Estimating for label and package printing

Historically, the estimating process was virtually a manual operation, and the estimator had to be reasonably good at mathematics, be orderly and accurate, methodical and legible with figures . with a good technical knowledge of all the processes, the sequence of pre-press, press and finishing operations, and be able to understand what job requirements might cause production problems.

It was also necessary for the estimator to compile records of actual outputs for different operations and processes, to prepare output tables, and to regularly compare estimates with actual costings. They would have a printed estimate form which had to be filled in as the estimate progressed. Although these stages were not too difficult for a good estimator in general printing, it was a time-consuming and onerous process, with no industry standardized estimating forms for label and carton production. It was the advent of the computer and the development of dedicated estimating software that began to change things.

Estimating software for the general printing industry has helped make the production of estimates for more standard print items much easier and more accurate. Label and package printing however, can be far more complex. There are frequently many more printing and finishing operations to be taken into account . flexo, offset, screen, letterpress, combination process, digital, hybrid, die-cutting, foiling, embossing, varnishing, slitting, web inspection, re-winding, etc. Then there is the whole area of origination, pre-press, plate and die-making, distortion for sleeving, cutting and creasing for cartons.

Even the possible range of materials that are used in the world of labels and package printing is way beyond that of the commercial printing sector. Just think of the many different paper and board materials used: matt, gloss, coated, uncoated, high wet strength, and much more.

Then there are all the different filmic and non-paper substrates, such as PET, OPP, PVC, PE, OPS, metalized film and metallic foils, etc., that may be specified, as well as a whole range of different adhesive types and release liners.

Label and package printing has become even more complex in recent years with the introduction of digital printing presses, both electrophotographic and inkjet, as well as hybrid digital/conventional presses for specific types of work and applications. Frequently today, the label printer may also wish to estimate a job for both conventional and digital printing and work out the crossover point in terms of run-length and profitability.

As the starting point for any new job it is essential that the data can be carried forward to each subsequent stage . order processing, production scheduling, inventory control and purchasing , job costing and accounting . as seamlessly as possible, without re-keying or additional data entry. This can be seen in Figure 2.1.

So let’s now look in more detail at the requirements of an estimating system, both in terms of what it should be expected to do, what it must include, and how it links with other modules in the MIS process.

RECOVERY OF COSTS

Bring all of the estimating requirements together and it can soon be appreciated that to produce an accurate estimate . or crossover estimates if multiple processes are being used . the label or package printing converter needs to know the cost of every material, every stage, every operation, every hourly pre-press, press and finishing operation rates before an accurate estimate can be produced. It may even mean preparing alternative estimates using different materials or processes for comparison.

Once entered, the information will need to be in a format that can also be carried through to all other subsequent modules with minimal or no additional data entry as required.

Remember too, that every label and package printing business has to pay wages, buy materials and meet expenses. These three basic items comprise the cost of a business and it is from the charges, made against individual production jobs, that costs have to be recovered.

Costs that need to be recovered in the estimating and costing system through hourly cost rates, materials expenses, outwork, etc. include:

• Cost of running offices and factory

• Capital investment – interest, depreciation

• Energy consumption

• Personnel costs – management salaries, canteen, etc.

• Wages, including holiday payments and employer’s liability insurance

• Plant and factory maintenance

• Administration costs – telephone, postage, auditing

• Transport and shipping – carriage, vans, etc.

With such a complexity of estimating factors and costs, it is not surprising that the first steps in the development of dedicated label (and carton) software were being undertaken as far back as the early 1980s. Today, sophisticated Management Information Systems incorporating label and/or package printing estimating programs are available from a number of specialized vendors, such as Cerm, Label Traxx, Tharstern, Optimus, EFI Radius, CRC and Globe-Tek. Pretty well all the MIS systems today are also integrated with one or more partners, including the latest Esko offerings.

Even with the sophistication of the latest MIS systems, estimating remains at their heart. Being able to estimate for different conditions largely dictates whether the MIS can readily support multiple print processes and formats, such as wind direction or the nesting or staggering of label or cartons. Many software suppliers get around this by integrating with CAD systems that can provides such calculations . in some cases being able to create nesting within the estimating program.

As the number of jobs increases and average run lengths get shorter and shorter, so the printer must be able to quickly create profitable estimates. So how does this all come together for the estimator using today’s MIS and other estimating software?

REQUESTING A QUOTE

The request for a quote . in a standardized format .should describe the external characteristics of the label or pack (e.g. size/shape, wind direction, number of colors, paper, quantities, etc.) and may need to be for different quantities, perhaps with different print or finishing options, while the converter may also be looking at printing the proposed job by either conventional or digital processes – whichever offers the best return. An example of an Online quote form using Cerm MIS software can be seen in Figure 2.2. 

As can be seen this requires data to be entered for shape, size of label, material to be used, number of colors and any finishing, quantity and the number of products, thereby enabling a price to calculated.

Some printers will already have a website that collects the necessary job information, without calculation. This is regarded as the first step.

The information is then stored and presented to the ‘estimator’. The actual ‘calculation’ becomes step two. The calculation establishes the cost. On top of this cost, somebody in the company (as step three) will define the proposed sales price, normally by adding a margin or in evaluating e.g. the added value of the estimate. Step four is to communicate the sales price in a computer generated quote letter to the customer.

To prepare the estimate the converter may additionally need to search on screen for appropriate substrates, inks, tooling or cylinders and determine their availability. Once an estimate(s) appears on screen . with the selected wind direction and maybe different quantity prices if required (see Figure 2.3) .

