It is important to recognize that there is a big difference between the price of a label and the total cost of the labeling technology or system.
Taking a holistic view of the costs associated with different product decoration technologies can significantly influence the selection of a decoration or labeling method.
Here we aim to provide the reader with a greater understanding of the concept of ‘total applied cost’ and will help them to make more informed decisions.
There are many instances where making a straight comparison of label prices is valid, but end users need to look at the whole picture in order to make a full and realistic assessment of the costs of product decoration.
From a supplier’s perspective, encouraging end users to widen their view can also open up new opportunities to present a more compelling case for their products.
EXPLAINING THE CONCEPT OF 'TOTAL APPLIED COST'
The total cost of a label is not merely the cost of the material and its conversion…there is a much wider range of factors at play. Customers trying to make comparisons between a wet-glue and a self-adhesive label or a shrink sleeve and an in-mold label, for example, would be naïve to make a decision based on simple price per thousand comparisons.
In-mold and direct decoration, for example, often require the user to store large quantities of pre-labeled containers on-site, in order to cope with the flows of demand across a number of variants. Storage, inventory and obsolescence are all part of the labeling cost and have to be considered at the very start when decisions are being taken as to how a product will be produced, presented and marketed.
Likewise the cost of application equipment, manning levels and labeling efficiencies are likely to be key components of the cost equation.
The concept of total applied cost encompasses all costs attributed to the labeling process from start to finish. Evaluating different decoration methods using this wider definition of costing can dramatically influence the selection process.
Material content is an important factor in the price per ‘000 and can comprise up to 70 percent+ of the price of the labels, dependent on the form of decoration used. Generally those labeling systems that rely heavily on paper based substrates such as wet-glue labeling, will compare favourably to laminate structures such as self-adhesive systems that include the cost of the liner and the adhesive.
Direct printed containers also tend to have high price per thousand, but offer significant benefits on the filling line because no further labeling operation in required. Printing and conversion costs such as repro, tooling, embellishments, finishing and packing materials are also factored into the price per thousand.
Figure 9.1 compares the basic price per thousand (material/print/conversion) for a basic paper label (achievable by wet-glue and self-adhesive methods only).
As one might expect when making a comparison on a price per thousand basis, the wet-glue label format clearly demonstrates a significant price advantage over self-adhesive.
Figure 9.1 Cost per ‘000 label comparision – self-adhesive versus wet-glue labels
TAKING A WIDER VIEW
A costing model that takes a total applied cost approach offers a new perspective on the cost of decorating a pack. Total applied costing includes a host of factors such as the cost and efficiency of label application, investment in capital equipment and machinery change parts, logistics and inventory control.
Details of those factors that can be included in a total cost model are provided in Figure 9.2.
Figure 9.2 Key total applied cost elements
Application equipment is a major cost factor contributing to the cost of labeling a pack.
Investment costs for wet-glue and self-adhesive application equipment tend to be comparable. Sleeving involves both an application system and additional shrink tunnels and although cost effective may require more than one applicator per line to achieve equivalent application speeds.
Consideration must be also be given to the high capital expenditure required for in-mold labeling equipment (by the molder).
When a number of different labels are being applied on the same line then the picture is more complex.
Down-time incurred when changing between variants will be reflected in increased labor costs and loss of productivity. Self-adhesive is generally considered to be the most versatile and flexible label system when it comes to multi-variant labeling because reels can be easily changed, down times are less and they often involve fewer people on the line. Digital direct decoration methods offer significant advantages for jobs that have a large number of variants or require personalization.
Rapid changing with in-mold and some direct print decoration can be carried out on the filling line but can require considerable logistic and inventory control (resulting from the storage and use of pre-decorated containers).
Adopting flexible packaging formats can offer considerable cost benefits in that no secondary labeling is required, with the primary packaging doubling as the decorative carrier of branding. This decorative system however, is commonly integrated with the product filling operation.
CUSTOMER CASE STUDY
A revealing case study into the cost of labeling also stemmed from the work conducted by 4impression on behalf of FINAT.
The analysis looked at the actual calculations and the decision making process adopted by an end user in the high quality beverages sector.
The decision to select either wet-glue or self-adhesive labeling for their containers was based on an assessment of applicator costs, change parts for each label variant, adhesive costs, operative costs and changeover costs. A breakdown of comparative costs for this user are highlighted in Figure 9.3.
Figure 9.3 Comparative Costing Model – Self-adhesive versus wet-glue labeling
Although the cost of the applicator for both systems was similar, the analysis clearly showed that changeover and downtime costs relating to switching between variants was the biggest single contributor to total applied cost and these weighed heavily against the wet-glue format.
