Continued Challenges Ahead for Direct Response Fundraisers

Due to continued strains on the supply chain regarding paper and supplies, the nonprofit industry is going to face an unprecedented series of challenges over the coming months. Demand for printing continues to be high while inventory remains very low with longer than usual lead times for materials resulting in continued cost increases. The ongoing impact of the pandemic has caused delayed shipping, has depleted inventory and has jeopardized scheduling due to the labor shortage.

So, what is happening?

Paper Mills Are Struggling

Paper allocations remain very strict. On-the-floor inventory at most suppliers is depleted. Paper producers are eliminating some paper grades and transitioning to packaging grades in some instances while other mills are closing permanently. Meanwhile, increased demand, increased shipping costs and ongoing staffing shortages are driving up prices.

Environmental-spec papers like Forest Stewardship Council (FSC) and Sustainable Forest Initiative (SFI) stocks are limited. Clients that require these environmental certifications on their mail pieces limit alternative paper sourcing options. Some organizations are dropping their logo requirements temporarily to allow more flexibility in substitute stocks

There has also been a sharp increase in the use of tissue and ivory board globally. Tissue demands are being driven by COVID-19, and ivory board demand has increased as consumption of single serve meals has transitioned from plastic containers to board for sustainability.

Rising Raw Material Demand

Suppliers are also seeing rising costs for other materials, including pigments and chemicals used in ink, polybag substrate, fuel and freight. Cost increases of at least 5% are expected in 2022 across these categories of materials.

Many mills in North America and some in South America delayed maintenance in 2020. Because demands for products escalated so extremely, mills delayed typical shutdowns for preventative maintenance. Regulations put into place because of COVID-19 limited access for specialized maintenance teams, mechanics and suppliers. These mills are now taking extended downtime to remedy deferred maintenance, further exacerbating the restraints of the pulp supply chain.

Despite shortages and cost increases, demand for printing is high. Many suppliers are operating at capacity.

Increased Fuel and Freight Costs

Over the past year, ocean cargo prices have skyrocketed up to four times. These prices have affected 40-foot containers, a common size for shipping products. Costs to ship to and from China have exploded within only a year’s time.

Reduced Labor Resources

In 2019, of the 14 million job postings for drivers, only 1.9 million hires were made. There has been a 40% decrease in commercial driver’s license (CDL) training due to capacity restrictions from COVID-19 and outright closures of CDL training schools. Fewer drivers means fewer goods moving across the country, not only stretching out lead times but underfulfilling demands for necessary products.

Labor shortages and the threat of COVID-19’s Delta variant outbreaks could further impact schedules and lead times.

Mail Delivery Issues and Rising Costs from USPS

In November, the U.S. Postal Service (USPS) moved ahead with its plan to lengthen the service standards for almost 40% of first-class mail and 7% of periodicals mail. Deteriorating service will most likely have a negative impact on mailer volumes and USPS revenue. Through pressure from Alliance of Nonprofit Mailers, The Nonprofit Alliance and other industry groups, I hope this misguided decision will be reversed.

So, what can you do?

Despite these myriad challenges, which will most certainly hit the nonprofit sector particularly hard, all is not necessarily lost. There are steps that can be taken and, for organizations that are prepared and flexible, there is a path forward.

Plan: Start planning now for the remaining months of 2021 and as far into next year as possible. It is important to provide a forecast to our suppliers into March and April 2022 to help source materials and set schedules. If you are expecting any potential volume increases, it’s critical to know in advance to source alternative materials. Paper availability and prices change daily — the sooner orders are confirmed the sooner you can work with suppliers to ensure the delivery of materials.

Be Flexible: Consider alternate paper stock during this time. Any flexibility will be helpful as certain stock selections may not be available or may have a significant price increase.

Review: A design review for your direct mail or custom project may uncover areas where you can reduce cost or accommodate supply issues.

Understand Postage: The USPS has recently updated its service standards increasing time-in-transit standards by one or two days for certain mail that is traveling longer distances. Businesses are asked to plan accordingly.

Go Digital: Consider digital services and a multichannel approach to supplement your printing needs. Direct mail is a long way from being replaced by digital fundraising and/or membership efforts in the nonprofit industry, but if you are not already employing an integrated multichannel approach, now would be a good time to start.

Anything you can do to get a head start on 2022 is going to pay off.