Tight Deadlines Mark Private Label

Andrew Reckner provides a rundown on the challenges of the new private label market paradigm - and gives advice on how to increase your success in the arena.

By Andrew Reckner, The Highland Group

It’s hard to overstate the need for speed amidst today’s rapidly changing market conditions. Even the private label (PL) industry, known for decades as a relatively sleepy corner of the consumer goods market, is no longer immune. Indeed, the PL world is becoming as fast-paced as the branded goods world, but with tighter margins. Retailers are now demanding incredibly short turnaround times and brand-level quality and selection, but at private-label prices. This challenging new market paradigm requires efficiency, agility and innovation across the entire PL value chain.

A recent experience of a personal care private label health and beauty products company illustrates the criticality of operational speed and flexibility. The company had a long-term relationship with a major U.S. retailer—their single largest account—to which they supplied hand lotion. The product sold well, emulating the national brand’s formula, packaging and marketing. Just prior to filling a large reorder from the retailer in anticipation of a major back-to-school promotion, they learned that the national brand had made eye-catching label design changes. The retailer loved the changes and directed the PL firm to make similar refinements to their label within 48 hours and commit to increased production levels for the new design or lose the promotional order. With their biggest order of the year in jeopardy, the PL firm moved quickly and decisively to meet the deadline.

In just two days, the firm redesigned the label and committed to having it ready for the promotion. Accelerating a process that would typically take weeks or months, they reset and printed the full run, and applied the material to new packages in record time. The retailer embraced the new product and the PL firm’s remarkable speed solidified their supplier relationship.

Could your company pull off a 48-hour miracle? Here are some areas of opportunity to increase your chances of success:

  • Eliminate operating inefficiencies. Critically evaluate all schedules and processes around product design, packaging, printing and labeling. Address gaps, risks, bottlenecks and overlaps. Identify and eliminate the root causes of production, shift, equipment, plant and quality variance. Cross-train supervisors and team members to enable quick resource realignment.
  • Maximize working capital. Take stock of receivables and collect as relationships allow. If behind on terms with vendors, negotiate new payment plans. Improve inventory management to accelerate the cash conversion cycle. Effective working capital management will free up cash, which can then be used to invest in employee training, product innovation, acquisitions or new market penetration.
  • Maximize equipment availability and utilization. Most companies overestimate asset utilization. Start by carefully tracking equipment status in terms of effective working hours, corrective maintenance, preventive maintenance, operational delays and unproductive hours. Once you have a clear picture of true equipment availability, you can take action to significantly improve equipment utilization and return on investment.

As PL firms move from “fast followers” to innovators and capture a greater share of the beauty products market, ongoing operational enhancements will be critical for success. Nowadays, every CPG firm faces the challenge of meeting heightened retailer and customer demands. Beauty packagers and manufacturers must execute operational improvements now to keep pace with the ever-increasing speed of change.

About the author: Andrew Reckner is a senior partner at The Highland Group, a global business consulting firm committed to delivering measurable financial results for its clients. For more information, please visit www.TheHighlandGroup.net