharmaceuticals, cosmetics to logistics, they serve multiple purposes beyond mere decoration. They provide essential product information, brand protection and differentiation, ensure regulatory compliance, and facilitate supply chain visibility and traceability. When the label industry’s supply chain suffers, so too do the supply chains of the industries that have products that labels adhere to.
Despite their ubiquitous presence and importance, label materials face several challenges in their sourcing process, exacerbated by global dynamics and market forces, such as:
Raw material availability and pricing – PS labels rely on materials such as paper, films, adhesives, and release liners. Fluctuations in the availability and pricing of these raw materials, influenced by factors like supply-demand imbalances, geo-political tensions, and environmental concerns, directly impact label manufacturers and their ability to meet customer demands.
Transportation and logistics disruptions – The Covid-19 pandemic exposed vulnerabilities in global supply chains, disrupting transportation and logistics networks worldwide. Delays in shipping, port congestions, and scarcity of shipping containers led to extended lead times and increased costs, affecting the timely delivery of label materials to converters.
Quality control and compliance – It’s often said that “quality is a given” in today’s label industry. If that’s the case, then maintaining consistent quality standards is imperative, and that means consistency in substrate performance. Not just any material will do. Variations in raw material quality, particularly in instances of substituting or sourcing from alternative suppliers, pose challenges in maintaining uniformity and meeting customer specifications.
Supply chain and sustainability – Heightened awareness of environmental and ethical sourcing practices has prompted stakeholders across the supply chain to prioritize sustainability. Label manufacturers are under pressure to adopt eco-friendly materials, reduce waste, and enhance transparency in their supply chains, which necessitates careful selection of suppliers and materials. Again, not just anyone or anything will do these days when it comes to material selection, especially when striving to lower the label industry’s environmental impact.
In response to these challenges, industry stakeholders can adopt various strategies to enhance resilience to supply chain issues that may arise. Areas to focus on include:
Diversification of suppliers – To mitigate the risk of supply chain disruptions, label converters can diversify their supplier base, and always be on the lookout for alternative material sources and new
strategic partnerships.
Investments in technology – Automation, digitization, and advanced manufacturing technologies are being embraced to optimize production processes, improve efficiency, and reduce the dependency on manual labor. The innovations often lead to decreased material waste.
Collaborative supply chain management – Collaboration and communication across the supply chain are critical for addressing challenges collectively. Close collaboration between converters, raw material suppliers, logistics partners, and customers fosters transparency, agility, and problem-solving. In addition, having close partnerships with fellow label converters can be a tremendous advantage when short on inventory.
Sustainability initiatives – Embracing sustainability initiatives, such as recyclable materials, bio-based adhesives, and reduced packaging waste, not only aligns with consumer preferences but also enhances supply chain resilience by reducing the reliance on limited resources and minimizing environmental impact.
By prioritizing transparency, innovation, and adaptability, stakeholders in the narrow web label industry can mitigate risks, seize opportunities, and ensure the uninterrupted flow of these indispensable materials that play a vital role in maintaining the industry’s health.
Josef Park, vice president of sourcing for Mactac, discusses how Mactac adapted to the pandemic-caused supply chain issues. He says, “We saw an exponential increase in demand. The industry also experienced shortages of supply across many major raw material categories coupled with extreme inflationary pressure. To overcome these challenges, we first and foremost looked to our people, ensuring our production teams were safe and supporting them as demand quickly accelerated. Additionally, we leveraged our strategic supply relationships, bolstering inventories and introducing new materials and products to continue servicing our customers at a high level. Furthermore, we utilized our legacy Mactac assets while simultaneously expanding our capacity through the two major acquisitions of Duramark (formerly Ritrama) and Spinnaker Coatings.”
Tim Kirchen, senior vice president, UPM Raflatac Americas, remarks, “Our industry went from balanced demand/supply to high demand/low supply and then to low demand/high supply in a matter of three years. That naturally has put stress on the up- and downstream supply chains in our industry.
