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Nov 1, 1999 12:00 AM
Close attention to production efficiencies and concern about labor shortages mark the web offset printing market in 1999.
Representing the largest segment of the printing industry in terms of volume, the web offset market boasts the biggest companies and the most employees. What happens in web offset affects the entire printing industry. Checking the pulse of this industry segment is a strong indicator of the health of the industry as a whole.
The Web Offset Assn. (WOA) and the Web Printing Assn. (WPA) conduct a web offset survey each year. The 1999 Market Outlook for Web Offset Printers provides insights into the state of the web printing industry both today and 12 months out. This year's portrait depicts a healthy industry enjoying the benefits of a strong economy and continuing demand for print products. However, the web offset market, characterized as a tough competitive environment, is also challenged by the ongoing labor shortage, which experts predict will last at least until 2003, and perhaps beyond.
This American Printer exclusive report presents highlights from the most recent web market outlook. This in-depth report was developed in conjunction with WOA and WPA, along with this year's vendor-sponsors--Baldwin Technology, Day International, Heidelberg Web and Sun Chemical.
The 1999 survey was sent to commercial heatset, coldset and combination web offset printers throughout North America. By far the majority of web printers use some combination of heatset, coldset and sheetfed presses, with 20 percent of respondents being coldset web only and slightly more than 14 percent heatset web only. Respondents are almost evenly split between coldset and heatset, with 60 percent running heatset web presses and 60 percent running coldset.
In spite of the fact that 24 percent of respondents indicate they have too much capacity, web plants are busy places. Fifty-five percent run three shifts/day and an additional six percent operate two 12-hour shifts/day. Thirty-two percent operate at least two shifts a day.
These presses are running an average of five days a week in 46 percent of the plants surveyed. Thirty-three percent operate six days a week and 13 percent report running seven days a week. With a solid economy and continuing demand for web products, printers are optimistic about the coming 12 months. Forty-three percent expect to run six days a week in the near future and 37 percent will operate five days a week. Fourteen percent expect to be running seven days a week in the coming 12 months, down somewhat from the 19 percent in last year's survey.
If the money is being made in the pressroom, keeping the iron productively operating as many hours as possible is the goal of these high-volume printers. As we will see, the work is there to keep the presses running, but printers still face problems with makeready times and overall productivity.
Median run lengths during the past 12 months were 122,500 impressions for heatset and 30,000 impressions for coldset web offset. Heatset printers anticipate their run lengths will increase to 137,500 impressions, while coldset printers project that the median run length will increase to 40,000 impressions. These projections are very optimistic, as printers were projecting much lower numbers during 1998. Heatset web printers, for example, projected median run lengths of 75,000 for 1999, when in fact, the numbers reached almost 123,000.
Median press speeds, according to the survey, are 25,000 impressions/hour for heatset printers and 18,000 iph for coldset presses. These numbers remain steady from last year's survey.
With all these presses running faster and average run lengths increasing, printers still must consider waste and spoilage, as well as chargeable time. Bottom line increases are to be found in productivity enhancements, not just press speeds.
In the 1999 survey, web printers reported average makeready waste of 8.7 percent, almost the same as in 1998, and average running waste of 5.5 percent, again the same as in 1998. These statistics are often difficult to evaluate because of the lack of exacting waste standards. Variations can exist due to age of the press, makeready methods, peripheral equipment, coverage, color requirements, etc.
Spoilage, however, is easier to pin down. "As calculated in tons or pounds, a printer's spoilage should be less than two percent," advises William C. Lamparter, president of PrintCom Consulting Group (Charlotte, NC). "If it is between two and five percent, it's a clear indication that there is room for significant cost savings improvement."
The fact that average waste and spoilage numbers remain stable across this web offset segment year-in and year-out would indicate that there is certainly room for improvement in this area. With paper prices projected to increase during 2000, printers may be more concerned about waste statistics in the months to come. Not having a handle on waste can negatively affect printers' profitability.
High spoilage numbers in particular indicate that something has gone wrong. Spoilage is unexpected and, therefore, not factored into job estimates. With tough competition and very narrow profit margins, spoilage has an immediate and direct correlation to the bottom line. As such, it should never be "acceptable."
When the survey asked about the causes of makeready waste, a familiar story is told--color, registration and inking continue to hold sway as the biggest culprits. In the 1999 study, 26 percent of respondents reported color-related issues as the major cause of makeready waste, and 21 percent reported registration as the major problem. And many printers listed both color and register as twinned causes of makeready waste.
