Supply chains built decades ago look very different today, in a postglobal world marked by government intervention, labor disruption, and capital scarcity. In the past, paper and packaging supply chains came under much less scrutiny. Why? Supply was often tight or balanced with demand, and companies didn’t need to distinguish their supply chains since end customers ultimately didn’t have much choice.

Now, dynamics have changed. As oversupply has come to characterize many paper and packaging markets, leading companies are using supply chain performance as a competitive differentiator. No longer are paper and packaging executives addressing supply chain management only when there are deviations. Instead, senior cross-functional teams optimize supply chains during periods of growth and contraction alike.

Building supply chains, then and now

Efficient supply chains used to be built for global scale. It was often sufficient, for example, to observe others, avoid the costs and mistakes of first movers, and then respond quickly to improve on competitors’ innovations in what was known as a “fast follower” approach. Now, however, supply chains need to be built for regional scale, and they are generally shorter and more diversified.

Supply chain disruptions like the UPM strike in Finland in 2022 and the Suez Canal blockage in 2023 have made packaging companies rethink their supplier choices and adjust network design to ensure continuity in a rapidly changing macro environment. In line with broader trends, companies are also shortening supply chains as they move away from “make-to-order-to-stock”—that is, forecasting demand, manufacturing products, and then storing them for clients. Now, products sit for very little time in warehouses, if at all, as companies shift toward a “make-to-order-to-print” strategy.

Supply is also evolving. Leading companies are working to create more circular and traceable supply chains, partly in response to new regulations such as the EU Deforestation Regulation (EUDR) that are mandating traceability. In the case of the EUDR, companies must prove their products are deforestation-free and produced in compliance with the laws of the origin country of the covered commodities, which include cattle, cocoa, coffee, oil palm, rubber, soy, and wood. One leading Nordic packaging company, for example, uses satellite imagery, 3D models, and data analysis to track and ensure that it is sourcing its fiber—for packaging materials and other products—from sustainably managed forests.

The government and regulatory landscape has changed dramatically, from a relatively stable environment to a much more volatile one. Paper and packaging companies must abide by regulations that often are more local than in the past. In the US, for example, individual states set sustainability regulations for packaging. In the EU, however, the Paper and Packaging Waste Regulation (PPWR) sets baseline requirements for packaging companies across Europe, and individual countries may set more ambitious targets affecting material choices, packaging design, and so on, which companies must also abide by.

In addition to navigating different regulations in different markets, paper and packaging companies need to be able to adjust their supply chains in response to regulatory changes. When companies face new tariffs, for example, supply chain transparency and traceability allow them to understand their exposure and prepare for mitigating actions, such as rapidly shifting the supplier base, if possible, or taking supply chain cost impact into account in pricing.

To gain visibility into its supply chain and shock exposure, one packaging company did a detailed mapping of its supply chain, building a view of tariff exposure to primary imports, finished goods to customers, intracompany trade, and domestic procurement (see Figure 1). A similar method can be used to model any supply chain disruption. In order to prepare for and respond to changes, companies need full visibility into their supply chains—not just Tier 1 suppliers but also further down the value chain.   

Figure 1

Automation is also transforming the supply chain. Whereas using digital tools for data collection was once cutting edge, today digital infrastructure is table stakes. Leading companies deploy intelligent automation and are starting to adopt AI to optimize supply chain planning. Smurfit Westrock, for example, has developed AI systems, trained with historical outcome data, that capture and codify decades of operational wisdom, enabling dynamic supply chains that adapt to changing market conditions. The company also uses AI tools to optimize forecasting, logistics, resource allocation, and manufacturing schedules.

As a result, the level of employees managing these supply chains has changed. For instance, at Smurfit Westrock, supply chain management historically centered on maintaining cost efficiency and reliable service levels. But more recently, the supply chain has become a core strategic function within corporate and board settings, and cross-functional executive teams use supply chain management as a differentiator from competitors.

Managing supply chains, then and now

As supply chains themselves have transformed, paper and packaging executives are managing them very differently too. Previously, leaders may have solved for a few select variables. In this setting, siloed, functional excellence was generally the norm.

Now leaders must embrace adaptability and resilience with their supply chains. They must regularly solve complex, multivariate equations. For example, increasing energy prices add complexity to production planning for pulp producers. Instead of running capacity either 24/7 or curtailing it completely, companies schedule to optimize capacity utilization, customer delivery on contract, and energy cost. To manage supply chains effectively in this new era, leaders are constantly evaluating and making strategic trade-offs, along with developing cross-functional teams within their companies and new industry partnerships outside.

Optimizing new supply chains: key strategies for leaders

Better reflect the evolving needs of customers, as a whole and individually. Today’s supply chains need to be responsive, working at high speed to address shorter lead times. In one example, a leading packaging company was struggling with delivery precision to customers. Shipments arrived whenever they happened to, not when the customer expected, and not in the quantity ordered but rather what the supplier was able to ship. This led to an increasing number of dissatisfied customers. The company set up a task force to identify the root causes of these struggles and accurately reflect customer demand in outbound logistics. The task force was able to speed up cross-functional decision making and increase delivery accuracy to meet customer needs.

Define how to think about scale. Instead of being one-size-fits-all, supply chains are now segmented based on customers, products, manufacturing facilities, and various other variables. In almost all cases, supply chains are regional rather than global, and local scale is typically the imperative.

Shift the supply base to improve resilience. To optimize supply chains, leading companies are diversifying the supply base and often nearshoring it. At the same time, leaders need to improve their understanding of where supply is coming from (i.e., traceability), monitor risk continuously, and scenario plan so they are ready to adjust course as necessary.

Integrate AI and automation in supply chains. AI can supercharge supply chain optimization by improving planning and increasing visibility to create “virtual scale.” Leading companies deploy AI tools to boost supply chain visibility, resilience, and agility. Deploying AI can also produce greater efficiencies and lower the cost to serve customers. For example, as Brazil’s single largest pulp exporter, Suzano has a highly complex supply chain. Using a mathematical optimization tool enhanced by AI, the company has been able to better manage trade-offs between various objectives, optimize its operations, and explore economies of scale, translating to greater efficiencies and more competitive prices for customers. 

Today forward and future back

The most successful paper and packaging companies will take actions to incrementally improve today’s supply chain while also reimagining the future supply chain based on anticipated changes.

In the first category, leaders will model full tariff exposure, and review network design in light of regional alternatives and cost reduction. In the category of future-back actions, leaders will rethink the supply chain footprint to minimize geopolitical risk and comply with local regulations. They will also take steps to diversify the supply base for mission-critical inputs and enable circular models. Finally, they will deploy and scale automation and AI to drive a step change in efficiency.

Managing supply chains may be more challenging than ever, but companies that optimize theirs are already pulling ahead of competitors.