“The supply/demand imbalances of the last three years have exposed strengths and weaknesses of our value chains,” Kirchen adds. “This provided an opportunity for us at UPM Raflatac to strengthen the robustness of our supply chain and optimize our internal processes. For example, the supply disruption period of 2021-2022 pushed us to reshape our supply strategy to a more balanced supplier portfolio. We’ve noticed that many other companies throughout the value chain have diversified as well, so they are not too heavily relying on any one supplier for critical materials.”
Thankfully, the industry has, for the most part, recovered regarding supply chain difficulties. Park says, “From the supply side, the industry appears to be fairly balanced. Fortunately, many of the supply issues we worked through in the pandemic years are behind us. And we hope it stays that way. We have seen demand pick up in the second half of 2023 and continue its momentum into Q1 of this year. The short-term outlook remains cloudy for the remainder of this year, and global conflicts have created some select disruptions. We see a trend across many industries back toward lean inventories due to relative ease of supply and higher costs of cash, but this makes the value chain more vulnerable to supply-based shocks. However, Mactac remains optimistic and well positioned to support the growth of our customers.”
Kirchen concurs. “Currently, we see that supply for key raw materials, such as liner, face and chemicals, is well in line with demand. Overall, we believe that supply chains have become more robust and adaptive throughout the last three years. Communication up and down the supply chain has afforded wider visibility into its strengths and created opportunities for continued and improved collaboration,” he says.
However, with respect to paper liner and face supply, UPM Raflatac deems that US domestic supply is unlikely to meet current and future demand. “That means that the US market is likely to become more dependent on overseas supply for critical paper liner and face materials,” says Kirchen, adding, “The lack of investment into North American paper label material capacity will remain a source of concern for the industry. This can only be compensated with a balanced import strategy. In addition, it is of vital importance that the label industry remains an attractive market for suppliers because constrained paper suppliers will look to service alternative markets.
“UPM Raflatac has a balanced and redundant supplier base for key raw materials. We strive to be a reliable partner to our customers, and our supply strategy plays a critical role,” Kirchen says.
Park notes that Mactac believes the near term will remain balanced. But, he says, “As demand continues to recover in the industrial sector, we believe that there is a strong possibility of inflation, although we expect it to be less intensive than what the industry experienced in 2021–22. As global economic conditions improve, we could see tighter supply chains. Mactac remains committed to a rigorous sourcing strategy that ensures we are a reliable supplier to our customers.”
The label industry’s consolidation trend is also something to consider as it relates to supply chain health. Park explains, “We expect there will be continued consolidation within the pressure sensitive industry. Mactac is well equipped to address this as we have strengthened and expanded our footprint through our many recent acquisitions, including Label Supply in Canada. Our portfolio of adhesive technologies, strong asset, production and distribution network, and our expert team allow us to deliver top-notch service across the industry with a broad collection of core and specialty products.”
Although this data marked the ninth successive month of excess capacity at global suppliers, the downturn eased to its weakest since last April. The index suggests that underlying trading conditions may be starting to improve as recession and inflation fears fade and businesses prepare for a stronger 2024. The cause of these fluctuations, GEP says, is due to global unrest – in particular, violence and attacks on ships taking place in the Red Sea.
GEP notes that the most noteworthy impact from disruptions in the Red Sea was to transportation costs, which rose to a 15-month high in January, as commercial ships took the lengthier route around the Cape of Good Hope. There was also a slight pick-up in safety stockpiling, GEP says, with reports from businesses of inventory building due to supply or price fears at the highest since last June. That said, they were well below the levels seen in 2021-2022 during the post-pandemic supply crunch.
Regionally, Asia’s supply chains were at their busiest in nearly a year, GEP reports, as factory purchasing activity in China, South Korea, and India rebounded, suggesting manufacturers there are gearing up for growth. In a similar vein, suppliers to North America and Europe saw their spare capacity shrink during January. Less slack was also seen for the UK’s suppliers, who have experienced subdued demand for 19 consecutive months.
“The world’s supply chains got busier in January, and activity at our global manufacturing clients is ticking up,” says Daryl Watkins, senior director, consulting, GEP. “With input demand trending higher, led by Asia, signaling a return to positive growth in the coming months, it is imperative business keeps tamping down suppliers’ price increases so inflation continues to trend down.”