Plate remakes, customer demands and folder problems all were seen as contributors to makeready waste, along with a host of other problems. A whopping 32.5 percent of the causes of makeready waste fell into the "other" category, meaning that less than two percent of respondents reported the same cause.
Registration problems, although still dominant, continue to decline. Newer presses with more automated registration and color controls may account for some of these advances, along with the adoption of computer-to-plate (CTP) technology. But getting to color remains the biggest cause of waste in this area. Some can be attributed to customer idiosyncrasies. However, as CTP becomes more widely adopted and CIP3-compliant prepress interface systems penetrate the market more deeply, color issues may well decline.
Using these new digital systems, ink key settings will automatically be provided through prepress interface software to press consoles. These ink key settings are determined by digital prepress data, which also has been used to generate contract proofs. This data is then applied to ink key settings to ensure that the printed sheet matches the customer-approved proof.
Although this technology is currently available, it is not being used widely, even when installed. However, using CIP3 protocols can help web printers cut makeready times and makeready waste by getting presses up to color--and registration--faster and with less spoilage.
Moving away from the issues of waste and spoilage, the web offset survey takes a look at chargeable time on press. Chargeable time, according to the survey, is the average ratio of chargeable time to total time on web offset presses, expressed as a percentage.
In general, the results of this year's survey were encouraging. Overall, there were slight increases in total chargeable time. Almost 24 percent reported chargeable time ranging between 76 percent and 80 percent, up from 20 percent in this range last year. Ten percent of respondents reported chargeable times between 86 percent and 91 percent, which is almost double those reporting in that range during 1998.
The other side of the coin, though, is not so shiny. Seven percent of respondents reported chargeable time of less than 60 percent, and 10 percent between 61 percent and 65 percent, double that of last year. Clearly, as well as some web printers are doing, others are falling behind, reinforcing the competitive nature of this industry segment.
Web offset printers also were asked to compare their firm's current and expected capacity to actual output. Only 24 percent reported having too much capacity, down from 26 percent last year. Approximately the same number (47 percent) report balanced capacity, and 29 percent indicate insufficient capacity. These figures closely reflect last year's numbers, indicating that the web offset industry generally is enjoying a balanced business situation. But there is still a wide spread between the winners and losers in this competitive marketplace.
With presses running faster and faster and printers adding more shifts, let's take a look at what they actually are producing--and what they will be printing in the next 12 months. General commercial and advertising continue to dominate this industry segment, settling in at around 25 percent for the present. Printers project those numbers to remain about the same in the coming 12 months.
Catalogs have shown substantial gains during the past year, jumping from 8.6 percent ofthe product mix to slightly more than 14 percent. And printers anticipate that catalogs will remain strong in the coming 12 months. Although the threat from the Internet remains very real to printers, retailers are still investing in print catalogs. We anticipate the long-term outlook for catalogs to be less than stellar, but catalogers are still experimenting with the Internet. In the meantime, printers will enjoy the benefits of continuing catalog printing, with the emphasis on "unique" looks, cost-efficient production and demanding turnaround times. (For more information on the catalog market, see american printer's end-user report on catalogs in April 1999, p. 46.)
The demand for newspaper inserts remains about the same at 11 percent of the mix. Magazines and periodicals have enjoyed a slight uptick during the past year, while direct mail has slid slightly.
Newspaper shoppers are the hardest hit, sliding from 19 percent of the product mix in 1998 to only 10 percent in 1999. And printers aren't looking for any improvement in this arena. Instead, web printers have won additional work from book printing, which jumped from six percent of the mix to nine percent, with additional increases forecast next year.
Running those webs at 25,000 iph seven days a week takes a lot of paper--a point not lost on the survey's printer respondents. But what types of papers are being used? During the past 12 months, heatset printers' usage of coated paper increased from 55 percent to 67 percent, while uncoated dipped from 28 percent to 25 percent. Newsprint in the heatset market is steadily losing its attractiveness, now representing only seven percent of the mix, contrasted with 14 percent during 1998.
These trends are expected to continue with coated leading the pack at 68 percent for the coming 12 months. Uncoated and newsprint will continue to be used at current levels, according to the survey, with SCA edging up only slightly.
