by Bill Link, on 11/9/23 7:00 AM
The paper-based packaging industry, for years, enjoyed a relatively stable and predictable landscape. Manufacturers knew what to expect and could easily forecast prices, manage margins, and predict profitability. The COVID-19 pandemic disrupted this tranquility, leaving the industry scrambling to adjust.
The Double-Edged Sword of the Pandemic
On one side, the pandemic led to a surge in demand for paper-based packaging. With more and more people working and shopping from home, the e-commerce sector witnessed explosive growth. This, in turn, necessitated a dramatic increase in the use of paper-based packaging, from corrugated boxes to folding cartons, to ship and deliver products to the doorsteps of millions of consumers globally.
On the flip side, the pandemic also introduced unprecedented disruptions. National lockdowns and restricted movement led to slowdowns or even complete halts in the flow of raw materials and finished goods. This clash of increased demand against a restricted supply chain spelled chaos for packaging manufacturers.
Navigating the Price Volatility
Facing opposing forces, the industry experienced sudden and frequent swings in the prices of raw materials. First, a steep price increase due to scarcity, followed shortly by a significant decrease when lockdowns eased and supplies began to flow again. Such abrupt shifts would have been challenging in isolation. However, taken together, they brought forward a conundrum that the industry was ill-prepared to tackle.
For years, corrugated and folding carton manufacturers relied upon consultants to update their pricing models. These updates, often shrouded in secrecy, would occur once or maybe twice a year. But now, the pace of change was frenetic. Weeks-long consultancy processes no longer sufficed in an environment that required almost immediate responsiveness.
The Silver Lining: Embracing Advanced Performance Costing
In these turbulent times, the value of specialized software like Advanced Performance Costing (APC) from Amtech became evident. Lacking in-house pricing analysts, many manufacturers turned to APC for its robust suite of features:
- Multiple Pricing Models Comparison: Evaluate different pricing strategies side-by-side to determine the most profitable approach.
- Seamless Integration: Combine production data, costing systems, and general ledgers for a comprehensive view.
- Dynamic Adjustability: Respond promptly to market and volume changes.
- Flexible Cost Allocation: Design and adjust cost allocations as per specific needs.
- Scenario Analysis: Simulate "What If" scenarios to prepare for various market conditions.
- Graphical Analysis: Obtain a visual representation of financial data for better decision-making.
- Accurate P&L Allocations: Ensure the costing system is aligned with the company's profit and loss statements.
Are You Ready for What’s Next?
The pandemic served as a profound learning experience for the paper-based packaging industry. It underscored that while we may currently enjoy a semblance of equilibrium, the future remains uncertain, and unforeseeable events can rapidly impact pricing. The lessons are clear: manufacturers must cultivate resilience, agility, and preparedness to navigate whatever challenges lie ahead. Advanced Performance Costing (APC) stands as a testament to the tools that can equip the industry for unpredictable times, ensuring manufacturers remain nimble and responsive to evolving market dynamics.
Schedule a demo of APC and see firsthand how this revolutionary software can streamline your pricing process and prepare you for unforeseen market fluctuations.
