We’ve spoken a lot recently about supply chain issues all over the world due to the increase in costs of raw materials
Thanks to unstable global markets, the coronavirus pandemic and Brexit, supply chains are feeling the pressure more than ever before. As a result, prices are at an all-time high and significant shortages are having a huge knock-on effect throughout the supply chain.
And as demand outweighs supply on essential materials such as cardboard, the result is additional stress and extra expense for many UK businesses.
In this blog, we’ve therefore outlined what’s happening with the cardboard supply shortage in particular, and what your business can do about it...
What’s going on with cardboard?
The latest kink in the global supply chain crisis is the issue with cardboard supplies. Basically, cardboard supplies are unreliable, which means that several UK businesses are unable to get hold of packaging and are letting customers down as a result.
What’s more, due to this supply shortage, what is still available has become more expensive – which means that many companies are faced with unavoidable price increases.
Why has this happened?
There are several factors that, added together, have resulted in a perfect storm of cardboard supplies, from the pandemic to Brexit and a change in shopping habits all over the world:
1. Changing shopping habits
Even before the pandemic, the way people shopped was changing with more and more people choosing the ease of shopping online to physically going to the shops. With pretty much all online orders delivered in cardboard packages, the demand for cardboard has therefore been growing for years.
Throw in a pandemic where consumers found themselves housebound, and online shopping rates skyrocketed – along with the demand for packaging – then supply becomes especially stretched.
In fact, the Royal Mail estimated that there were around 200 million extra parcels through their own and other courier networks in 2020 alone!
2. The COVID-19 pandemic
Many of the cardboard-producing paper mills around the world shut down during the pandemic. Whilst most of these companies are now back up and running, they are scrambling to cope with a backlog of orders.
Plus, with the change in shopping habits discussed above, combined with the annual increase in demand for cardboard and packaging over the festive seasons, many are struggling.
What’s more, the pandemic also changed the way businesses had to sell too, with several businesses that would traditional never sell online being forced to do so – all adding to the supply and demand issues.
3. Online retail giants
Whilst small- to medium-sized businesses are struggling to source cardboard, retail giants such as Amazon are only making things worse.
Due to their sheer size and massive bankrolls, they are taking the majority of what’s available – and leaving little behind for everyone else.
Additionally, small- to medium-sized business simply can’t absorb the added costs like Amazon does, resulting in financial difficulty for them, or price rises for their customers.
What can I do about it?
If your business is struggling due to the cardboard supply shortage, rest assured that you are not alone. But what are the next steps?
Here are some ideas to try…
1. Create a cash flow forecast
If you’re to be able to handle additional costs, you need to be prepared; this is where creating a cash flow forecast comes in.
Keep an eye on your finances and get to know the amount of money you expect to come in and out of your business every month. This should hopefully enable you to put the necessary plans in place to prevent any shortfalls and plan for additional expenses before it’s too late.
2. Cut costs
If you need to improve your cash flow, the best place to start is by cutting costs.
From setting up cash flow control so you’re aware of every single expenditure, to liaising with suppliers (more on that below!) and even asking for a breather on rent, there are plenty of ways to be productive and cut costs, so you are better placed to handle additional expenses. We’ve explored 10 cost-cutting solutions in this blog.
3. Lock in prices
If you haven’t yet been affected by the cost increase of cardboard, now’s the time to talk to your suppliers and lock those prices in!
A good supplier will have been busy working hard to find supply solutions, so they should be able to provide a good range of packaging materials with workable pricing options. Plus, they’ll want to keep your custom.
So, if you aren’t happy with your current prices, speak to your suppliers and see what they can do – or shop around for better deals.
4. Explore extra funding options
Another way to cope with additional expenses in your business is to raise extra funds. From overdrafts and crowdfunding to invoice financing and even asset refinance, there are several ways you can raise extra money to help cover additional costs and deal with debt.
For more ideas, don’t miss our blog where we explore the best financing options available for small- to medium-sized businesses.
5. Think about a CVA
If you are still facing financial difficulty yet believe your business has a viable future, it could be worth exploring the option of a company voluntary arrangement.
A CVA is a powerful business turnaround tool that gives much needed time and space to companies so that they can trade out of debt.
There are a number of benefits to a CVA, so, discover more about how the process works and if it’s right for you here.
How McAlister & Co can help
If your business is struggling and you need some help and advice on what to do next, McAlister & Co are here to help.
We’ve got years of experience in business rescue and recovery, and our friendly team will be able to advise you on what to do next in order to turn your business around.
Don’t suffer in silence – reach out to us today and start taking back control.