Competition is fierce in the label converting business, and much of that competition is related to price. However, label converters have to exercise caution in lowering prices to drive demand. With tight profit margins, it is dangerous to attract new customers based solely on cost.
Fortunately, 2021 was a banner year for many label converting businesses due to the pandemic and increased consumer demand for online access to products and services of all kinds. How can label converters hold these gains and protect profits into the future? By assessing ways to drive costs out of operations.
Here we review three challenges that may be eroding the profits in your label converting business.
1) Reducing Material Waste
The greatest offender that creates costly material waste is poor scheduling.
Effective scheduling is where it’s at for label converters. Being strategic—and masterful—at scheduling projects to minimize waste can drastically drive costs down. But scheduling shouldn’t be a manual process as it is currently in many label converting companies. Automating this process can have a significant impact on minimizing waste.
An enterprise resource planning (ERP) with a stellar scheduling function wins the deal for label converters when it comes to gaining efficiencies. Why? Because there's a lot of profit that can be pulled out of efficient scheduling.
Strategically managing project timelines also results in getting orders out quicker, which allows you to process more orders. Optimizing scheduling enables you to pull more profit from the label creation process.
2) Driving Down Labor Costs
People are part of the process. They manage the operations, deliver the goods, and represent a large part of the cost of doing business. There are a few ways this plays out in your organization.
Higher Costs Due to Too Many Manual Processes
The fewer people you have doing work, the lower your payroll and the more profit you make. Customer service is one area that eats up a lot of payroll. And inflated payroll is usually due to businesses not automating enough of the processes that drive customer satisfaction.
Bottlenecks
Bottlenecks are another area of potential optimization. The lack of digital and “self-service” options for customers can create bottlenecks in areas like art approval. These bottlenecks drive costs up and can negatively impact the customer experience. Automation not only reduces production time and errors, it shortens overall turnaround times.
Inability to Scale
If your business's ability to take on more orders is due to a lack of staff, your ability to scale is severely hindered. Growth cannot be contingent only on hiring more staff. Instead, consider modernizing processes, such as offering online ordering to reduce the staff required to process orders.
3) Machine Downtime
Lastly, another factor that significantly eats into your profits is machine downtime.
System inefficiencies lead to revenue loss and unused capacity. Downtime is one of these inefficiencies. As we like to note: “Downtime represents an opportunity cost.” And the cost can be immense.
Not optimizing your machine use is also how label converters lose out on profits.
Optimizing Machine Use
You can maximize what each machine gives you in return by getting orders ready for press more quickly and easily by automating customer service, order entry, planning, and prepress.
Imagine the savings achieved in a typical two-shift operation running equipment valued at $250/hour as follows...
Addressing Challenges
Material waste, labor issues, and machine downtime are where we see label converters losing the most profit. Conversely, they represent the biggest opportunity to improve profits. Check our new guide outlining our best practices for modernizing and optimizing your label converting business.