At the recently held 2024 TLMI Converter Meeting, Corey Reardon, president and CEO of market research firm AWA Alexander Watson Associates, presented data examining the connections between global and local markets. He said, “We’ve learned over the last few years that regardless of how small or big you are, and even if you’re a multinational with facilities and operations all around the world, the events that happen halfway around the world or in other parts of the globe have an impact on your business – even locally in Wisconsin, California, or Michigan.”
AWA research reports total label production at around 72 billion square meters globally, with 45% of that production in the Asia-Pacific region today. “This has grown significantly over the last five or 10 years,” said Reardon. “Five years ago, that production was divided more even into approximate thirds from Asia, North America, and Europe. And this shift impacts supply sources for all the markets.”
Despite these changes, however, Reardon said stock levels are back to a normalized level for 2024. “The data illustrates this,” he said, adding, “And certainly as have discussions I’ve had with a broad base of material suppliers, converters, and even brand owners across the value chain. There’s a consensus that the destocking phenomenon that plagued us through 2023 is behind us.
“That doesn’t mean that we’re not going to see supply chain disruptions moving forward,” Reardon cautioned. “We have a war in the Middle East that is making the Suez Canal a problematic area for transportation.”
Organizations are moving to the cloud to address existing challenges. Driven by the need to insulate operations from supply chain disruptions, product shortages, cost pressures, process inefficiencies, and manual errors, Loftware’s recent “Top 5 Trends in Labeling & Packaging Artwork” report revealed that 50% of companies already deploy important business applications in the cloud. This compares to just under 40% embracing cloud-first strategies a year ago.
With quick deployment times, lower upfront costs, easy access, and the ability to scale, cloud technology is a game-changer for unlocking value. As illustrated by our research, an increasing number of business systems are moving to the cloud in order to realize these benefits, and labeling shouldn’t be any different. If you think of the label as a product’s passport through the supply chain, it becomes crystal clear how mission-critical this function is to all companies that operate across global supply chains.
Loftware’s survey, which polled nearly 500 professionals across all industries and 55 countries, revealed that 71% of companies believe the cloud or a hybrid solution will be their preferred deployment method for labeling within the next three years. This is no surprise as today’s global supply chains require new levels of visibility and agility as companies add new suppliers and partners, expand into new regions, strive to ensure continuous operations, and attempt to meet increasing regulatory and customer demands.
Traceability increases in importance
Recalls have proven to be a massive disruption to supply chains, worsening delays in time to market, demanding costly fines, risking consumer health, and damaging brand reputation. This rings true in the medical device, pharmaceutical, and food and beverage sectors in particular.
These industries are heavily regulated, therefore oversight is incredibly important and one error could derail an entire product line, resulting in financial penalties. At Loftware’s recent Convergence Conference, John Blake, Gartner senior research director, highlighted the costly results of inaccurate labeling and discussed how non-declared allergens, mislabeling, and inaccurate packaging graphics continue to be a leading cause of product delays and recalls, ultimately costing manufacturers millions of dollars in lost sales. He outlined how compliance violations in the pharmaceutical industry have exceeded $50 billion since 2000, while the average cost of non-compliance has grown by 43% over the past nine years. In the food industry, labeling mistakes are reportedly costing companies around $10 million on average in direct costs according to a joint study by the Food Marketing Institute and Grocery Manufacturers. Therefore, finding ways to minimize errors is paramount and to do so in an efficient manner will be a major factor for business success.
Businesses are demanding solutions that enable faster reaction times to manage potential recalls and avert risks presented by falsified goods and counterfeit products – all of which could damage brands and threaten customer safety. To manage these threats, businesses must embrace cloud technologies that improve their ability to track and trace products across global supply chains.
Better track and trace through supply chains can also help companies to deliver on their corporate social responsibility goals. As sustainability targets continue to grow in importance, companies must consider how they can improve labeling and packaging strategies and continue to focus on the customer experience, all while meeting new environmental goals and watching the bottom line.
