Millwood is continuing to monitor the economic factors that affect our industry. PMMI’s recent State of the Industry U.S. Packaging Machinery Report described the various ways that the global economy is impacting the packaging industry as well as projections of how these economic trends are likely to continue influencing the production of machinery and packaging in the coming years.
Deceleration in international trade and manufacturing has slowed global economic growth, with the GDP continuing to increase, but at a lower rate in 2019 than 2018. A decrease in housing investment and an increase in imports offset consumer and government spending, business investment and inventory investment. Uncertainty in global trade, including trade conflicts between China and the U.S., poses risks to financial markets, which will worsen prospects for economic growth. Oil prices have also had an impact on the economy at large, with an increasing supply and decreasing demand leading to a surplus that will affect importing and exporting economies in opposite ways.
The global spread of COVID-19 has also been a major disruption to the global economy since early February of this year, due to both safety risks the virus itself as well as policy responses. The virus created a plummet in demand, shock with tourism, travel and all group activities being significantly reduced across the globe.
Many countries choosing to discourage non-essential shopping and in-person activities have had major impacts on multiple industries, including restaurants and retail. On the supply side, major disruptions to supply chains have caused what some are calling a “human credit crunch,” referring to the effects that a sudden halt of the flow of people has on the economy.
Despite these economic slowdowns, the value of domestic shipments for packaging machinery and converting machinery both rose 4%, to $8.2 billion and $842 million respectively, in 2019. This resulted in an increase of backlog orders of both types of machinery by 6.5% compared to 2018.
The pharmaceuticals sector is forecast to grow at a compound annual growth rate (CAGR) of 1.2% from 2019 to 2025, the fastest growth of all sectors, followed by beverages, which is forecast to grow at a CAGR of 1%. The beverages sector also represents the largest share of US converting machinery shipments in 2019 with 29.2% of the share, or $245 million.
Trends show that aftermarket success for original equipment manufacturers (OEMs) rely on having excellent customer service and availability of replacement parts. Therefore, manufacturers should pay special attention to training technicians, value-add services and inventory levels.
Customer satisfaction has become a mandatory component for success rather than a bonus when it comes to field service, which creates an opportunity for OEMs to address the needs of their customers from the onset of the sale and maintain the relationship with them after the machinery is purchased.
Sustainability is also a growing focus in the packaging industry. Growing attention to the depletion of natural resources has driven demand for environmentally friendly solutions, which has increased the emphasis on optimizing machinery. At the same time, changing trends in materials are having an effect on machinery. Machines need to be able to handle these changes, such as implementing lightweight corrugated and recycled materials. They must also be as efficient as possible when it comes to box sizes and packaging, with an emphasis on reducing material usage and waste. Machines with a smaller footprint may also be favored as they reduce energy usage, which is a key factor in sustainability goals.
Maximizing productivity, efficiency, sustainability and safety are the most prominent goals for the packaging industry in the coming years, from both a machinery perspective and a materials perspective. With uncertain economic prospects on the horizon, companies that focus on these factors as well as exemplary customer service are more likely to weather the storms that may come in the aftermath of COVID-19 and other influences facing the global economy.