Keeping your costs in check is the cornerstone of a profitable business. Not only does it help you maintain a sizable profit margin and give you an edge over your competitors, but it can give you the opportunity to reinvest in your business.
This is particularly crucial when managing your costs for label materials. According to the 'State of the Industry Update: Fourth Quarter ' report (opens as a pdf), 79.6% of printing industry participants attributed per-unit operating cost increases to inflation in the first three quarters of . However, with how averse customers have been to cost increases, only 49.8% said they increased their prices.
While the report only included printers and converters in the United States and Canada, material costs have been rising across the pond as well, with the cost of paper, films, and packaging materials going up by 70% for some European companies, per a recent white paper from Infigo.
The white paper also indicates increased ink prices, which the European Printing Ink Association linked to the higher cost of vegetable oil and shortages of palm oil and soybean oil.
Back in the U.S., the Trump administration has intentions to levy tariffs against Canada, Mexico, and China, but announced Feb. 3 that the 25% tariffs on Canadian and Mexican goods ' such as lumber products ' would be paused for 30 days for negotiations. As of Feb. 27, the latest news on this front seems conflicting. While a White House official indicated the March 4 deadline is still in place, President Donald Trump himself said the tariffs may be enacted April 2 ' nearly a full month later.
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With so many financial factors, converters and printers need to be mindful of their spending on label materials. We spoke with three label producers to give you some ideas for saving on cost without compromising quality.
Cost savings should start at the beginning of the material acquisition process, when you're sourcing materials from your suppliers. For instance, Repacorp, a PRINTING United Alliance member, negotiates with its suppliers to ensure lower costs for its materials.
'We negotiate a time frame that they will hold the pricing no matter what ' whether it's six months or eight months or a year or whatever that is,' says Rick Heinl, CEO of the Tipp City, Ohio-based company. 'Most of the time, we can get them to hold it for at least six months. Then, we price everything based upon letting customers know that if we get a price increase, we will raise the price based upon the material cost.'
Heinl also suggests asking for a rebate from suppliers.
'They say, 'Well, if you want a rebate, you have to do this much business with us,'' he explains. 'So as long as we do that much business, we're tied into it. And they don't want to lose the business, but obviously if the price is higher, you get higher sales dollars, which is higher commission off of the rebate.'
In terms of acquiring material, Lori Campbell, president of The Label Printers in Aurora, Illinois, highlights a factor that can sometimes slip through the cracks: shipping costs.
'It tends to be one of those forgotten items until you start looking at it at the end, and you go, 'Oh my God, look how much it's costing us to bring material in here,'' Campbell says. 'That's a big thing, so trying to purchase efficiently so that we're avoiding excess shipments ' not just from a cost standpoint, but also from a sustainability [standpoint]. There's no point in having trucks out there willy-nilly if we can combine some of those.'
Additionally, having a Rolodex of multiple suppliers can help you manage your materials by giving you more options to choose from.
'Sometimes, somebody will come in and say, 'We've got a better product and here's your price,'' Heinl says. 'They give us a great price, and we test it and it doesn't work. I'm not going to jeopardize my customers who have already approved the materials that we're giving them.'
When it comes to managing the material itself, storage is a top priority. Drawing from experience, Heinl says Repacorp implements air conditioning in its plants, as well as a misting system, to prevent stored substrates from getting damaged.
'I've had plastic bags with material in them, and I've had as much as a quarter of an inch of water in the bottom of the bags,' he recalls. '[Heat] drives the moisture out of the material and right into the bag.'
Another tip for reducing material costs is to limit the variety of substrates you're ordering in the first place.
'What we don't want to do is buy every single width under the sun,' says Tim McDonough, president of Butler, Wisconsin-based Flexo-Graphics. 'We've standardized, gone to the 'lean supermarket model' of standardizing on width ' 17, 16 1/2, 16, 15 1/2, and so on down the road. We try to make ourselves fit jobs into those SKU sizes. So, I'm talking about the big movers like semigloss or clear or white BOPP. Certainly, there are specialty items, certain metallic PETs or white PETs, that we'll just buy specific amounts for jobs.'
McDonough and Campbell agree that there's typically no need to stock more than what is required for the most time-sensitive jobs.
'We tend to run as much as we can on the on-demand model,' McDonough says. 'Once we get material in, it's going on the press relatively quickly ' like within a week ' and then out the door. We try not to have tons of it sitting in the warehouse.'
However, Campbell adds a caveat: If it's a material you use a lot or need to move quickly, it might be a good idea to always have extra on hand.
'With certain customers, whether it's a written agreement or a verbal/handshake kind of agreement, we'll keep a certain amount of material on the floor available for them,' she says. 'So, we have a safety stock always available for them.'
And to help streamline what you do keep stocked, Heinl suggests putting RFID tags on your materials so you can inventory them quickly.
Moving to the production floor, there are several practices that can help you manage your costs for labels.
McDonough says Flexo-Graphics, which mostly uses servo-driven presses, doesn't put just any substrate on any available press. Instead, he explains that they will evaluate which of its presses will run a particular job best, which helps to boost efficiency.
Tying in with this, Campbell emphasizes the importance of understanding how a substrate will actually move through a press.
'Some of the more aggressive, softer, oozier adhesives, if you will, can create problems on certain presses for us,' Campbell says, 'where [the operators] just have to slow the speeds down a little bit and make sure they're keeping their rollers cleaner, because things will get gummed up.'
To reduce costs further, McDonough says his operation tries to keep stock usage to a minimum during the changeover and makeready processes.
'We put a huge focus on makeready reduction and changeover time improvement,' he says. 'We always have lean initiatives going on about that, though we try and use the least amount of material possible because we do a lot of changeovers here at our company. We're not really a big long-run house, so changeovers are where we have to be efficient.'
Campbell adds that maintaining visibility on how much material is used for jobs versus how much you would have expected to use is key.
'If we think that a job should take a couple hundred feet for makeready and then a few thousand feet for the run, that's what we put out there for the press operator,' she says. 'Then we audit back to see, OK, what did you actually use? And if it's in excess of what we estimated, then we're going back and looking at OK, well, why? Was this a one-off situation? Did we have problems with the material? Did he have problems in the makeready? Did he run into a bad splice or something somewhere in the run and had to run extra?'
Campbell says that involving the operators in 'the game' of keeping material use down can help; at The Label Printers, they challenge operators to use less material than they're allotted for a particular job.
She also notes that some operations will make more labels than a customer orders in case they need extra, but she sees this as a waste of resources.
'We don't run lots of extra; we produce to order,' Campbell says. 'We very rarely will run over for overstock purposes where we just say, 'Hey, I've got an extra roll of 500 here, let's throw it on the shelf and hope that they order it again and we can use it.' We try to limit that to very rare occasions.'
At the end of the day, there are a seemingly endless number of ways to reduce your label material costs. While you may have already put some of these ' and other ' strategies in place, trying out new tactics and implementing the successful ones can help you cut costs even further and stay ahead of the competition.
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