Part of this is around how social, ethical, and environmental performance factors into the process of selecting suppliers. Being able to trace products both upstream and downstream will become important for managing the product lifecycle and ensuring sustainable sourcing. These intelligent supply chains can track, trace, and authenticate goods at every stage of the journey. Additionally, modern labeling solutions reduce inventory, eliminate a large global footprint, and ensure that all products are made, shipped, and delivered to the right place, thereby avoiding unnecessary loss and waste.
Digital transformation extends to all-in-one labeling
Gartner research highlights that 94% of CEOs want to maintain or accelerate Covid-19 pandemic-driven digital transformation programs. As part of this journey, companies are seeking an all-in-one labeling solution that can meet the full scope of their requirements for bringing products to market quickly, efficiently, and more competitively. Then there’s the increased demand to print on anything, from hard or flexible plastic like a water bottle, to a foiled pouch, a curved surface, or even wood.
This has created a desire for an all-in-one solution that offers integration capabilities to manage output for all devices, from thermal label printers, to color inkjet and laser, coding and marking devices, visual inspection systems, serialization solutions, and more. Through the advancement of cloud-based technologies, companies can now use their marking and coding equipment as part of a “one size fits all” intelligent factory operation. This benefit is illustrated in Loftware’s report, with 79% of supply chain professionals believing a centralized and standardized approach to all print output is the top benefit of implementing a unified system for labeling.
Adapting to the new normal
Global supply chains have undergone a massive overhaul since the Covid-19 pandemic. As companies deal with new challenges, such as ongoing wars and a turbulent global economic situation, new technologies and ways of working should be firmly on their radar. To survive this shifting business landscape and keep supply chains running smoothly, making the move to cloud technologies for important business applications, such as labeling, will be key.
Labels play an indispensable role in a wide range of industries. From food and beverage to pharmaceuticals, cosmetics to logistics, they serve multiple purposes beyond mere decoration. They provide essential product information, brand protection and differentiation, ensure regulatory compliance, and facilitate supply chain visibility and traceability. When the label industry’s supply chain suffers, so too do the supply chains of the industries that have products that labels adhere to.
Despite their ubiquitous presence and importance, label materials face several challenges in their sourcing process, exacerbated by global dynamics and market forces, such as:
Raw material availability and pricing – PS labels rely on materials such as paper, films, adhesives, and release liners. Fluctuations in the availability and pricing of these raw materials, influenced by factors like supply-demand imbalances, geo-political tensions, and environmental concerns, directly impact label manufacturers and their ability to meet customer demands.
Transportation and logistics disruptions – The Covid-19 pandemic exposed vulnerabilities in global supply chains, disrupting transportation and logistics networks worldwide. Delays in shipping, port congestions, and scarcity of shipping containers led to extended lead times and increased costs, affecting the timely delivery of label materials to converters.
Quality control and compliance – It’s often said that “quality is a given” in today’s label industry. If that’s the case, then maintaining consistent quality standards is imperative, and that means consistency in substrate performance. Not just any material will do. Variations in raw material quality, particularly in instances of substituting or sourcing from alternative suppliers, pose challenges in maintaining uniformity and meeting customer specifications.
Supply chain and sustainability – Heightened awareness of environmental and ethical sourcing practices has prompted stakeholders across the supply chain to prioritize sustainability. Label manufacturers are under pressure to adopt eco-friendly materials, reduce waste, and enhance transparency in their supply chains, which necessitates careful selection of suppliers and materials. Again, not just anyone or anything will do these days when it comes to material selection, especially when striving to lower the label industry’s environmental impact.
In response to these challenges, industry stakeholders can adopt various strategies to enhance resilience to supply chain issues that may arise. Areas to focus on include:
Diversification of suppliers – To mitigate the risk of supply chain disruptions, label converters can diversify their supplier base, and always be on the lookout for alternative material sources and new
strategic partnerships.
Investments in technology – Automation, digitization, and advanced manufacturing technologies are being embraced to optimize production processes, improve efficiency, and reduce the dependency on manual labor. The innovations often lead to decreased material waste.
Collaborative supply chain management – Collaboration and communication across the supply chain are critical for addressing challenges collectively. Close collaboration between converters, raw material suppliers, logistics partners, and customers fosters transparency, agility, and problem-solving. In addition, having close partnerships with fellow label converters can be a tremendous advantage when short on inventory.