Coldset printers, not surprisingly, continue their commitment to uncoated paper and newsprint. Newsprint accounts for approximately 51 percent of the paper used in coldset, followed by 46 percent uncoated. Those numbers are expected to remain the same in the next 12 months.
When compared to the 1998 survey, there is a noticeable shift away from newsprint to uncoated in this arena. In a recent study done by the Graphic Arts Marketing Information Service (GAMIS), print buyers see paper as being the most important distinguishing attribute of quality. And in most cases, paper quality is defined by print specifiers as brightness levels. This fact alone may clarify the slow move to uncoated stock for coldset printers.
Of course, paper is one of the major costs involved in any print job. Paper prices, in general, have remained stable during the past 12 months, with survey respondents reporting price drops of 11 percent for newsprint and four percent for SCA. However, when asked to project paper prices for the coming 12 months, the picture was not as rosy.
Web printers see the price of coated paper increasing five percent in the near future, and uncoated paper moving up more than six percent. In addition, newsprint is expected to regain its former pricing position, after increases of 10 percent. SCA, too, will attempt to recoup lost ground with five percent price increases.
The question remains whether paper price increases can be passed on to already cost-conscious print buyers. With cutthroat pricing already in place, can printers afford to absorb these anticipated paper price increases and still maintain a healthy bottom line? Time will tell how well large printing companies fare in price negotiations and how determined the paper industry is to enforce increases.
Aside from paper, what are printers buying in the coming year? Will web presses hold sway? How about aggressive purchases of digital prepress equipment? Something for the bindery?
Press purchases still rank high. Fourteen percent of survey respondents indicate that they plan to purchase a heatset web offset press in the next 12 months, and 10 percent plan to purchase a coldset/open web offset press. This is down only slightly from last year, indicating a market in which printers continue to be serious about web press upgrades.
In addition, web printers plan to buy sheetfed offset presses. Sixteen percent are looking to add or replace sheetfed units in the coming year.
In the process of selecting a press, printers have a long list of features they consider important --all of which add up to increased productivity and savings. Features designed to increase efficiency (reduce waste/spoilage) were seen as having primary importance, followed closely by units that have high-speed printing capabilities in terms of impressions per hour. Printers also are interested in purchasing presses that reduce makeready times.
Other key considerations include the dependability and durability of the equipment, the quality of the impressions themselves and last, but not least, the projected return on investment.
What about digital workflow? Almost 29 percent of respondents currently have CTP systems, with an additional 24 percent planning to purchase in the next year. These figures are up from 1998, when only nine percent of the respondents reported having CTP systems. The intend-to-buy numbers also are up, reflecting a willingness to make investments in this productivity-enhancing technology.
CTP technology has come into its own during the past year. There are not only more users, there are more satisfied users providing a solid base of experience that can be tapped into. There is no lack of experience in the industry on issues ranging from implementation to staffing to workflow to realistic payback periods.
But buying CTP isn't like buying a new car--you have to buy the car, a gas station, the highway and the on-ramps. Fortunately, the investment can pay off in reduced makeready times, reduced waste and increased quality.
Respondents to this year's web offset survey also showed interest in purchasing imagesetters (17 percent) and four-color proofing systems (19 percent). Proofing remains a hot area for all printers, especially in light of our increasingly digital processes. New entries into both the imagesetter and proofing markets should make choices easier for printers looking for new solutions to existing problems.
In the finishing arena, inkjet continues to hold the most interest among purchasers. The move to more customized versions of catalogs and direct mail, along with concerns about postage and distribution, offer value-added opportunities for web printers.
The survey also asked printers how they planned to improve their firm's operations. As in the past two years, the No. 1 answer was to increase sales in their present market. Perhaps of more interest, however, is that web printers are becoming more interested in increasing sales in new markets. Twenty-two percent of survey respondents look to new markets for expansion, as compared to only 14 percent a year ago.
It is heartening to see web printers starting to become more sophisticated marketers. With so many companies fighting over the same pie, opportunities for expansion in existing markets sometimes are limited. Although there are undoubtedly opportunities to sell more to current customers, printers are well advised to look to new markets to bolster sales.
Customers don't buy printing; they buy the results that printed products yield. The best salesperson is the one who understands the driving forces behind customer demands. If customers are concerned about distribution costs, for example, opportunities for new services may lie in innovative solutions to this problem.
