BUSINESS SENSE BY STEVE PALMA, GO2 LAB MEDIA
The Costs of Drug Testing Chain of Custody and Control Forms Are Rising
Understand Why Printed Form Prices Are Increasing, And What to do About It
process. From collection to transfer to the specimen’s arrival at the laboratory, our industry relies on these mission-critical paper documents to execute drug testing. Recently, the costs associated with
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printed forms have been on the rise. Tere are several factors contributing to these price increases, including current trends in the paper market, the cost of warehouse labor, rising transportation costs, and the adoption of electronic solutions.
Producing Paper: Rapid Changes in the Global Market
To understand the pricing of printed chain of custody and control forms, let’s first take a close look at the paper market.
Supply and Demand A balance between supply and demand is required to sustain paper prices. Currently, the market is experiencing an imbalance. On the supply side, there have been major capacity reductions among paper producers, while on the demand side, we have an improving U.S. economy, lower unemployment, and gains in commercial print shipments influencing paper price increases.
Mill Operation Costs Te impact of supply and demand in the paper market extends to the operation of paper mills. The number of machines producing
Uncoated Free Sheets (UFS) paper has been on the decline, and an additional reduction in capacity is scheduled for 2019. UFS mill inventories are at three- year lows, resulting in longer lead times to fulfill orders. Mills are also grappling with high operating rates and increased
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n the Drugs of Abuse industry, chain of custody and control forms are still essential to the entire testing
operating costs. In fact, there have been four UFS price increases in 2018 alone—the most increases in a single year since 1995.
Raw Material Costs In the global pulp market, prices are climbing to unprecedented highs. According to RISI, the leading information provider for the global forest products industry, pulp producers increased prices nine out of twelve months in 2017 and seven out of the first eight months in 2018. Factors contributing to these 17 increases include Chinese demand and weather related disruptions in supply. In addition to record-setting pulp
prices, we are also seeing an increase in the cost of chemicals. Most chemicals used in paper
production come from China, where environmental reform has disrupted the supply and triggered price increases. Raw material costs are expected to stay on an upward trend with continuing issues of availability from China.
Transportation Costs As the pulp market reacts to mill operation, raw material, and environmental costs, the price of transportation is also approaching 40-year highs. As the U.S. economy strengthens, demand for trucks is outpacing the supply of drivers. An estimated 50,000 more drivers are needed just to meet the current demand. Meanwhile, turnover at large fleets rose to an annualized rate of 95% in 2017. Transportation costs are also affected by high fuel prices, a truck shortage, and rising booking rates. When comparing July 2017 to July 2018, the average cost per mile to book a truck rose by 29%, extending a stretch of year-over- year continuous gains to 17-months. Tis
winter 2019
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