Sustainability initiatives – Embracing sustainability initiatives, such as recyclable materials, bio-based adhesives, and reduced packaging waste, not only aligns with consumer preferences but also enhances supply chain resilience by reducing the reliance on limited resources and minimizing environmental impact.
By prioritizing transparency, innovation, and adaptability, stakeholders in the narrow web label industry can mitigate risks, seize opportunities, and ensure the uninterrupted flow of these indispensable materials that play a vital role in maintaining the industry’s health.
Catching up with key suppliers
L&NW caught up with two of the label industry’s key suppliers to discuss their experiences in overcoming the supply chain challenges brought on by the pandemic. We also asked these suppliers to assess the current situation, and not only predict what the future may hold, but also how the industry is better equipped to overcome future challenges.Josef Park, vice president of sourcing for Mactac, discusses how Mactac adapted to the pandemic-caused supply chain issues. He says, “We saw an exponential increase in demand. The industry also experienced shortages of supply across many major raw material categories coupled with extreme inflationary pressure. To overcome these challenges, we first and foremost looked to our people, ensuring our production teams were safe and supporting them as demand quickly accelerated. Additionally, we leveraged our strategic supply relationships, bolstering inventories and introducing new materials and products to continue servicing our customers at a high level. Furthermore, we utilized our legacy Mactac assets while simultaneously expanding our capacity through the two major acquisitions of Duramark (formerly Ritrama) and Spinnaker Coatings.”
Tim Kirchen, senior vice president, UPM Raflatac Americas, remarks, “Our industry went from balanced demand/supply to high demand/low supply and then to low demand/high supply in a matter of three years. That naturally has put stress on the up- and downstream supply chains in our industry.
“The supply/demand imbalances of the last three years have exposed strengths and weaknesses of our value chains,” Kirchen adds. “This provided an opportunity for us at UPM Raflatac to strengthen the robustness of our supply chain and optimize our internal processes. For example, the supply disruption period of 2021-2022 pushed us to reshape our supply strategy to a more balanced supplier portfolio. We’ve noticed that many other companies throughout the value chain have diversified as well, so they are not too heavily relying on any one supplier for critical materials.”
Thankfully, the industry has, for the most part, recovered regarding supply chain difficulties. Park says, “From the supply side, the industry appears to be fairly balanced. Fortunately, many of the supply issues we worked through in the pandemic years are behind us. And we hope it stays that way. We have seen demand pick up in the second half of 2023 and continue its momentum into Q1 of this year. The short-term outlook remains cloudy for the remainder of this year, and global conflicts have created some select disruptions. We see a trend across many industries back toward lean inventories due to relative ease of supply and higher costs of cash, but this makes the value chain more vulnerable to supply-based shocks. However, Mactac remains optimistic and well positioned to support the growth of our customers.”
Kirchen concurs. “Currently, we see that supply for key raw materials, such as liner, face and chemicals, is well in line with demand. Overall, we believe that supply chains have become more robust and adaptive throughout the last three years. Communication up and down the supply chain has afforded wider visibility into its strengths and created opportunities for continued and improved collaboration,” he says.
However, with respect to paper liner and face supply, UPM Raflatac deems that US domestic supply is unlikely to meet current and future demand. “That means that the US market is likely to become more dependent on overseas supply for critical paper liner and face materials,” says Kirchen, adding, “The lack of investment into North American paper label material capacity will remain a source of concern for the industry. This can only be compensated with a balanced import strategy. In addition, it is of vital importance that the label industry remains an attractive market for suppliers because constrained paper suppliers will look to service alternative markets.
“UPM Raflatac has a balanced and redundant supplier base for key raw materials. We strive to be a reliable partner to our customers, and our supply strategy plays a critical role,” Kirchen says.
Park notes that Mactac believes the near term will remain balanced. But, he says, “As demand continues to recover in the industrial sector, we believe that there is a strong possibility of inflation, although we expect it to be less intensive than what the industry experienced in 2021–22. As global economic conditions improve, we could see tighter supply chains. Mactac remains committed to a rigorous sourcing strategy that ensures we are a reliable supplier to our customers.”
