Managing the chain reaction

Given the challenges faced by businesses in the aftermath of the global economic crisis, the recent raft of positive indicators on the improving health of the UK economy have been a breath of fresh air indeed. That said, the improving outlook is bringing with it a fresh set of challenges for the timber transit packaging industry.

According to TIMCON, the UK trade body that represents the timber pallet and packaging industry, there is growing evidence the industry is being affected by higher timber prices and early signs of some supply shortages, largely driven by a significant upturn in UK construction market activity.

Fluctuations in market demand are nothing new, of course, but coming off the back of such a prolonged period of muted business activity, ill-prepared manufacturers could be facing some tricky negotiations on prices and delivery times over the coming months as they look to service an increasingly bullish client base.

The change in the fortunes of the construction industry is, of course, to be hugely welcomed. Few sectors were hit as hard during the downturn so to see orders in July and August accelerated at the fastest pace for three years is a major boost.

With greater demand, however, comes a knock-on effect on price. Indeed, the Markit/CIPS UK manufacturing PMI report for August identifies that purchasers are now paying more for wooden pallets and pallet timber - costs that ultimately have to be borne by the packaging manufacturer or specifier. What's more, with the UK timber manufacturing industry dominating the supply to UK customers - competition from other markets such as the Baltics has significantly tailed off recently as manufacturers and specifiers increasingly opt for the many valueadded benefits that buying British brings - there is even greater pressure on already busy sawmills, particularly when it comes to providing non-standard sizes.

Unavoidable as these market conditions are, there is much that transit packaging providers can do to mitigate them. Ultimately, it all comes down to effective and rigorous supply chain management, coupled with value engineering and continual improvement. By establishing long-term partnerships with trusted suppliers throughout the supply chain, it is possible to maximise efficiencies and ensure greater price stability and continuity of supply, even in the most extenuating of circumstances.

Working with market leaders helps, of course. Here at Nicklin, for example, we have forged strategic partnerships with key trading partners such as BSW Timber, Taylor Maxwell, DS Smith and ITW Industry over the long term and more recently developed strong relationships with James Jones & Sons and ECC Timber.

These partnerships allow us to integrate our collective market knowledge, expertise, resources and processes in order to maximise the returns we offer our clients. A simple enough concept in practice but, in reality, something that many transit packaging manufacturers don't have in their arsenal. With escalating concerns over rising prices and supply issues, all eyes will be on next month's set of construction PMI figures to see if they can continue their recent impressive gains. Looking at the wider economy, only time will tell if the tentative recovery is truly embedded for the long term.

Whatever the prognosis, establishing lasting partnerships throughout the supply chain is one way timber packaging manufacturers can put their operations on the best footing for happy clients and long-term success - in good times and bad.