Our experience shows that investment considerations only play a subordinate role when deciding on label management (LBM). Risk and benefit considerations are clearly at the forefront of the decision. Nevertheless, it is advisable to also pay attention to the investment costs.
In this blog, we will show you how to assess an LBM and how you can include the investment aspect in the process.
Author’s note: Please note that this is our personal opinion on the selection of a label management system. Every company has its own approaches and requirements.
Product labeling in itself does not create value. However, it secures the added value that is created elsewhere in the company: Even the best product will only achieve the best price on the market if it is identifiable and traceable and thus complies with national and global regulations and standards, for example.
The specialist literature offers a variety of models and criteria for the selection and evaluation of software. All of these are generally applicable to an LBM. It is important not to get lost in the model, but to take a pragmatic and transparent approach in order to develop the right basis for decision-making.
There are also soft factors such as overall impression, trust and competence. These are naturally difficult to evaluate.
The aim is to develop the basics for the decision-makers and to present them in an appealing way. It is highly recommended to proceed according to a concept. The more structured the procedure and the more transparent the design of the evaluation, the greater the chance that the result and the resulting decision will be understood and supported by all those involved.
We recommend assessment according to the “magic triangle”.
The risk assessment should show how business-critical the labeling process is.
A clear and comprehensible risk assessment is essential for every decision-maker.
As a rule, the benefit is determined by means of a utility value analysis. One danger here is that errors or an inadequate approach can lead to incorrect results. The more criteria are taken into account, the greater the risk that essential criteria cannot be adequately distinguished from non-essential criteria.
Payback / Return on Investment (ROI)
Calculating the payback period or return on investment (ROI) regularly proves to be very useful. The difficulty in this approach lies in determining the costs, as many are not directly available.
Total Cost of Ownership (TCO)
We find this approach useful when a decision has to be made between very different IT infrastructures or license models. For example, SaaS (Software as a Service) versus subscription or an on-premise model.
An assessment regarding the investment in an LBM is both simple and very difficult:
Costs of all operational hours spent on labeling.
Potential: 50%
Digitization and automation eliminates the need for administration and control (overhead) as well as manual selection of label templates and filling in data for the print job.
A product recall is certainly one of the most costly mistakes that can occur in a company. If the error on the label concerns identification or traceability, the damage is even greater.
Any manual intervention in the selection of the label layout or data determination doubles the risk of this occurring.
Errors that are noticed before delivery lead to unplanned additional costs and often delay delivery.
Analyses of production and packaging often reveal that labeling efforts are inadequately mapped and are often responsible for delays. Delays in labeling can be reduced with an efficient process.
Faults that cannot be rectified during operations and do not require recalls become quality cases. A quality manager usually has to find the cause of the defect and take measures to avoid it in the future. Companies that do not have access to historical print data usually bear the high costs of processing the quality case without being able to determine the exact cause.
Poor system availability, fluctuating network stability and a lack of replacement processes mean production downtime and delivery delays.
If customers have special labeling requirements, such as a private label, which cannot be implemented with the previous labeling system, opportunity costs can also arise due to lost business opportunities.
Companies that have to carry out a visual inspection again after marking or have to release parts from the marking process in other systems or manually also have hidden costs in the process here.
What counts here is the effort required to implement new requirements. Here, the number of people implementing a change and the number of system interfaces are the cost drivers.
Payback is nothing other than the reciprocal value of the return on investment (ROI).
The return represents all the savings you achieve with the new LBM. To do this, you need to go through all operational and hidden costs and make an estimate of the savings. For example, if you save one minute per print job and you carry out 1 million print jobs per year, you have a return of one million euros (assuming 1 minute = 1 euro).
The investment is the sum of all expenses. This includes project, license and maintenance costs. Infrastructure costs such as server rental can also be included. We recommend only including the additional servers, as otherwise the servers of the old system should be added back to the “return”.
In most cases, there is not enough time to present the results of a benefit analysis in detail to the decision-makers. For this reason, it is important to limit yourself to the essential points of the benefit analysis. The following points should be addressed:
We will be happy to help you evaluate the right solution for you. We also have templates in Excel and PowerPoint that we will be happy to provide you with.