The label industry’s consolidation trend is also something to consider as it relates to supply chain health. Park explains, “We expect there will be continued consolidation within the pressure sensitive industry. Mactac is well equipped to address this as we have strengthened and expanded our footprint through our many recent acquisitions, including Label Supply in Canada. Our portfolio of adhesive technologies, strong asset, production and distribution network, and our expert team allow us to deliver top-notch service across the industry with a broad collection of core and specialty products.”
Global effects local
GEP, a supplier of AI-powered procurement and supply chain solutions, recently reported its GEP Global Supply Chain Volatility Index – an indicator tracking demand conditions, shortages, transportation costs, inventories and backlogs based on a monthly survey of 27,000 businesses – rose to -0.12 in January 2024, from -0.44 in December 2023, its highest level since last April, indicating that spare capacity across global supply chains has shrunk.Although this data marked the ninth successive month of excess capacity at global suppliers, the downturn eased to its weakest since last April. The index suggests that underlying trading conditions may be starting to improve as recession and inflation fears fade and businesses prepare for a stronger 2024. The cause of these fluctuations, GEP says, is due to global unrest – in particular, violence and attacks on ships taking place in the Red Sea.
GEP notes that the most noteworthy impact from disruptions in the Red Sea was to transportation costs, which rose to a 15-month high in January, as commercial ships took the lengthier route around the Cape of Good Hope. There was also a slight pick-up in safety stockpiling, GEP says, with reports from businesses of inventory building due to supply or price fears at the highest since last June. That said, they were well below the levels seen in 2021-2022 during the post-pandemic supply crunch.
Regionally, Asia’s supply chains were at their busiest in nearly a year, GEP reports, as factory purchasing activity in China, South Korea, and India rebounded, suggesting manufacturers there are gearing up for growth. In a similar vein, suppliers to North America and Europe saw their spare capacity shrink during January. Less slack was also seen for the UK’s suppliers, who have experienced subdued demand for 19 consecutive months.
“The world’s supply chains got busier in January, and activity at our global manufacturing clients is ticking up,” says Daryl Watkins, senior director, consulting, GEP. “With input demand trending higher, led by Asia, signaling a return to positive growth in the coming months, it is imperative business keeps tamping down suppliers’ price increases so inflation continues to trend down.”
At the recently held 2024 TLMI Converter Meeting, Corey Reardon, president and CEO of market research firm AWA Alexander Watson Associates, presented data examining the connections between global and local markets. He said, “We’ve learned over the last few years that regardless of how small or big you are, and even if you’re a multinational with facilities and operations all around the world, the events that happen halfway around the world or in other parts of the globe have an impact on your business – even locally in Wisconsin, California, or Michigan.”
AWA research reports total label production at around 72 billion square meters globally, with 45% of that production in the Asia-Pacific region today. “This has grown significantly over the last five or 10 years,” said Reardon. “Five years ago, that production was divided more even into approximate thirds from Asia, North America, and Europe. And this shift impacts supply sources for all the markets.”
Despite these changes, however, Reardon said stock levels are back to a normalized level for 2024. “The data illustrates this,” he said, adding, “And certainly as have discussions I’ve had with a broad base of material suppliers, converters, and even brand owners across the value chain. There’s a consensus that the destocking phenomenon that plagued us through 2023 is behind us.
“That doesn’t mean that we’re not going to see supply chain disruptions moving forward,” Reardon cautioned. “We have a war in the Middle East that is making the Suez Canal a problematic area for transportation.”
Supply chain management evolution
By Josh Roffman, senior vice president, Marketing & Product Management, LoftwareOrganizations are moving to the cloud to address existing challenges. Driven by the need to insulate operations from supply chain disruptions, product shortages, cost pressures, process inefficiencies, and manual errors, Loftware’s recent “Top 5 Trends in Labeling & Packaging Artwork” report revealed that 50% of companies already deploy important business applications in the cloud. This compares to just under 40% embracing cloud-first strategies a year ago.
