Food Processors: How to save when sourcing millions of labels
Although most food processors view labels as a commodity item, for large operations that consume millions of thermal labels per month, it is a prime operating expense with sourcing decisions made at the corporate level.
With so much at stake, processors find themselves in a constant quest to find reliable label companies capable of delivering a quality product, consistently, and at the lowest possible price. For many, this means partnering with specialty converters that can pass on savings due to bulk purchasing power of thermal media direct from its source, in addition to unique consignment and inventory management options.
Although this can be a tall order, sourcing a thermal label supplier that can deliver all of the above can reduce annual labeling budgets by as much as 40 percent.
“You can run through a couple million thermal labels faster than you think,” says Russell Gayer, manager of printing services for a major U.S. meat processor. In addition to managing the in-house print facility, Gayer has experience sourcing labels at the corporate level.
According to Gayer, Fortune 500 food processors can utilize hundreds of millions of labels per month. Even comparably smaller operations of $200 million or more in annual revenue can have label budgets that exceed $250,000 a year.
For meat and poultry, specifically, the information that appears on the label varies depending on whether or not it is a processed or prepared meat or poultry product, or an unprocessed meat cut, or poultry product, and upon the type of package or container in which the product is packed and shipped.
However, most packages requires multiple labels including scale labels that list the price pound, net weight, total price, when the item was packed, the sell-by date, safe handling instructions and often a bar code. Labels are also used to provide nutritional information or to promote a product as “great for the grill” or “keep frozen.”
Labels are also widely used on shipping or institutional containers to impart information mandated by regulators including product type, handling statement, legend, establishment number, net weight, ingredients statement, signature line, nutrition facts, and safe handling instructions.
Far from “blanks,” these labels often come pre-printed from the converter with store name, logos or other branding, as well as fixed information and defined spaces or boxes where variable data will be printed later by the processor.
According to Gayer, the process of identifying a thermal label converter begins with an RFP to multiple suppliers, followed by careful vetting of each to determine the company’s stability and long-term viability.
“Obviously price is the ticket to the dance,” says Gayer. “However, we follow up with a lot of questions so we can learn about the company we are partnering with to determine if it can deliver the goods consistently.”
Gayer cites the example of OMNI Systems. In 2000, he contacted the company for a quote on scale labels in quantities that were in excess of thirty million per month. OMNI Systems, the largest, privately owned label convertor in the United States, specializes in pre-printed or blank direct thermal or thermal transfer labels.
To start, he found the initial quote hard to believe. “When I got the pricing, I thought surely there was a mistake,” he says.
When he contacted the company to confirm the price, OMNI Systems explained that as the largest consumer of thermal media in the world, it had the purchasing power to procure quality raw materials at extremely low rates. In addition, the company operates in a lean, modern, 24/7 operating environment. The savings that result are passed on to the customer.
Price, though, is only one piece of the equation. Selecting an unreliable label company can lead to range of problems including inconsistent or late deliveries, as well as raw material, adhesion, or other print-related issues.
“Any company can offer product at a good price, but in my opinion you measure a company by how they respond when something goes wrong,” says Gayer.
“My experience with OMNI Systems is that in the past 15 years things do not go wrong very often,” says Gayer. However, he recalls a time when the printing on the scale labels was not properly centered. OMNI Systems “stepped up to the plate and corrected it” immediately by shipping replacements even though it meant taking a $30,000 loss.
When dealing with millions of thermal labels in rolls of varying diameters, another major concern for processors is inventory management.
Once the supplier is approved at the corporate level, individual or regional processing plants can access the information and order using the company’s ERP system.
However, leaving the task of inventory management to in-house staff can result in human error that can leave the processor high and dry.
For this reason, large thermal label converters often offer several Vendor Managed Inventory options to ensure that label stock is maintained to inventory minimums and replenished quickly from regional distribution centers.
This type of program requires the label converter to maintain its own sizable inventory at specific minimums agreed upon with the customer.
“From a corporate point of view, we realize that with the volume of tens of millions of scale labels there has to be significant inventory at the supplier as well,” says Gayer. “So we worked with them to identify an appropriate min/max inventory for them to keep based on past order history and projections.”
For higher volumes, OMNI Systems offers a consignment option that allows the processor to store thermal transfer or direct thermal labels at their facility at established minimums so stock is available at all times. The processor is not asked to pay for inventory until it has been pulled and reported.
If required, OMNI Systems can also take control of the inventory process for the end user by tasking personnel to go to the processor’s site to complete inventory counts and ensure label supplies are maintained.
There are many advantages to this type of arrangement, including guaranteed product availability, less cash invested in labels sitting on a shelf, and a significant cost savings by eliminating the need for overnight or expedite fees. This type of approach can save processors up to 40% on annual thermal label budgets.
“There are companies that find [the consignment approach] to be very useful,” says Gayer. “Obviously, the advantage is you don’t have to pay for the labels until the point of usage so I can see the financial advantages to doing business that way.”