sensitive label waste
In this project our team was asked to solve a waste management
issue in a manufacturing organization. Kieran Label Company produces
labels for customers worldwide with several custom label needs.
The company is consistently growing and management has begun to
implement as many cost reducing techniques as economically possible.
Our goal was to eliminate an out dated policy initially used for
smaller job sizes. With Kieran Label Co.’s growth order sizes
have increased making the old policy obsolete. We accomplished our
goal by formulating a charting system which allows Kieran Label
Company to customize the overage amount for every order. Thus, by
implementing our policy we will save the company money on each order.
Kieran Label Corporation was founded in 1979 by Kieran Vanier.
He previously was the CEO of Vanier Graphics which he had founded
when he was in his thirties. It grew to be a multi-million dollar
company which he eventually sold and retired. After retiring he
founded Kieran Label and put it into a trust for his grandchildren,
the oldest of whom was in grade school.
When the company began it only had one press and one part-time
employee. The first year in business they sold $73,000 in labels.
Three years later their net income was positive for the first time.
Twenty-five years later they own 10 presses, employ 47 people, and
hold a paper inventory of approximately $700,000. They sell approximately
$9 million in labels per year and average a 10 percent profit.
Kieran Label specializes in custom orders. They manufacture roll,
sheet, and continuous tag and label products to meet the customer’s
specifications. With a variety of presses they are capable of printing
labels as wide as 16”. They have invested over one million
dollars in dies, to help eliminate tooling costs for the customer
and reduce turn around time.
The operations of the company begin with the customer calling
in with an order. When they call in they speak with a customer service
representative. The customer service representative receives all
of the specifications about the labels that the customer needs.
They then produce a quote for 3 quantities close to what the customer
needs. For example, if the customer needed 30,000 labels a quote
would be produced for 20,000; 30,000; and 40,000 labels. This gives
the customer a choice of increasing the number of labels they order
to get a quantity discount. Once the quote is approved by the customer
they send their purchase order and the order is processed. The customer
service representative creates a job ticket with all the information
about the job (see appendix).
Once the job ticket is completed it then goes to the purchasing
manager. He then selects what material should be used. If we do
not have the best material for the job in stock he will then purchase
it. Once the materials are decided on, the job ticket goes to the
production manager so that the job can be produced. The job it put
on the press that is most effective for the job. When the press
is ready the material is brought over and the job is set up on the
press. As soon as the job is setup the President, Bill, comes to
the press and approves the job. Once approved the job is run. Currently
they try to manufacture 112 percent over what the customer ordered.
This is because the customer will accept 10 percent over what they
ordered unless they specify that they only want the exact quantity.
The other 2 percent is to account for waste at the rewinding machine.
As the labels are manufactured they either are put onto large master
rolls or folded as they come off the press. The labels that are
folded are then put into boxes and moved over to the shipping department
when completed. The labels that are on master rolls are moved to
the rewinding department to be put on smaller rolls to the customers
The rewinding machine operator receives the master rolls and the
job ticket when the job is completed at the press. They then look
in the ticket to see how many labels the customer wants per roll.
They use that number to calculate the counter setting for the rewind
machine. To calculate this setting they multiply the number of labels
per roll by the label depth and then divide by 10. They divide by
10 because the counter is based on 10 inches. The counter is then
set to that number. Another setting on the counter is set to a little
less so that the machine will slow down and can be stopped as close
to the actual counter setting as possible. This is where our problem
takes place. When the rewinding begins the master roll is large
and slows down the machine and makes it easier to stop. As the master
roll gets smaller there is not as much tension on it and the machine
rotates faster and makes it more difficult to stop accurately. When
the rewind machine operator is finished putting all the labels on
to smaller rolls they then move the finished rolls to the shipping
department. If there are excess labels they are put to the side
and kept for a limited amount of time to be used if the customer
orders the same labels again.
The shipping department receives the jobs when they are completely
finished and ready to be boxed and shipped. They put the rolls into
boxes according to what the customer wants. When they are finished
being boxed the boxes are then shipped according to the customer’s
directions. The most common ways that jobs are shipped are by a
trucking company, UPS, or customer pickup. At the end of the day
when all jobs are shipped the job tickets are brought upstairs to
the accounts receivable clerk to be invoiced on the following day.
The accounts receivable clerk receives all the job tickets and
packing slips for all jobs that were shipped. She then invoices
each job. While invoicing she must pay attention to the quantity
of labels that were shipped. She must do this because the of industry
standards that are highly respected. One such standard is that customers
will accept a 10 percent overrun on the quantity that they ordered.
They do not have to accept more than that. This affects the invoicing
because we cannot invoice the customer for more than 10 percent
over the order quantity unless they have approved it. When the jobs
are done being invoiced, the invoices are then mailed out to the
customer with samples of the labels that were printed. After this
is completed the job tickets then goes to the costing department.
The jobs are cost by making sure all the manufacturing time and
finishing time are entered in the computer and that all material
used is accounted for. This includes raw material, ink, and boxes.
A report is then printed that shows all material and time that was
used and totals the cost for each job. Once this process is completed
the ticket is passed on to the President to review how effectively
the job was manufactured. The job ticket is then filed numerically
in a file room. These tickets are kept for five years so there is
information on each job that is manufactured. This information is
used when a customer calls in with a repeat order. When there is
a repeat order the customer service representative must go pull
the ticket from the file room and see if there is any labels stored
in the warehouse that were overrun. If there is then they would
use those labels toward the quantity ordered. If there is not any
in the warehouse then they must look to see if we lost money on
the previous job. If we lost a lot of money on the job then the
price must be adjusted accordingly. The process is then completed
as explained above.
Real Life Operational Problem
The management team at Kieran Label Co. led by Bill Walker, who
is the President of Operations and our contact, discussed with us
the operations of the company and allowed us to use our own time
frame when considering the problem to tackle. His main concern was
the amount of wasted labels at the end of production. He discussed
with us the current policy and allowed us to come up with our own
idea to solve the operational problem.
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Lifetime Value of a Customer
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