It may need human tuning in relation to competitors or profitability and, finally, printed onto the label or package printing company's letterheads, or sent to the customer by fax or e-mail. 

If the customer subsequently telephones to discuss the quote, then it probably needs to be instantly called-up on screen for review and maybe amendment, perhaps to compare costs and pricing between different methods of production.

With some of the latest MIS software, label companies thinking of investing in, say, a new digital press or already offering conventional and digital technologies, can run dual or trial estimates for the different technologies and do cost crossover comparisons with the other presses or press technology that they are already running or are thinking of considering. This can be based on the choice of press or on capabilities for colors and in-line finishing options, or cost (as seen in Figure 2.4.).

Figure 2.5 also shows a crossover graph, this time prepared to compare estimates for printing a job either by digital or flexo processes and based on material cost, hours and different quantities. In this cast the crossover is given as 24,140 labels at a cost of £1,310.

Leading MIS software suppliers today all incorporate an ‘online quote’ facility that will calculate the selling price online, or for a variant of an existing estimate (such as another quantity or process), will follow the rules already defined in an existing estimate. Intuitive estimating algorithms are able to provide multiple price options including best margins and different production routes (Figure 2.6). Existing rules may even apply for a brand new quote, but only in simple cases.

Another current trend is for the generation of ‘tenders’ for existing or potential customers asking for a complete pricelist for a wide range of labels in order to confirm a label printer for all of their products for the next one or two years, based upon price. This trend led Cerm for example, to write a dedicated label-wizard to make dozens of estimates in one operation.

It must be remembered however, that any estimating system is only as accurate as its cost rates. They must be up-to-date and be an accurate reflection of the true costs of running the business in terms of manpower costs, materials costs, machine running costs, ancillary costs and shipping costs. If the cost rates are not accurate, then the estimate itself will be wrong . possibly losing business or taking on work that will not make the anticipated sales margins.

REQUIREMENTS OF ESTIMATING SOFTWARE

Key requirements of a suitable MIS will include:

• Easy to learn and use, with flexibility during implementation

• Provide fast, accurate, and consistent estimates regardless of user experience

• The setting of pricing restrictions on the software user. For example, restricting the use of discounts to, say, 15% or 20% for the sales manager and 10% for others

• Adding company spoilage or waste figure allowances based on specific processes or job complexity

• The viewing of substrate, ink, foil, standard cutter or other in-house stock holding before making production decisions

• The defining of sales price bands for specific types of customers or markets, e.g. trade customers, new accounts, long-term customers, etc.

• Include multiple quantity pricing capabilities, perhaps with a sales price override

• Calculate profitability targets for all or new types of work

• Provide consolidated estimating knowledge in a centralized shared database

• The ability to undertake routine estimating/quote analysis by type of work, customer, print process, machine, personnel, profitability, etc.

• The ability to generate customer estimates for conventional analogue or digital printing processes, and prepare crossover costs between two or more presses

• The updating of any historical estimate based on the latest rates and machinery

• The ability to calculate ink, varnish or coating usage based on the substrate used, expected coverage, etc.

• Provide for the tuning of pricing whilst monitoring profitability

• Ensuring that shipping/despatch costs can be included in the estimate, based on freight method, location, weight of the shipment

• Access customer estimate history

With today’s sophisticated Online quote software, virtually any member of staff can produce an accurate quote, so eliminating delays in getting quotes back to customers. Indeed some software will even enable customers to quote jobs themselves.

NEGOTIATING WITH CLIENTS

With web-based estimating systems it allows sales to provide immediate answers to questions during negotiations with clients (see Figure 2.7), even to the point of providing detailed quotations on the road and upload artwork for the job.

Once estimates have been approved and production initiated, the estimating module will also need a range of analysis and reporting options that can provide both on-screen and printed estimate analysis. The software will provide comprehensive sales analysis by customer, type of work or market sector, profitability, customer documentation, and follow estimates through to final ledger posting.

ADVICE AND CAUTION

While the estimating and quote process has become ever more sophisticated and automated, the estimator’s role in a label or package printing plant has not been superseded. A good estimator may be able to suggest alternative options (see Figure 2.8.) while working on an estimate. 

The rule should be to quote as exactly as possible for what has been asked for, but also be able to . under an appropriate heading such as ‘additional work suggested’ . any alternatives or improvements which it is thought might interest the customer. Each suggested item can be given a reference so that the customer can come back to decline, discuss or accept. The estimate should be carefully worded to indicate clearly to even a non-technical customer, exactly what has been included.

Together with the estimate, either on the back of the quote or clearly referred, there should be set out the company’s Standard Terms and Conditions.

If a printed job is to be shipped on a periodic, monthly, quarterly or long term basis then the estimate should include terms for ‘Payment on Account’, or a sum added in the estimate to cover interest.

The best label and package printing estimating software will literally process thousands of pieces of information for each job, including a careful look at virtually every piece of equipment and capability found in-house. It will capture the best practices, giving any estimator the ability to perform at the highest level, regardless of experience. The software protects the equity found in the most experienced employees, while enforcing the business rules already developed by the company, making estimates accurate, consistent, and profitable.

When label and package printing businesses are confident in their estimating abilities, producing results that are consistent with their estimating process, then they are most likely to generate higher margins, and have the knowledge at their fingertips to understand how competitive they can be without losing money on a job.

For the future, the trend is towards ever greater estimating software integration – with other industry partners and with cloud computing – as well as the way that software is brought together and used. Rather than just buying software, the future may be more to do with licensing software and estimating modules that include after support and other services.