UPDATED 5/12/22
Supply chain problems have not gone away for any of us, unfortunately. The pandemic paralyzed manufacturing, shipping, and product distribution worldwide including the warehousing industry. We are all still feeling pains from inventory backlogs, out-of-stock situations, and staffing shortages. Warehouses and manufacturers are now dealing with shortages in paper labels and RFID supplies (tags, labels, and readers). Here is the latest on how these shortages can affect the supply chain industry directly.
Labeling Problems
Manufacturers and distributors may soon experience another hit to daily operations if not already – Labels price increases and a shortage of labeling supplies. Whether they are printed simply with text, include barcodes, or embedded with RFID technology, labels are used for accurate product and skid identification. Finland, specifically paper manufacturer UPM Raflatac, is a leading supplier of release base paper (the liner paper from which labels are peeled) and face paper (actual labels). At the beginning of 2022, the Finnish Paperworkers Union went on strike followed by support from the Transport Workers’ Union (AKT), which refused to handle UPM shipments out of Finland’s ports. This completely shut down UPM’s production and export of labels. The strike ended April 23 after all parties approved settlement proposals.
According to an article from Supply Chain Brain, the Finnish strike is mainly affecting western markets like the United States and Europe. Yet there have been a series of paper shortage problems happening prior to the strike caused by higher label demands, U.S. weather issues where adhesive producers are based, Covid shutdowns and restrictions, the blockage of the Suez Canal, and paper pulp supply chain disruptions. The strike just adds to the already limping industry. Labels are a critical component in the warehousing industry. Label prices are already on the rise. Hopefully, the circumstances surrounding access to affordable labeling supplies will end sooner rather than later.
Why the RFID Tag/Reader Shortage?
Warehouses that use RFID (Radio Frequency Identification) embedded labels will be hit doubly hard. RFID labels and tags use chips. The worldwide chip shortage isn’t breaking news, however media coverage seems focused on its impact in the automotive and personal electronics industries, overlooking RFID labels in the ensuing chaos. Pandemic shutdowns led to the chip shortage and manufacturers are still playing catch-up. Distribution facilities that use the technology continue to deal with shortages in replenishing their RFID supplies.
East Asia manufactures about 95% of silicon wafers that serve as a base in which chips are placed. Many of those suppliers note that they will not be able to meet demand until 2024, extending the chip shortage. A worldwide expansion of chip manufacturing is slow going. All major suppliers are reportedly investing to increase capacity as a result of rising demand; however, it will not impact shortages for at least one-to-two years. According to Bloomberg, Intel Corp. is building a $20 billion chip-making hub in Ohio that will be open in 2025. Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co. are also expanding in the U.S., with production forecasted to be at least a year out.
These highly sought-after chips are also used in the equipment that reads RFID tags and RF labels. Now there is a backlog of orders for RF readers worldwide due to pandemic shutdowns. Many of the RFID equipment manufacturers are located in China and have been playing catch-up too. However, the newest shutdowns have added even more strain to the supply chain, affecting new equipment orders from warehouses.
To curb disruptions in your daily operations from these shortages, your facility should continue to buy from your current label supplier so you don’t ‘lose your spot’ to someone else in need of labeling supplies at the same volume. It is also important for manufacturers and warehouses to work with your RFID equipment suppliers to properly maintain your current readers, avoiding the immediate need for new products. Have you been experiencing problems with labels or readers? Contact us and let us know!.
