The UK label sector is slowing down and firms are chasing fewer clients. Customers' expectations have risen and not fallen according to a survey from Inprint business development manager Andrew Walker
The contracting sales market and supplier rationalisation by customers has led to many labelling companies posting losses and the outlook is challenging. How can this sustain the companies competing within our market and how do labellers grow their market share? Andrew Walker believes the answer lies in the customers’ hands.
In a buoyant market, demand from customers gives label suppliers the opportunity to almost pick and choose the jobs and customers they work with. This provides a strong position from which to negotiate lead times, delivery dates and, most importantly, price.
In more challenging market conditions, however, it is the customer who holds all the cards. Those suppliers who acknowledge this key change and act quickly to meet and pre-empt customer demand will survive, while those who do not risk losing the customers they have and possibly their business.
Inprint has already seen evidence of this change with typical lead times being reduced from between three and four weeks to 10 days or less.
Although this improved response rate means increased production costs, it is essential for labellers to be flexible to client needs. Inprint has also seen a change in stock delivery methods and sales agreements.
On larger print runs Inprint holds completed stock and customers are billed as the labels are shipped. This necessitates a guaranteed minimum stock threshold for the labeller and financially benefits the customer.
These changes show the increased pressure facing labellers. More importantly, they reflect the pressure that customers are facing in terms of responding to consumer demand.
Unexpected demand caused by a flu epidemic, for example, will place unexpected demand on pharmaceutical.
This demand filters down the supply chain to the labeller who can assist their customers by reacting quickly and flexibly to adjust to such demands.
There are rewards in return but not in an immediate financial sense. Instead, the principal return is one of goodwill and trust. This trust allows the relationship between supplier and customer to mature into one of partnership. In turn this will translate into profit through bigger contracts or a larger share of current contracts.
With the knowledge that its customers’ opinions shape its own strategy, Inprint has recently conducted a customer survey to better define the needs of clients.
The results give an interesting snapshot of the labelling industry, delivering several clear conclusions. Overall, the survey confirmed that labellers must be more flexible to their customers’ needs to remain competitive.
It also reasserted the concept that a customer/supplier relationship is better replaced by a mutually beneficial partnership in order to encourage business.
Customers felt that more factory visits, combined with cross-training opportunities, would benefit future projects. This would allow for an increase in skills transfer between label specialists and packaging engineers.
The survey also revealed that label innovation is important. Advances in design can deliver advantage, particularly in the highly competitive sales promotion industry where brands are battling for consumers’ attention on the shelf.
Packaging plays an important part in swaying the consumer and an innovative label design can give products an edge.
The predominant factor for growth in the industry, however, is to include legal information. Ever-changing legislation, particularly in the pharmaceutical industry, demands that more and more information needs to be included with a product.
To include this information, which is often translated into several languages as well, while reducing the overall packaging, companies are turning to leaflet-labels as the answer.
Importantly, these changes are not limited to the UK market. Their effects can be seen in the international market too. Global companies in the pharmaceutical and food-manufacturing industries expect suppliers to have global capability and to be able to support international projects.
This demonstrates a move away from the reliance on local suppliers and reflects the importance that companies place on label quality and the reduction of lead times instead.
Overall, the labelling industry needs to be more sensitive to the changes that are currently shaping our future. Only by listening to customers’ needs and working closer with them can labellers consolidate the business they have and be in a position to grow.