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Nov 1, 1998 12:00 AM
Since 1983, the Web Offset Assn. (WOA) and the Web Printing Assn. (WPA), formerly the Non-Heatset Web Section of Printing Industries of America, have conducted an industry survey that checks the pulse of the web printing industry. The 1998-1999 Market Outlook for Web Offset Printers, with an expanded format, provides insights into the state of the web printing industry both today and 12 months out. The outlook paints a picture of a relatively stable industry segment beset with the challenges brought about by new technology and the increasing need to meet new and different customer demands.
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 Technologies, Champion International, Day International, Heidelberg Web and Sun Chemical.
The 1998-1999 survey was sent to commercial heatset, coldset and combination web offset printers throughout North America. Combination printers, as defined by the study, are those with heatset and coldset web offset capabilities, as well as sheet-fed presses. Of the total respondents, slightly more than 38 percent were heatset printers, 42.5 percent were coldset printers and 19.1 percent were combination printers.
For the most part, web offset printers run busy shops. Almost 35 percent report running their presses three shifts a day, while 21 percent run two shifts and 16 percent report running somewhere between two and three shifts a day. With the high cost of the presses themselves, not to mention plant overhead charges, it is no wonder that these printers keep their iron running as much as possible. Conventional wisdom says you can't make money if the press isn't running.
And these presses are running an average of five to six days a week in the majority of plants. Fifty-two percent of respondents report having run their presses an average of five days a week over the past 12 months, and almost 23 percent run six days a week. A not-insignificant 19 percent run seven days a week. When asked to project how many days they would be running during the coming 12 months, printers, in general, anticipate continuing to run five days a week or, in 29 percent of the cases, six days a week.
Median run lengths during the past 12 months were 75,000 for heatset printers, contrasted with 22,000 for coldset printers. Heatset printers anticipate their run lengths will remain approximately the same for the coming 12 months, while coldset printers project that the median run length will increase to 25,000. Median press speeds, according to the survey, are 25,000 iph for heatset printers and 18,000 iph for coldset presses.
Running all those web presses 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 paper are being used? During the past 12 months, heatset printers used 55.4 percent coated paper and 28.1 percent uncoated. This is a decrease in the use of coated paper from 61.5 percent reported in 1997. Allowing for some variation in the types of companies reporting, it was interesting to note that slightly more than 14 percent of heatset printers are using newsprint, and 2.3 percent have moved to supercalendered stock.
When asked to project paper usage for the next 12 months, the use of coated papers appears to be increasing, while uncoated papers are decreasing along with newsprint. SCA (supercalendered) rises slightly, but at lower levels than expected considering the recent addition of SCA capacity in North America.
Coldset printers are not jumping on the bandwagon for SCA either. Newsprint accounts for approximately 58 percent of the paper used in coldset, following by about 40 percent uncoated and two percent coated. Considerably less than one percent is represented by SCA papers.
It will be interesting to keep an eye on the projected use of SCA papers for 1999 versus the actual, when those figures become available. Companies such as R.R. Donnelley and Quad/Graphics see the new grades of SC papers notching up in brightness levels while still delivering the benefits of light weight. Recent technology improvements have brought SCA into the spotlight of high-speed heatset offset web markets. And customers have heard about these new offerings. "There's a whole stable of customers just waiting to test this stuff," claims one large web printing company exec.
Of course the rise in use of any paper is directly related to its cost. Paper prices, in general remained stable during the past 12 months, report survey respondents. With the exception of newsprint (which printers reported to have increased in price an average of 6.4 percent), both uncoated and coated saw decreases in prices within respondents's plants.
Projections for the next 12 months show paper prices remaining stable. Although small increases are seen, they range from a low of .5 percent for supercalendered to a high of 4.4 percent for newsprint. Printers are not worrying about paper pricing for the next year, although paper mills may be wishing for more substantial increases, in part to offset the high cost of upgrading or adding new paper lines.
Which brings us to the issue of profitability. No printer can expect to see bottom line increases without taking into consideration waste and spoilage, as well as chargeable time.
In the 1998-1999 survey, web printers reported average makeready waste of 8.8 percent and average running waste of 5.7 percent. These statistics often are difficult to evaluate because of the lack of exacting waste standards. "Waste varies by particular situations," explains William C. Lamparter, president of PrintCom Consulting Group (Charlotte, NC). "It can depend on the age of the press, makeready methods, peripheral equipment, coverage, color requirements, etc."
Spoilage, on the other hand, is easier to pin down. "As calculated in tons or pounds, a printer's spoilage rate should be less than two percent," advises Lamparter. "If it is between two and five percent, it's a clear indication that there is room for significant cost savings improvement."
With paper prices relatively stable and no large increases on the horizon, printers may tend to be less concerned about wastage statistics. However, not having a handle on waste can negatively affect printers' profitability. Spoilage in particular indicates that something has gone wrong. It is unexpected and, therefore, not factored into job estimates. Spoilage has a direct correlation to the bottom line. As such, it should never be "acceptable."