Printers must ask what differentiates their company from the competition. To be successful in coming decades, printers should offer services that distinguish their operation from others. These services need not be elaborate, but they must be oriented to the needs of the client. To stand out from the commodity supplier, printers must find new ways to get customers' products to market faster, cheaper and more effectively. The best marketing strategy a printing company can adopt is to offer services that help its customers differentiate themselves in a crowded marketplace. Proactive innovation is the key, along with an in-depth understanding of the key drivers in the buyer's business.
But increasing sales is not the only answer in today's web offset industry. Successful printing companies also must keep an eagle eye on increasing productivity. Twenty-two percent of survey respondents understand this, listing improved efficiency as a top-notch way to improve operations--and profitability. An additional 10 percent are looking to install more production equipment to speed in-house efficiencies.
Finally, the survey asked web printers what they considered to be major problems facing the industry into the next century.
In 1998, competition weighed heavily on the minds of web offset printers, with almost 52 percent listing it as their No. 1 concern. And it is still a big issue for printers, with 72 percent of respondents listing competition/low pricing as a major problem. There is no doubt that it's a tough market out there, with printers struggling to find the magic formula for attracting customers' business.
In spite of this highly competitive marketplace, printers are now more concerned about the lack of skilled employees. Seventy-three percent of respondents stated that finding the right people for the right jobs is increasingly difficult.
This is not a problem unique to the printing industry. With unemployment running at 4.2 percent to 4.5 percent, employers are scraping the bottom when it comes to filling positions.
Finding good people is not an easy task, and printers must be willing to hire some less obvious choices. Web printers are using unique devices to attract the attention of young people to the industry. Perry Judd's, for example, has made good use of billboards and radio advertising. And many web printers work closely with local high schools and technical colleges, establishing their companies as the place to work. Human resource experts believe it is easier to attract talented people as employees if the company is seen as a community leader and a desirable employer.
In general, printers must look more closely at what attracts people to their company. It isn't always a case of who pays the most money. Experts claim that the reason most often given for leaving is a lack of advancement opportunities. Young employees are looking for more promotion opportunities and they want promotions to be given sooner and more frequently. To that end, companies that provide training, tuition reimbursement and fast-track advancement programs are positioned to attract and retain the best employees. And firms willing to provide unique benefits, such as fitness centers or employee discounts at area retailers, also position themselves as desirable employers.
Digital technology still looms large for web printers, with 37 percent of respondents listing it as one of the top three problems they face. Tied to the concern about digital technology is production problems, listed as one of the top three problems by almost 30 percent of respondents. As the industry slowly but surely moves from a craft to computer-integrated manufacturing, challenges abound. Finding the capital to invest in digital upgrades is only a part of the problem. Deciding which technologies are appropriate and which can be bypassed looms large in the minds of printing execs.
To help companies wend their way through digital pitfalls, technology managers are playing increasingly important roles. These individuals must not only understand the digital world, they must understand printing and customer needs. A truly effective technology manager understands the whole better than the parts. If your company doesn't yet have a technology guru on staff, now is the time to find one.
Capacity and paper pricing issues are starting to grow in importance to web printers. With anticipated paper price increases projected for 2000, printers look to that arena with some trepidation.
Environmental issues, once a major problem for many printers, has fallen in importance. But recent signs indicate that web printers are once again watching the legislative battles revolving around the environment. Although only nine percent of respondents listed environmental issues as a major concern, that is a substantial increase from 1998, when no one thought them important.
Today, more than ever before, it is important for web offset printers to hone their marketing skills to secure a loyal customer base, while striving to perfect their internal operations to improve productivity. Providing services and products that customers value and that distinguish one printer from another is absolutely essential. But attention also needs to be given to internal cost-cutting measures, especially revolving around unexpected spoilage, makeready time/ waste and workflow automation.
Web printers must creatively search for the skilled employees they will need to support their efforts into the next decade. And they must create a work environment in which talented employees have a voice in everyday operations. Invest in the digital tools to improve and speed internal operations, and create a clear marketing message to the marketplace. Stand out from the crowd. With these strategies, web offset printers will face a bright future as we move into the next century.
See charts on pages 45-58 in the November 1999 issue of American Printer.
For a copy of the 1999 Market Outlook for Web Offset Printers, contact the Web Offset Assn., 100 Daingerfield Rd., Alexandria, VA 22314; or call (703) 519-8156. The study is available to PIA web associations' members for $79.95; the price for non-members is $112.95.