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Managing paper costs

May 1, 2002 12:00 AM


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In today's economy, competition is fierce for a sustainable piece of a fragile customer base. Printers must offer notable and consistent quality, commendable service and a fair price. While the last factor is not always the most critical, it is usually the first to get noticed and often the hardest to maintain.

The need to control operating costs is indisputable, particularly when it comes to paper. Indeed, according to GATF (Sewickley, PA) and PIA (Alexandria, VA), paper represents 22.6 percent of most printers' cost of sales.

TACKLING INVENTORY

For Sells Printing Co. LLC (New Berlin, WI), proper inventory management is critical to paper-cost control. According to Loretta Bowman, Sells supply chain manager and a certified purchasing and inventory manager, “Obsolete inventory is like a boat anchor that drags you down, while tying up dollars that could be better utilized for other opportunities.”

Sells is a full-service commercial printer that produces catalogs, annual reports, direct-mail packages, newsletters, publications and printed premiums. Its press equipment includes an eight-unit Heidelberg-Harris M300A; an eight-unit Harris M90 heatset web with aqueous coating, scratch-off, scent and pattern-gluing features; a six-color, non-heatset Didde web with roll-to-roll capabilities; and a 41-inch, five-color Miller TP-104 sheetfed perfecting press.

With such diverse applications and pressroom equipment, Sells must maintain a variety of papers in inventory at any given time. In Bowman's first year with Sells, she cut 750,000 lbs. of miscellaneous and overstocks out of the company's paper inventory, reducing it by a full third.

Bowman accomplished the inventory reduction in part by distributing user-friendly, easy-to-read inventory reports to the pressroom production staff and customer service reps, with a company-wide edict to use old stock first. She also improved the company's estimated vs. actual-usage tracking methods, ultimately resulting in a substantial reduction in overconsumption.

Not only was Sells able to redirect those dollars previously tied up in inventory, but with a more manageable inventory, the company was also able to eliminate its off-site overflow-storage facility, saving the associated leasing and insurance costs.

MULTIFACETED APPROACH

Cedar Graphics (Ronkonkoma, NY) uses a multifaceted approach to paper conservation and cost control: a comprehensive management information system, automated press controls, CTP and waterless printing.

Cedar Graphics is one of the largest sheetfed waterless commercial printers in the U.S., with two six-color, 51-inch presses, and two six-color and one eight-color 40-inch presses — all are Mitsubishi presses with coaters, and all operate without fountain solution, using waterless plates. In addition, Cedar has a two-color, 40-inch Mitsubishi press and a six-color, 26-inch Komori for occasional conventional printing applications. The company also operates a high-end photography studio and offers extensive screening options up to 500 lines per inch.

According to president Mike Clark, Cedar is known for its cutting-edge technology, exceptional quality and always delivering its jobs on time. Many of its customers are upscale fashion and cosmetics companies, and other high-profile corporate entities.

Its customers' quality expectations were one of the reasons Cedar selected waterless printing as its process of choice, with productivity being an added benefit. Because presses running waterless come up to color and register so much faster, and hold those consistently throughout the press run, paper savings of 30 percent to 40 percent have been reported.

CTP reduces spoilage because the plates come out right the first time, Clark says. Fewer plate remakes and tighter registration further reduce makeready waste.

In addition, Cedar Graphics uses CIP3/4-compliant equipment. Clark notes that Cedar's front end is wired directly into the press console. The RIPed data automatically write a file to the press to set the ink fountains, resulting in tremendous time and paper savings. Clark reports excellent color on the second pull. Makereadies that took two hours just a few years ago are often down to 30 minutes for a four-color job, or one hour for a six-color job's makeready.

Clark quantifies the savings by acknowledging that Cedar Graphics still charges the same prices it did 10 to 15 years ago. The time and paper savings allow the firm to hold its prices, while producing more jobs. Now it can complete five to six jobs per eight-hour shift, instead of three or four.

Clark reports that between waterless printing and CIP3, Cedar has created up to 25 percent more capacity: “We're able to sell more work in less time and be competitive both from a pricing and performance standpoint,” he says.