When the survey looked at the causes of makeready waste, the Big Three once again came to the fore. Registration, color and ink problems continue to hold sway as the biggest reasons for makeready waste. In the 1998-1999 study, 20.2 percent of respondents reported registration as the major cause of makeready waste, and 26 percent reported color issues as the problem. An additional 7.8 percent reported ink problems in the top three of makeready waste culprits.
Paper, customer changes, positioning and equipment problems all were seen as contributors to makeready waste, along with a wide host of other problems. A whopping 27.2 percent of the causes of makeready waste fell into the "other" category, meaning that less than two percent of respondents reported any given cause.
There appear to be fewer registration problems than reported in 1997, possibly due to the addition of new presses with more automated registration and color controls. But getting to color continues to be the biggest cause of waste in this area. Some of this can be attributed to customer requests, but we anticipate big advancements in this arena as CIP3-compliant prepress interface systems penetrate the market further.
Using these 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 ideally has been used to generate proofs that the customers have okayed. This data is then applied to ink key settings to assure that the printed sheet matches the proof. This automated technology should alleviate at least some of the issues inherent in getting up to color in a timely manner.
Even if we eliminate waste and spoilage while keeping the presses running seven days a week, chargeable time on press could benefit from close examination. Survey respondents were asked to estimate their firm's average ratio of chargeable time to total time on web offset presses. Thirty percent of respondents stated that chargeable time on their presses ranged between 71 and 75 percent. An additional 20 percent reported chargeable time between 76 and 80 percent, with 17 percent reporting 81 to 85 percent.
Respondents also were asked to compare their firm's current and expected capacity to actual output. Considering the widely held opinion that there is far too much capacity in the industry, the results were somewhat surprising. Only 26.3 percent of printer respondents reported having too much capacity, while 32.7 percent said they didn't have enough capacity. An impressive 47 percent claimed that their business balanced their current capacity. So, at least for the present, the web offset industry is generally enjoying a balanced business situation. There are those, however, who claim that the printing industry, by its very nature, will always have overcapacity. If that is so, the above figures might be interpreted as indicating a booming web offset segment. As with all things, however, reading the numbers is far different from living day-to-day with those same numbers.
With all this business, let's take a look now at what printers are actually producing--and what they think they will be producing in the coming 12 months. General commercial and advertising products continue to dominate the product mix, representing 27.6 percent of everything produced by all companies. Thisis an increase over 1997's 23 percent number, although printers believe that this category will decrease somewhat to 24.2 percent during the next 12 months.
Newspapers and inserts edged out commercial and ad products with a combined 29 percent, however this may be due to the unusually high response from coldset printers for this year's survey. Newspaper shoppers were produced by 19 percent of respondents, and newspaper inserts were listed by 10.7 percent. These numbers are expected to increase slightly, but not significantly, over the next year, according to the survey.
Magazines and magazine inserts still report solid numbers, with 12.3 percent of printers listing these products. These numbers are expected to remain steady during the coming months.
Catalog production appears to have dropped slightly from 1997, being at 8.6 percent, as compared to 9.6 percent, during the past 12 months. Continuing decreases were expected for the coming year.
Although my mailbox is still crammed with catalogs, we may be seeing some effects of non-print-based media on the catalog industry. Certainly further investigation is required into this traditionally important market segment. (For more on the catalog market from an end-user point of view, keep on eye on american printer in the coming months.)
Direct mail represents 12.7 percent of the product mix and is expected to increase another percentage point within the next 12 months. Books, both hard and softbound, also are remaining steady at slightly more than six percent for now and the immediate future.
In a quick peek at the types of equipment web printers are adding to their line-ups, 18.7 percent of respondents indicate that they plan to purchase a heatset web offset press during the next 12 months. Acknowledging that printers are generally optimistic in their forecasts and stated buying patterns, it nevertheless would seem to be a market in which printers continue to be serious about new web press purchases.
It may well be that printers view the newer press technology as being a major component in nudging productivity higher--and therefore providing more comfortable profits. In the process of evaluating web presses for purchase, printing execs have a checklist of features that add up to increased productivity and savings. Features designed to increase efficiency (reduce waste/ spoilage) were seen as having primary importance, following closely by units that had the capability of high-speed printing 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.
Not mentioned by respondents to this survey as a consideration in purchasing a press was brand or automation features. Obviously automation is part and parcel of quality and efficiency, and printers certainly have preferences for suppliers. However, in general the vendor with the most efficient press capable of printing high-quality products at high speeds should win the day--providing, of course, that the price is right.
And what of the highly touted computer-to-plate (CTP) equipment? Nine percent of the respondents report currently having CTP systems installed, while another 18.7 percent plan to purchase them in the next 12 months. This "intent to buy" percentage is down somewhat from last year, but probably reflects a more accurate percentage of those now willing to make an investment. Interest in new technology always influences printers to indicate positive purchasing plans. In reality, however, their operations may not be ready for completely digital workflows.
In addition, CTP technology has gone through a shakedown period during the past year. Today there are not only more users, but more satisfied users. This provides a solid base of experience that can be tapped into on issues ranging from implementation to staffing to workflow to realistic payback periods. There is no doubt that CTP is coming into the mainstream. The question remains whether your digital workflow is in a state to support the move to computer-to-plate. And not to be forgotten is the printers' customers. Are they ready for the shift? Buying CTP isn't like buying a new car--you have to buy the car, a gas station, the highway and the on-ramps. And that can be a daunting task for many printers.
