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The State of the Production Industry

The State of the Production Industry

By Traci Cacioppo

These days, the marketing world is facing unprecedented challenges to almost every aspect of producing a direct mail campaign.

What are the challenges that the industry is facing?

Whether you’re working with paper and postage or supply chains and transportation, you’re undoubtedly encountering roadblocks with price increases, labor shortages, and overall delays.

Paper & Raw Materials

The overall costs for paper and raw materials—including envelope glue, ink, and label adhesives—have continued to increase at an alarming pace. In past years, we’d typically see a paper increase annually. But in 2021, we’ve seen at least three increases to date with another expected later in August. Each time there’s an increase, we’re facing anywhere from a 2%-10% increase in cost.

The mills are also reducing what they’re producing and increasing the minimum poundage for an order, meaning smaller print runs can’t get the paper. We’re seeing this with almost all types of paper—coated stocks, specialty stocks (i.e., Springhill colors), and textured stocks (i.e., linen stock). It seems the only paper that hasn’t been impacted is standard stock such as 60# Offset. In addition, the delivery of paper has shifted from 1-2 weeks to upwards of 3-7 weeks.

The bottom line: between the capacity reductions and market shifts, you’ll inevitably continue to incur higher costs and experience longer lead times.

Postal Rates Increase

It has become the norm for the USPS to increase postal rates every January, but the industry is being hit by another increase that will go into effect on August 29. And this one is quite a doozy. 

Normally there’s one segment that takes the hit, but this time, postal rates are increasing across the board. Nonprofit rates are rising 4.39%-9.20%, a postcard is going from 36 cents to 40 cents, and a standard one-ounce letter is increasing from 55 cents to 58 cents.

Supplier Labor Shortages

Most of our suppliers are experiencing labor shortages. Resultingly, the people mail shops can hire are hired a much higher rate, which affects mailing schedules and increases mailing costs. So much so that we’ve seen mail shop costs increase from 3%-5% over last year.

Transportation Delays

The transportation industry isn’t just being hit by labor shortages and fuel increases; it’s also being impacted by the computer chip shortage, as these chips are needed to run the trucks. This has made it difficult to get new trucks on the road to replace those that are going out of service. 

Moreover, material coming from overseas is seeing delays, and it’s not just material leaving China; other international material is waiting upwards of 2-3 weeks at sea to dock and then encountering further delays unloading to truck and rail lines.

Why is this happening?

  • The pandemic: The pandemic has caused logging industries to slow down, paper mills to convert to producing other products, and the paper sector to close or consolidate.
  • Increased demand: Restaurants, entertainment, and travel industries are starting to mail again, and organizations are now competing for less supply and more demand.
  • Changes and challenges within the USPS: The changes implemented by the Postmaster General, competition with the increased demand for package delivery, and dire financial state of the USPS have all contributed to our current roadblocks.

What can you do?

Here are eight things you and your agency can do now:

  1. Adjust planned and future job kickoffs to an earlier date.
  2. Add additional time to your overall schedule.
  3. Work with suppliers to schedule your paper orders and jobs through the end of the year and place your orders sooner rather than later.
  4. Research alternative paper options and test package formats that can help you save costs.
  5. Refine your mailing lists to maximize your budget and reach the right audience.
  6. Explore USPS promotions and keep costs down with formats that qualify for the USPS’s nonprofit letter postage rate.
  7. Utilize low-cost letter appeal follow ups for high response campaigns.
  8. Align your direct mail campaigns with your digital marketing efforts, including email, paid media, and social media.

For more information or assistance with your production strategy, contact us at info@thelukenscompany.com