Panelists for the APDSP panel discussion were, clockwise from top left, Danny Ionescu, HP; Dan O'Malley, RB Converting; Jim Walsh, Felix-Schoeller; and Tim Horn, KIP.
Editor’s Note: Attendees to the APDSP panel discussion on September 21 heard from four key industry players about why prices are high and shipping is slow. Below are some transcribed (and edited) comments from key parts of the conversation. Panelists were Tim Horn from KIP, Danny Ionescu from HP, Jim Walsh from Felix-Schoeller, and Dan O'Malley from RB Converting. (If you’d like to view the recording of the panel or read the entire transcript, log into the APDSP Member Portal and click on the Reports & Recorded Webinars tab on the left.)
Q: Dan, what are you seeing regarding media pricing trends at the moment?
Dan O'Malley:
Well, from our standpoint, we're trying to recover from some of the COVID shortages and the COVID situations. So we've seen transportation costs go up, we've seen packaging costs go up, we've seen just about everything... and the mills, the domestic mills are on shortened schedules. A lot of them, they don't want to make xerographic type paper as much as they did because corrugated is [in greater demand]. So we're trying to find more sources for wide format papers.
Q: Jim, what are you seeing?
Jim Walsh:
We're also impacted with logistics, especially since COVID. The supply chain starting back up has created a demand situation where the available containers that are out there are in high demand. Therefore, as the demand goes up, the price goes up and the contents within the containers have to absorb that cost. And that gets passed on to the market.
Think about paper … it's a commodity. … Those containers that are in high demand are being filled with cell phones and things that could absorb that type of cost. Then when you apply paper to that type of exercise, you can double the price of a bond roll. …
Now that's one aspect. The other aspect is what Dan touched on, the domestic mills are looking at their assets and they're saying, "Where are we going to make the most margin on what products?" And the bond business, being a very mature business and costs being taken out in competition and everything else with respect to that, has created a situation where the margin associated with that business has the mills looking at their assets and they're doing what anybody else would do. … What's more appealing to them are the products that are attached to the higher margin. …..
……And every time we try to think that it's starting to get better, for instance, this first quarter, we were hit with a huge Corona spike and that created a retraction back into the economy.…. I believe, hoping that, after the first of the year, the situation's going to start to recede and we're going to see some normalcy by then.
Q: Is it logical to assume that mills will respond to demand and start making more paper?
Dan O’Malley: I'm sure that that will happen. Right now, the mill has all the power. But as supplies and demand, things change, we'll have some buying power. The converters and the manufacturers like Jim Walsh's company, Felix Schoeller, will have more say so in the matter, but right now with this situation from coming off a COVID, logistics, trucking companies are just brutal right now to deal with. So we're just trying to pick up the pieces and see where we're at.
Q: Tim, what are you seeing in the current state of equipment availability and shipping times and things like that for KIP?
Tim Horn:
Well, of course, it's getting better. We've all gone through the pandemic times where inventory was very limited due to personnel outages. Mostly the shortages today, whether it's equipment or in our supply chain, really are related to personnel outages and shortages at factories, ports, rail yards, trucking companies, et cetera. So when the supply chain is affected, of course it affects the factories. Then of course, we can't get things to the ports, can't get them on ships, we can't get them here into the United States.
Generally speaking, we believe we're going to be in a constricted shipment scenario, really into the middle of next year. …. Because the container costs are going to continue to stay fixed at exorbitant rates. We're paying, right now, anywhere from three to five times more for containers than we did in the past. As an example, in 2019, a 40 foot container was somewhere around $3,500 to $4,000. The spot price for that same container today is somewhere in the neighborhood of $20,000 and $25,000…..
….. To go back to your question, what's the availability today? Well, it depends on the product that's being ordered, of course. Just like the media processes and manufacturing, we focus on what products are in the highest demand. And of course in the technical print market, the low volume products are in the highest demand. We're trying to do everything that we can to get those products here into the states in a timely manner. Our orders have been up 25% over the same period last year, January to August…..
….. As you look into '22, our goal right now is to move towards a 30 day delivery window. Now that's still quite achievable, we think, probably by the middle of the year, of next year. Please remember, we all, we're very accustomed to just in time manufacturing, but just in time just doesn't work anymore. We were very accustomed to receiving equipment orders and shipping them the same day or the next day in 2019. But of course those days are going to be a ways off. So I think setting the right expectations in the market with customers that they're in that 60 to 90 day window with us trying to improve that at every opportunity and also making certain that we have good communication with those customers, with their business in mind and what they need, I think are the important pieces.
Q: Danny, what are you seeing at HP in terms of equipment availability and shipping times?
Danny Ionescu:
With respect to availability, I think I'm no different than anyone else on this panel, HP is a global company with many, many, many touch points, across many different products and supply chain elements that really contrive to a lot of the challenges that have been articulated here. I can tell you that, in terms of how we go to market in North America, we have a distribution component of how we get products out to market. Then we have our authorized resellers who are also another touch point in terms of how we get products out to market. So we always have a little bit of a buffer with respect to inventory that's out there. The question is, once you start running deep into that buffer and you start eroding your weeks of supply from those elements, then the supply chain pressure on to HP really becomes quite intense. Again, we are no different than what's already been articulated, the supply chain is extremely complex. Whether you're trying to procure components where a manufacturer of those components has had to shut down because of COVID, or there's a lack of a silicone chips, or there's not enough containers to be able to secure a shipment to be picked up in any of the manufacturing facilities around the world. Tim highlighted the number of ships... actually, we actually took a video and we actually counted 178 ships from what the eye could see in terms of anchored out there, trying to get an appointment to get in and offload the containers.
Q: What can reprographics firms do to improve the situation?
Dan O'Malley:
I've schooled my clients who are in the reprographic side of the world to educate their people, educate the AEC market. Let them know that, hey, everything that we talked about this morning is real. So nobody's going to be giving them anything. It's time for everybody to tighten it up, in my humble opinion, and raise your prices. Even though it's commodity driven, well, let's find something that'll separate you from the pack. So if a company's going to do it for X dollars, you can do it for a little bit more maybe, but provide it to them now. You've got to start adding value even to the commodity side. One quick final example, we've been promoting... all these people use a 20 pound bond, right? So we've been promoting 24 pound bond as opposed to the 20. And actually we're getting a lot of play with that. A lot of people have liked that little upgrade and that's just something that we're throwing in there.
Jim Walsh:
…..One of the things that has been said is [to add] solutions to your portfolio. …. Try to break the mold, try to step outside the box …. If you want to make more money, you got to go down into various other markets and utilize your assets, direct some people, incentivize them to take that asset and direct it towards a higher end application where you could add some value to it.
Tim Horn:
There's been quite a bit of a business stimulus out there and we're in an environment of incredibly low interest rates. So in my opinion right now … if I were an owner, I would certainly look at buying some new technologies. With KIP technologies, we bring a unique offering. It's toner-based technology, very low cost of ownership, as a matter of fact, in our low volume print systems, it's the lowest cost of ownership. It also gives them the highest image durability. So as you're trying to differentiate your products in the marketplace, you need to have a story, and that can begin with what you're doing in your business, what technologies you brought into your business, and then what products you can obviously offer the market. …. So my suggestion right now would be, take a risk on approach to the market. I think if you do that, you'll find very favorable results over the next 18 to 24 months.
Danny Ionescu:
We are of the belief that reprographers, even during this pandemic, have seen a resurgence of commercial print come back to reprographers. So, with the bad of having a lot of these commercial offices having to shut down because of COVID, a lot of the print is being farmed out back to reprographers. So we monitor usage based on what we're seeing in the industry. And so that is a great opportunity to seize the moment of serving those customers and serving them well. And rather than chase a new customer or trying to lower your price on existing customers, try to maximize the wallet spend that you have with your existing customers with superior quality, superior service, and really expand the product offering beyond that commodity print.
(If you’d like to view the recording of the panel or read the entire transcript, log into the APDSP Member Portal and click on the Reports & Recorded Webinars tab on the left.)