Insights from Jim Struhar, Nosco's Chief Financial Officer
In 2019, there was little to no price volatility or material disruption for the over $40 million of raw materials Nosco bought to make its end-products. Then, in late Q1 2020, COVID-19 was thrust upon the global supply chains.
With this, many market dynamics were changed, perhaps permanently, resulting in the current disrupted supply chains and price inflationary conditions we are experiencing. Most recently, a rare weather event (in February 2021) occurred in Texas, which brought our domestic oil and chemical industries into a further strained supply situation. This directly impacted the availability and pricing of the products we buy to service our pressure-sensitive labels and flexible packaging product lines.
- Skewed product demand due to COVID environment.
- eCommerce grew exponentially creating imbalanced packaging requirements.
- Substantial cost increases for both inbound (ocean capacity major issue) and outbound freight.
- Added COVID-19 costs associated with safety protocols and operating the business in accordance with CDC, OSHA and local health board guidelines.
- Higher labor costs to attract and retain employees within manufacturing operations.
- Significant increases in the cost of chemicals – impacting film and plastic related materials, including pressure-sensitive labels.
- February weather event (specifically Texas) major disruptor – specifically, chemical / refining capacity (“hard shut-downs” and declarations of force majeure).
- Ransomware attacks negatively impacted folding carton board and supply, driving material allocations and prices higher.
How has this impacted Nosco and what has Nosco done to mitigate its impact on its operating performance and service level to its valued customers?
Industry-level material allocations and multiple price increases are currently in place for all the major raw materials Nosco purchases for its primary products lines –roll stock, folded literature, carded packaging and cartons.
Prior to the COVID-19 pandemic onset and its associated disruption to global supply chains, Nosco established long-lasting and loyal relationships with the top suppliers for its products. These valued supplier-customer relation-ships (combined with Nosco serving the pharmaceutical companies that provide products to combat the pandemic) have resulted in Nosco being impacted far less from a raw-material-availability standpoint. Additionally, these valued supplier relationships also ensured Nosco received the industry’s best pricing during these turbulent times. The post-COVID-19 economic recovery will continue to challenge supply chains into the foreseeable future; but rest assured, Nosco has the wherewithal to be best-in-class through these difficult times.