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!.
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Cost Impact and Budget Planning for Warehouse Operations
Label and chip shortages are creating significant financial pressure on warehouse operations beyond simple availability issues. Label costs have increased 15-25% industry-wide, with RFID tags seeing even steeper price jumps of 30-40% in some markets. These increases directly impact operational budgets that many warehouses locked in months ago.
Warehouse managers are experiencing several cost-related challenges:
- Emergency procurement costs: Rush orders for available inventory often carry 20-50% premium pricing
- Increased inventory carrying costs: Facilities are stockpiling labels when available, tying up working capital
- Labor inefficiencies: Manual workarounds for missing RFID capabilities require additional staff hours
- Quality compromises: Lower-grade alternatives may reduce adhesion and scanning reliability
Smart budget planning now includes building 15-20% contingency funds specifically for labeling supplies and establishing preferred vendor agreements that include price protection clauses. Warehouses are also evaluating their current labeling density—determining which products truly require RFID versus standard barcode labels to optimize spending.
Operational Workarounds and Process Modifications
Forward-thinking warehouses are implementing creative solutions to maintain productivity despite supply constraints. These operational adjustments help minimize disruption while extending existing label inventory.
Inventory Management Adaptations
Many facilities are modifying their labeling strategies to conserve critical supplies:
- Selective RFID deployment: Reserving RFID labels for high-value items or critical tracking points only
- Reusable tag programs: Implementing returnable RFID tags for reusable containers and pallets
- Digital-first approaches: Increasing reliance on mobile scanning and digital documentation where possible
- Batch labeling optimization: Consolidating similar SKUs to reduce total label consumption
Technology Integration Solutions
Warehouses are leveraging existing technology infrastructure to compensate for labeling gaps. Vision-based systems and mobile apps can partially replace traditional scanning in controlled environments. Some facilities are implementing hybrid approaches where QR codes printed on standard paper serve as backup identification when RFID supplies are unavailable.
Cross-docking operations are particularly adapting well by maintaining digital manifests that reduce the need for individual item labeling during short-term storage periods. This approach works especially well for fast-moving consumer goods that spend less than 48 hours in the facility.
Long-Term Strategic Considerations
The current shortage situation is prompting warehouses to reconsider their long-term identification and tracking strategies. Supply chain resilience now includes diversification of labeling suppliers and technologies.
Key strategic shifts include:
- Multi-vendor sourcing: Establishing relationships with 3-4 label suppliers across different geographic regions
- Technology diversification: Reducing over-reliance on single identification methods like RFID
- Local supplier development: Working with regional manufacturers to reduce import dependencies
- Standardization initiatives: Adopting industry-standard label sizes and specifications to increase supplier flexibility
Some warehouse operators are also exploring emerging technologies like computer vision and AI-powered identification systems that could reduce dependence on physical labels entirely. While these solutions require significant upfront investment, they offer protection against future supply disruptions and may provide long-term cost advantages as the technology matures.
Frequently Asked Questions
How long are label and RFID supply shortages expected to last?
Major suppliers indicate they won’t meet chip demand until 2024, extending RFID shortages. New chip manufacturing facilities from Intel, Samsung, and Taiwan Semiconductor won’t begin production until 2025 or later. While the Finnish paper strike ended in April 2022, underlying supply chain issues from weather disruptions, COVID shutdowns, and increased demand continue affecting label availability.
What alternatives exist if my warehouse can’t get RFID labels?
Warehouses can temporarily switch to traditional barcode labels for product identification while maintaining basic tracking capabilities. Some facilities implement hybrid systems using available RFID tags for high-priority items and barcodes for standard inventory. However, this may require adjusting warehouse management systems and training staff on different scanning procedures.
Should warehouses switch suppliers during these shortages?
Switching suppliers during shortages is generally not recommended. Maintaining relationships with current suppliers helps preserve your position in their allocation queue. New suppliers typically prioritize existing customers during shortages. Instead, communicate regularly with current vendors about delivery schedules and consider diversifying suppliers for future resilience once availability improves.
How can warehouses extend the life of existing RFID equipment?
Regular maintenance is crucial for maximizing RFID reader lifespan during equipment shortages. This includes cleaning antenna surfaces, updating firmware, calibrating read ranges, and replacing worn cables. Partnering with equipment suppliers for preventive maintenance programs can identify potential issues before failures occur. Proper training ensures operators use equipment correctly, reducing premature wear.
What impact do label shortages have on warehouse automation systems?
Label shortages can disrupt automated sorting, picking, and inventory management systems that rely on consistent labeling for product identification. Inconsistent label quality or substitutes may cause scanning errors, leading to mispicks or system delays. Warehouses may need to adjust scanner sensitivity, implement manual verification steps, or temporarily reduce automation speeds to maintain accuracy.