Sheet-fed offset presses also are receiving attention. Of all respondents to the survey, almost 63 percent currently own sheet-feds and eight percent intend to purchase them within the next 12 months. Heatset printers and combination printers, in particular, are looking to add sheet-fed capabilities and/or upgrades, with just over 14 percent of these two categories indicating an intent to buy sheet-fed presses.
Respondents to this year's web offset survey also showed interest in purchasing four-color proofing systems (most likely digital systems), ink-jet systems to assist in personalization and versioning, and color scanners. A surprising 5.3 percent of respondents have indicated they intend to purchase direct digital presses--an interesting mix with offset heatset or coldset presses.
The survey also asked printers how they planned to improve their firm's operations. As in the past two years, the #1 answer was to increase sales in the present market, followed by improved production efficiencies. Thirty-eight percent of all respondents indicated that the best option to improve operations was to increase sales volume in present markets. This is only slight less (40.4 percent) than last year's survey.
While we commend printers for wishing to sell more to present customers, we also believe that web printers already are fighting for the same piece of the sometimes shrinking pie of available customers. In attempting to increase sales in present markets--selling more to current customers--the onus lies on developing truly unique services and value-added products. These services and products must be focused on solving customers' problems, not printers' problems.
It is often difficult to ascertain what customers want since they often don't know themselves. Here is where the consultive salesperson, working in close cooperation with the service-oriented CSR, can really shine. Salespeople tuned into customer's businesses, and blessed with a certain amount of empathy for other people's problems, can craft innovative solutions that will build loyalty to specific printing companies and drive that bottom line upward.
Ask yourself what differentiates your company and its services from the competition. If your answer revolves around quality products delivered on-time at a fair price, you are no different from the other 50,000 commercial printers hawking their wares. To be successful in the coming decades, printers must offer unique products and services. If you don't have a unique story today, develop one. If you don't, there will be no way to increase sales in your present market nor to enter new markets.
And while you are creating increased sales, don't forget about having a closer focus on increasing profits. It is gratifying to note that 29.6 percent of this year's survey respondents listed improving efficiency as a good way to improve operations. This is up more than 10 percent from last year and reflects a renewed awareness of the importance of infrastructure efficiencies.
In the final analysis, it is important for web printers to understand that they must do an effective job of marketing their services. Marketing includes not only identifying and mastering your core competencies, but identifying and mastering value-added services. The tough part about value-added services, of course, is that they change constantly. As soon as everyone does it, that service is no longer "value-added." Printers need a strong internal marketing organization that understands this concept and proactively works to offer customers services they truly find important.
Finally, the survey asked web printers what they considered to be major problems facing the industry into 1999.
Competition is on the minds of web printers these days, with 51.8 percent reporting competitive pricing or unrealistically low pricing. This is up from 13.8 percent in 1997. As the web printing industry becomes more commoditized, pricing pressures will only increase. At the risk of sounding heretical, savvy managers must find a way to start selling value and stop selling printing.
Food is mentioned in only 15 percent of McDonald's advertising, for example. McDonald's sells an experience. Graphic arts firms must refocus their energies around selling value instead of print. Print is merely a tool to the customer. Customers don't always see value in print--they see value in the expertise and innovative services that companies can offer to solve their problems. And these problems can run the gamut from selling more product, getting to market faster, converting more sales or just getting the boss off their back. If your services can help a client sell $100,000 more in a given year, the customer will be less likely to buy those services based on price alone.
Of course having the knowledge and efficient operations to offer unique services depends on having the best staff possible. A problem that is increasingly facing printers. Almost 47 percent of respondents listed a lack of skilled employees as a major problem. This shows a huge jump for this category from 17.5 percent in 1997 to 46.7 percent in 1998.
The lack of skilled employees is not a problem we expect to go away any time soon. Finding good staff people is not an easy task, and printers must be willing to hire some less obvious choices. And although not an easy or necessarily inexpensive task, printers should institute in-house training programs designed to educate those with the proper talents to be productive and long-term employees.
Keep in mind, however, that the culture of the workplace is extremely important in hanging on to those skilled employees. Recent studies clearly indicate that there are generational differences. If you, as a manager over 50, believe that the #1 concern of your bright, young employees is keeping a job at any cost, there will be a disconnect in your communication. Those bright young workers don't care about job security. They are interested in other attributes such as job satisfaction, participation in decision making and self-fulfillment (which may or may not have anything to do with their jobs).
To overcome the problem of a lack of skilled employees, web printers must innovate--innovate in the places they find workers, in the ongoing training they deliver and in the programs and "perks" that young staffers find meaningful. Unless these programs are implemented, finding skilled employees always will be a huge problem facing web printers.
Digital technology ranked third when asked about problems. All too often, web printers see digital technology as a mysterious universe that holds no interest and quickly turns into a money pit. With their affinity for mechanical press technology, it often is difficult for managers to comprehend and direct a focused technology plan. