How to Save Big (and Fast) with Direct Marking
Introduction
Efficiency is the name of the game and we love nothing more here Matthews Automation Solutions (MAS) than finding efficiencies that significantly cuts cost with a fast ROI. To that end, we’re interviewing Andrew Braham from our product identification division Matthews Marking Systems (MMS).
Andrew is a Business Development Manager at MMS and has helped many companies to find efficiencies in their product ID and marking systems for a smoother and more cost-effective operation.
Today we’re looking at labels vs. print-on-demand for secondary packaging, sometimes referred to as case marking and coding. Let’s jump right in.
Interview with Andrew
Lynn (MAS): Andrew, why look at carton labeling for cost savings in a distribution center? Is it really a good place to start?
Andrew (MMS): Labeling is a great place to start because it’s often overlooked. It’s easy to “do it like we’ve always done it” and focus on other areas. But replacing labels have upfront, volume, and secondary costs that all add up.
Of course, not everyone can replace carton labels with a print-on-demand system due regulations or customer requirements in their industry. But significant savings can be had if you can make the switch.
Lynn (MAS): What kind of savings are we talking about?
Andrew (MMS): Specific savings depend on your situation, but let’s take a hypothetical that’s typical for what we see with our systems involving a 4” mark. It’s a rough hypothetical, but it will give you a good idea about how label replacement shakes out.
Let’s say your production is making 5,000,000 marks per year across 21 lines. Your average cost per label is $0.028 with total annual operating costs for labels of $140,000.
When you print directly onto cartons, your average cost per mark is $0.0056. Your total annual operating costs for direct marks are $28,000. That gives you a direct printing savings of $112,000 per year over label.
Lynn (MAS): What happens when you figure in rework and the new direct marking equipment costs?
Andrew (MMS): Excellent question. The picture gets even stronger for direct case coding.
If you currently use labels, then you know about all about errors such as delamination (labels falling off,) jams and breakdowns where cartons hit the shipping exception lane for repack. 50,000 cartons per year will go into the shipping exception lane in our example with a 1% repack rate.
The cost to repack in the shipping exception lane is very expensive with the additional labor overhead involved.
Let’s estimate this late-stage rework at $15 per box, which adds up to $750,000 per year.
With direct case coding, you’ll likely reduce errors by 80%, which brings to total units that go into the shipping exception lane down to 10,000 cartons per year. That means your repack costs per year are $150,000 instead of $750,000, which is a $600,000 annual savings from the shipping exception lane alone.
Lynn (MAS): $600k is significant. That makes for an attractive ROI, yes?
Andrew (MMS): Correct. The new equipment cost for direct case coding is $40k per line in this case, or $840,000 total. The annual operating cost savings of $112k plus the $600k repack savings gives you a total annual savings of $712,000. The ROI is $840k/$712k for an 85% ROI in the first year and a 1.2 year payback.
ROI Details
| Production | Labels | On-Demand Marks |
| Number of lines | 21 | 21 |
| Volume of marks annually | 5,000,000 | 5,000,000 |
| Mark type | 4″ high with graphic element | 4″ high with graphic element |
| COST INPUTS: | ||
| Direct carton marking new equipment cost | – | $840,000 |
| Average carton ID cost | $0.0280 | $0.0056 |
| Annual operating cost | $140,000 | $28,000 |
| Annual repack/exception lane volume | 50,000 | 10,000 |
| Average cost per repack | $15/box | $15/box |
| Total annual repack cost | $750,000 | $150,000 |
| Annual error reductions | – | 80% |
| SAVINGS AND ROI: | ||
| Operating cost saving of labels vs direct marks ($140K – $28K) | – | $112,000 |
| Net repack savings ($750K – $150K) | – | $600,000 |
| Total annual savings ($112K + $600K) | – | $712,000 |
| First year ROI ($840K/$712K) | – | 85% |
| Time to total ROI | – | 1.2 years |
Lynn (MAS): Is this an average ROI?
Andrew (MMS): Everyone’s production and marking system requirements are different, so their savings will be a little different. It’s important to dig into the details in order to get a good estimate for their situation.
Lynn (MAS): What’s the easiest way to get started in figuring out more specific savings and ROI?
Andrew (MMS): The easiest way to get started is to have a 15-minute introductory call and go from there if needed. Call or email and tell me that you want to look into label replacement, and I’ll be glad to help.
For more information, go to MMS’ label replacement webpage or contact Andrew Braham at Matthews Marking Systems at braham@matw.com 412.665.2565.
ABOUT THE AUTHORS
Andrew Braham has 15 years of experience in the product identification industry with a focus on continuous improvement in cost, delivery, and quality. He has worked with large-scale retailers and manufacturers throughout the US to solve their toughest marking and coding challenges and help drive operational excellence.
Lynn Drewicz, Marketing Manager, has worked with many global manufacturers and material handling suppliers, from custom technical ceramics, metal fabrication and membrane switches, to industrial samplers, heat exchangers, batteries and automation products. Her hobbies include tennis and music.