With quick deployment times, lower upfront costs, easy access, and the ability to scale, cloud technology is a game-changer for unlocking value. As illustrated by our research, an increasing number of business systems are moving to the cloud in order to realize these benefits, and labeling shouldn’t be any different. If you think of the label as a product’s passport through the supply chain, it becomes crystal clear how mission-critical this function is to all companies that operate across global supply chains.
Loftware’s survey, which polled nearly 500 professionals across all industries and 55 countries, revealed that 71% of companies believe the cloud or a hybrid solution will be their preferred deployment method for labeling within the next three years. This is no surprise as today’s global supply chains require new levels of visibility and agility as companies add new suppliers and partners, expand into new regions, strive to ensure continuous operations, and attempt to meet increasing regulatory and customer demands.
Traceability increases in importance
Recalls have proven to be a massive disruption to supply chains, worsening delays in time to market, demanding costly fines, risking consumer health, and damaging brand reputation. This rings true in the medical device, pharmaceutical, and food and beverage sectors in particular.
These industries are heavily regulated, therefore oversight is incredibly important and one error could derail an entire product line, resulting in financial penalties. At Loftware’s recent Convergence Conference, John Blake, Gartner senior research director, highlighted the costly results of inaccurate labeling and discussed how non-declared allergens, mislabeling, and inaccurate packaging graphics continue to be a leading cause of product delays and recalls, ultimately costing manufacturers millions of dollars in lost sales. He outlined how compliance violations in the pharmaceutical industry have exceeded $50 billion since 2000, while the average cost of non-compliance has grown by 43% over the past nine years. In the food industry, labeling mistakes are reportedly costing companies around $10 million on average in direct costs according to a joint study by the Food Marketing Institute and Grocery Manufacturers. Therefore, finding ways to minimize errors is paramount and to do so in an efficient manner will be a major factor for business success.
Businesses are demanding solutions that enable faster reaction times to manage potential recalls and avert risks presented by falsified goods and counterfeit products – all of which could damage brands and threaten customer safety. To manage these threats, businesses must embrace cloud technologies that improve their ability to track and trace products across global supply chains.
Better track and trace through supply chains can also help companies to deliver on their corporate social responsibility goals. As sustainability targets continue to grow in importance, companies must consider how they can improve labeling and packaging strategies and continue to focus on the customer experience, all while meeting new environmental goals and watching the bottom line.
Part of this is around how social, ethical, and environmental performance factors into the process of selecting suppliers. Being able to trace products both upstream and downstream will become important for managing the product lifecycle and ensuring sustainable sourcing. These intelligent supply chains can track, trace, and authenticate goods at every stage of the journey. Additionally, modern labeling solutions reduce inventory, eliminate a large global footprint, and ensure that all products are made, shipped, and delivered to the right place, thereby avoiding unnecessary loss and waste.
Digital transformation extends to all-in-one labeling
Gartner research highlights that 94% of CEOs want to maintain or accelerate Covid-19 pandemic-driven digital transformation programs. As part of this journey, companies are seeking an all-in-one labeling solution that can meet the full scope of their requirements for bringing products to market quickly, efficiently, and more competitively. Then there’s the increased demand to print on anything, from hard or flexible plastic like a water bottle, to a foiled pouch, a curved surface, or even wood.
This has created a desire for an all-in-one solution that offers integration capabilities to manage output for all devices, from thermal label printers, to color inkjet and laser, coding and marking devices, visual inspection systems, serialization solutions, and more. Through the advancement of cloud-based technologies, companies can now use their marking and coding equipment as part of a “one size fits all” intelligent factory operation. This benefit is illustrated in Loftware’s report, with 79% of supply chain professionals believing a centralized and standardized approach to all print output is the top benefit of implementing a unified system for labeling.
Adapting to the new normal
Global supply chains have undergone a massive overhaul since the Covid-19 pandemic. As companies deal with new challenges, such as ongoing wars and a turbulent global economic situation, new technologies and ways of working should be firmly on their radar. To survive this shifting business landscape and keep supply chains running smoothly, making the move to cloud technologies for important business applications, such as labeling, will be key.