PAPER SPECS DRIVE QUALITY

At R.R. Donnelley & Sons (Downers Grove, IL), customers range from producers of small, short-run magazines and catalogs, to some of the largest publishers in the country. “Generally speaking,” says Tom Hayes, director of supply-chain development, “Donnelley recognizes that each customer has different needs, and tries to put together programs around those needs to deliver the best value.”

For customers who depend on Donnelley to supply the paper, the printer offers the basic printer-supply approach. For medium-size and large customers, it has developed what Hayes calls hybrid approaches, where Donnelley actually becomes co-manager of the customer's supply chain. In addition to making sure the customer ends up with paper that meets its quality requirements and budget constraints, and will successfully run through the presses with consistent quality, Donnelley looks at costs across the entire supply chain to see where it can improve paper productivity.

Obviously, waste reduction is a major contributor to that productivity, and Hayes recognizes that one of the biggest causes of waste at Donnelley plants is web breaks. To address this and other issues of productivity, Donnelley created an extensive set of Paper Roll Specifications (available at www.rrdonnelley.com/services/paperspecs). Hayes reports that the specs have been endorsed by most of the major mills, because Donnelley worked hand in hand with them to write guidelines that the mills can work with and that also drive tighter tolerances.

In addition to web-break performance standards, Donnelley's paper specs include mill splice restrictions, acceptable basis-weight variation, maximum/minimum roll diameters, core specifications and wrapping instructions.

Across Donnelley's long-run printing platform, 50-inch diameter rolls are standard, subject to maximum weight as dictated by the physical limitations of material-handling equipment and press reel stands. The larger roll diameters drive efficiencies at both the paper mill and the printer.

To further minimize web breaks and improve productivity, Donnelley spends a lot of time training its staff on Six Sigma methodology. Everyone — from the roll truck drivers to roll tenders, press crews and customer service reps — are trained on the value and importance of paper, including identification of root causes of waste and web breaks. The printer is also focusing on reducing inventory.

“In the end,” says Hayes, “we have to be aware that, as printers, we're not just competing with other printers, but we're competing with other media. The more efficient we are with the supply chain, the better off we are in terms of serving our customers.”

Paper prices stabilize as economy recovers

What will happen to paper prices as the economy and print markets recover? Will they continue to stabilize or even fall as they did last year, or will they spike, as they did in 1994 and 1995?

“Most indicators point to continued stability or softness — at least for the short run,” says Dr. Ron Davis, chief economist for PIA (Alexandria, VA). “Printers' paper costs were down about one percent for 2001. As of January, printing and writing paper prices were down by 1.8 percent from January 2001, based on government data.”

U.S. paper production declined by 5.8 percent in 2001 after falling 2.5 percent in 2000. Overall, printing- and writing-paper prices declined in 2001.

Davis says the wave of paper-company mergers and acquisitions in the past few years is an attempt to reduce overcapacity in the paper industry. But, while there has been some mill restructuring, Davis notes there is still plenty of worldwide capacity coupled with a generally soft worldwide demand.

“Based on the current global paper supply demand, we can expect stable paper prices through the remainder of the year,” says Davis. He notes, however, that paper markets may start to tighten in 2003 as economies in other parts of the world recover.

Is it waste or spoilage?

Waste is the amount of time and material — including paper — consumed during the production process that can't be billed to the customer, such as plate remakes, makeready waste and production inefficiencies. Waste costs are included as a part of a printer's operating expenses and are factored into job estimates.

Spoilage, on the other hand, can be defined as an error caught after the printing or binding process. Examples include reprinting signatures because of color variations, cutting errors and shortages.

To reduce spoilage and waste:

  • Clearly define both terms to all employees.
  • Accurately measure waste and spoilage and communicate the results.
  • Involve employees in solving the most significant problems — you can't fix everything at once.
  • Benchmark your current performance against past years' and evaluate the company's progress.

Source: Peter Doyle, operations manager, Action Printing (Fond Du Lac, WI)