In addition, the cost of change parts for label applicators were also a major factor, with the cost of change parts for the wet-glue system being almost twice that of the self-adhesive format. The additional adhesive cost for wet-glue was also taken into account.
On a total applied cost basis self-adhesive was a clear winner in this case.
The practicalities of applying the label were a major contributor to costs. A wet-glue operation often involves longer start-up times in the bottling hall and more change parts for different sizes and shapes of labels, whilst a self-adhesive line has a quicker changeover and can involve fewer people on the line.
In this particular case study the user had to accommodate a large number of variant changes. In situations where fewer variants are used the relative costings would change and perhaps a different method of labeling preferred.
It must be remembered that there are a number of non-cost based factors that can often eliminate certain decoration methods from any effective cost comparison. The marketing or design brief may, for example, dictate that the label contains gold hot foiling which may eliminate shrink sleeving from the equation.
On the other hand a requirement to achieve decoration with 360 degree graphics and with total encapsulation of a pack would strongly favour shrink sleeving and effectively eliminate all other decoration methods.
The higher the graphic content and the wider the range of surface finishes and embellishments required, the more likely it is that self-adhesive or wet-glue labeling will be selected as the optimum decoration method.
Other practical considerations such as product resistance, chemical/water resistance, pack durability, and even pack safety often pull rank over cost issues.
If a decorative system cannot meet the required specification then it cannot be considered. A shrink sleeve on a glass bottle for instance may offer practical solutions to fragment retention, light weighting and the surface protection of the print (clear sleeves are often reverse printed) and may therefore be the only solution on offer to solve this problem.
Alternatively a self-adhesive label may be the only option if the pack has to be sterilized or autoclaved.
Pre-labeled containers such as a direct decorated or in-mold container may be the best way of optimizing speeds on the filling line.
Only when two or more decoration systems are able to meet the specification, can comparative costing take place.
The ‘manufacturing window’ is an important consideration when choosing the method of decoration because it will impinge on a suppliers’ ability to meet lead times. When deadlines are critical, for example in the case of a product launch, marketing and logistical considerations often override cost considerations.
The ‘manufacturing window’ is extended particularly when the label specification includes some form of embellishment e.g. hot foil-stamping, embossing, lamination.
Sheet-fed, wet-glue label manufacturing requires a separate machine pass for each embellishment process extending the manufacturing window considerably. By comparison roll-fed processes can produce the printing and embellishing in ‘one pass’ considerably reducing lead times.
Direct digital printing with its print on demand capability has significant advantages where lead-times are tight.
THE ENVIRONMENTAL COST OF LABELING
It is anticipated that cost evaluations of label systems will increasingly have an environmental dimension attached to them.
End users taking a holistic view will want to find ways to reduce the financial burden of packaging waste. They will inevitably favour labeling formats that facilitate the recovery and recycling of packaging waste.
Any converter that can present a total cost model that takes account of environmental impact, will be at a competitive advantage to their counterparts.
Labeling systems that are best able to facilitate total pack recyclability, cut down on application and process waste and help reduce excess packaging will become the solutions selected by end-users. Issues that could come into play are the difficulties and costs involved in removing labels or sleeves in order to re-use or recycle packs and the costs attached to the disposal of backing liners on self-adhesive systems.
The ability of the label system to reduce excess packaging in the supply chain could also be significant. For example a self-adhesive label-leaflet may offer a way for users to eliminate secondary packaging such as cartons. The graphics and information currently carried on an outer carton could now be incorporated within a label-leaflet.
Clearly there is a need to consider the total impact of labeling in the packaging supply chain and the role that the label plays in waste reduction and its influence on the ability of the final pack or product to be recycled.
LOOK AT THE WHOLE PICTURE
Often there is more than one way to decorate a product and each solution must be carefully evaluated before a rational decision can be made.
Rather than looking at any one or more criteria in isolation, a more appropriate approach is one that evaluates the total cost of labeling a pack to the required quality, performance and application speed, within a specified time frame.
Some customers will continue to look at the price of the label and not the cost of the label, but it is clear that users are coming under pressure to consider a much wider range of cost factors when selecting the most appropriate method of decorating their product. The environmental cost of labeling is a case in point.
For those who are not currently taking a wider view it is only a matter of time before they have to bend to market drivers.
In the meantime it is often in the interest of converters and suppliers to present a lifecycle view of the labeling process so that all costs are reviewed and fair and informed comparisons between labeling and other decoration systems can be made.