How to Save When Sourcing Millions of Labels

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1 24400 Highland Road Richmond Heights, OH Phone #: Fax #: How to Save When Sourcing Millions of Labels Grocery chains that consume millions of thermal labels each month are turning to specialty converters that can reduce annual labeling budgets up to 40% Although most national and regional grocery chains view labels as a commodity item, for large operations that consume millions of thermal labels each month, it is a prime operating expense with sourcing decisions made at the corporate level. Traditionally, these labels have been supplied by the commercial equipment manufacturers of weigh scales and thermal printers in the razor-razorblade model. The equipment is often sold at, or slightly above, cost and the consumables the labels and printheads are provided over the life of the equipment for a king s ransom. With so much at stake, grocers are turning instead to reliable label providers that are capable of delivering a quality product, consistently, at a lower price. For many, this means partnering directly with specialty label converters that can pass on savings due to bulk purchasing power of thermal media direct from its source and can do so without voiding OEM warranties. By sourcing a thermal label supplier that can deliver all of the above, grocery chains can reduce annual labeling budgets by as much as 40%. 1

2 Swimming in labels Supermarket labels come in many forms: scale labels for meat, bakery, produce or deli items; merchandising labels for branding and sales promotions; shelf marking labels to provide information about the product and to help customers easily locate products on shelves; and specially coated pharmacy vial labels for prescriptions to protect against daily exposure to soaps, hand sanitizers, and lotions, etc. Far from blanks, these labels often come pre-printed 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. For grocery chains, the typical arrangement is to contract with the label supplier that then ships product to the chain s regional distribution centers or a third party logistics company. These labels are critical for all supermarkets and have to always be available in stock so appropriate min/max inventory options based on past order history and projections ensure label stock is maintained to inventory minimums and replenished quickly by the converter. Each individual store then orders the labels from its internal ERP system as needed. Scale labels for meats Among the most prevalent labels required by a chain involve the packaging of meat, so it warrants additional attention. 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. 2

3 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. For this type of labeling, grocers can get labels in two different ways. Many require large national or regional meat processors to fabricate or pre-slice the product, weigh it and apply the appropriate labels with pricing before it arrives at the store. The other option is for the grocer to do this work in house, including variable printing when needed. In some cases, it can be a combination of both. 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. Although Gayer is on the supplier side of the equation, many grocers act like meat processors, taking meat in bulk form from local suppliers and processing and labeling it for sale. As such, the experience of sourcing labels at the corporate level is very similar. 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. 3

4 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. Large converters, like OMNI Systems, can also source accessories like printheads directly from the same manufacturers that sell to the scale OEMs, without the additional mark-ups typically involved. In addition to this, they can also include all tooling and plates at no additional cost. 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. For supermarkets, at the top of the list is protecting bar codes against damage such as smudging or tearing that can affect the ability to scan the product, says Nimitt Adhvaryu, Director of Business Development and Marketing for OMNI Systems. This can happen with frozen meat, for example, that begins to thaw by the time the shopper gets to the checkout line. The condensation can quickly begin to destroy the label and affect the barcode, so labels with specialty coatings are often required. One of the most important priorities for a grocer is keeping their checkout lines moving, says Adhvaryu. When a checker can t scan an item at the register due to a bad label or damaged bar code, it slows the entire process down. Customers may become dissatisfied and even go elsewhere for faster service. So the labels need to scan the first time every time. 4

5 As for the cost savings, Adhvaryu sites an example in which a major grocery chain that was purchasing labels from the scale manufacturer switched to OMNI Systems and was able to save significantly on its annual label budget. We were told by the corporate office that we were 35% cheaper than the incumbent and with the millions of labels per year we were able to literally save them 1.5 million dollars the first year, says Adhvaryu. That is not only a lot of money, but the labels meet, and often exceed, the original equipment manufacturer s suggested spec requirements. When dealing with potentially millions of thermal labels in rolls of varying diameters, another major concern for grocery chains is inventory management. Leaving the task to in-house staff can result in human error that can leave the processor high and dry. For this reason, large thermal label converters like OMNI Systems offer Vendor Managed Inventory options to ensure that label stock is maintained to inventory minimums and replenished quickly from regional distribution centers. According to Adhvaryu, this type of program requires the label converter to maintain its own sizable inventory at specific minimums agreed upon with the customer. There are many advantages to this type of arrangement, including guaranteed product availability, less cash invested in inventory sitting on a shelf, and a significant cost saving by eliminating the need for overnight or expedite fees. With this approach, grocery chains that spend hundreds of thousands on labels annually to reduce label budgets by as much as 40%. For more information, contact OMNI Systems: Phone: (216) ; Fax: (216) ; webforms@omnisystem.com or online at Want to learn more about how Omni can help your business? Request a quote today! 5