How national retailers save when sourcing millions of labels

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Although most national and regional retail 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.

With so much at stake, retailers 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 without voiding OEM warranties.

When a national retailer had to convert from UPS labels to new shipping and inventory tracking labels for national rollout within 6-8 weeks, for instance, the task was urgent. Yet after some investigating the retailer was not only able to solve the problem but also drastically reduce label expenses.

"They actually shipped two weeks ahead of schedule while saving us over 40% in label costs," says Doug Williams, the print category manager. For the national retailer the overall savings added up to almost a million dollars each year, adds Williams.

Retailer labels are largely used for shipping as well as for inventory management in a variety of SKUs. 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. 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.

One of the most essential labels that Williams requires, for instance, is a product ID label. These multi-part labels can be affixed to both shipping boxes and the contents inside, on potentially any product the national retailer carries. They are used to help track inventory at over 1,000 retail stores nationwide as well as at strategically placed distribution centers, which replenish store supplies as needed.

"We use millions of these product ID labels annually alone, and they are vital to our operation," says Williams.

According to Williams, 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 a key factor," says Williams. "But reliability, service, and responsiveness are also qualities we look for in a partner."

Williams cites the example of OMNI Systems, the largest, privately owned label convertor in the United States, which specializes in pre-printed or blank direct thermal or thermal transfer labels. A few years ago, he reviewed a quote from the label converter on product ID labels for a volume of several million annually.

To start, he found the initial quote hard to believe. "When I got the pricing, I went back to OMNI twice to verify it was correct because it was much lower than our other quotes," says Williams.

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.

Such large converters can also source accessories like printheads directly from the same manufacturers that sell to OEMs, without the additional mark-ups typically involved. In addition to this, they can also include all tooling and plates at no additional cost.

"They were able to save us over $800,000 on the one label product," says Williams, who relates that he was satisfied with the quality as well. "After testing printed samples in stores, everything worked as promised from fit and form to adhesive."

Price, though, is only one piece of the equation. Selecting an unreliable or unresponsive label company when change is required can lead to range of problems including inconsistent or late deliveries, as well as raw material, adhesion, or other print-related issues.

Recently, the Fortune 500 retailer urgently required a new product ID label design that incorporated shipping function when UPS stopped providing a previously supplied label.

"We were in a time crunch," says Williams. "The new labels had to be created and produced with enough time to supply our stores and distribution centers nationally," says Williams.

OMNI worked with Williams to expedite the entire process from design, proofs, tooling, and samples to testing, approvals, production and shipping. Several artwork proof designs adjusted the size of the label's border and print area. In the end, a 3" x 6" label with face slits and removable adhesive in two different core versions were created, and over 4,500 cartons of product were direct shipped to more than 1,000 stores and distribution centers nationwide.

To ensure a smooth national rollout, the label converter was also required to hand apply a special 4" x 6" label to each carton. This was to facilitate proper storage, so that when stores received the product prior to the label transition date, they would be placed in the correct holding area of each store until the proper time.

With the national retailer and label converter working together under deadline and logistical complexity, the newly designed product ID labels were shipped two weeks ahead of schedule, enabling a successful rollout.

When dealing with potentially millions of thermal labels in rolls of varying diameters, another major concern for retail 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. 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.

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