When people hear the word “tariffs” they usually think of them as either the good, the bad, or the ugly. How do packaging professionals react to tariffs?
The short answer is the packaging industry has dealt with tariffs—along with trade embargos, NAFTA, strikes, inclement weather, and labor shortages. These events require that packaging professionals must be prepared for any challenge. Over many years, packaging professionals have successfully risen to the challenges associated with tariffs and other matters. Our industry’s history says we can do it again.
When the U.S. was founded, George Washington’s second official act was to enact a 5% tariff on all items coming into the country, mostly to raise revenue for our fledging nation. Multiple presidents would follow by enacting tariffs to add to revenue, protect American businesses, or punish other countries. Throughout the 20th century, U.S. presidents enacted embargoes ranging from the Soviet Grain embargo to the total trade China embargo from 1950-1972 to the U.S. steel and aluminum trade embargoes of the 1970s and 1980s against Japan.
A look at past successes
American farmers and businesses received money from their banks and investors to hire more laborers during the Soviet grain embargo. When NAFTA was ratified in 1993, American manufacturers had to figure out ways to reduce pricing, just as they are now. Packaging companies reduced labor initially and over time, they developed unique designs, reduced packaging footprints, aided customers in inventory management, and helped with labor issues. The packaging industry’s willingness to step in and deflect some of the job losses was monumental.
Our industry aided existing manufacturing floors by developing creative and unique packaging designs that reduced material and labor costs. A prime development was RFID tags. Inventory could be tracked easily to reduce product loss. We also worked with shipping companies to reduce damage and improve cube utilization at the pallet, truck, rail, and ocean container levels. New packaging software was developed to aid multiple entities, from computer-aided design (CAD) to cube utilization software packages. These industries continue to help companies find improvements.
In past articles I have described how packaging has taught me patience, preparedness, and persistence, with the focus on preparedness. In many scenarios, packaging is the conduit between departments within companies and between manufacturing, shipping, and retail/commercial markets. Packaging professionals must traverse inclement weather and work around labor shortages. These two situations have dramatically affected trading, production, and shipments. We now face another situation requiring these same skills.
What to do today
How does one prepare for change? It depends on your specific role, whether you are a buyer in a company, a designer in a packaging firm, or the president of a packaging company. As a purchasing/sourcing agent, you should have multiple suppliers for the same substrate. An example is having 85% of your business with a preferred supplier and the other 15% with at least one other supplier. This is useful in case of inclement weather, strikes, tariffs, and/or a labor shortage. Inclement weather and labor shortages have been more devastating to packaging companies than the current tariffs. Labor shortages will continue to be an issue for the balance of this year for many manufacturers.
If you are a packaging manufacturer, the same logic applies for procuring raw materials and having a reliable labor force. If you buy your materials internationally, add a domestic source. If you supply your labor internally, develop a relationship with a labor company for overflow projects or emergencies. If you use only outside labor sources, arrange multiple sources. If you use one shipping firm, secure at least one more. If you are the president of company, create an alliance with competitors.
At times, companies are devastated by a flood or fire—and then a competitor offers to assist with recovery, orders, or shipments. Many larger packaging companies purchase from each other today, whether it be lumber, resins, paper, or tooling. To maintain U.S. dominance, the markets need these continued partnerships. Packaging companies can do their part to reduce the impact of tariffs by maintaining their customer costs or offering additional services (contract packaging or inventory management).
Packaging professionals are historically masters of change and chaos. Our world revolves around change, and tariffs are just a type of change they deftly navigate. We must be ready for anything. Packaging professionals play vital roles in our economy. We are the agents of change, protection, support, and perseverance. We can succeed once again.
The author, Dawn Burcham, is an IoPP Certified Packaging Professional and PPM Packaging Lead/Co-Packing Fulfillment Manager at GE Lighting, a Savant Company, LLC. For more information on IoPP, visit www.iopp.org.
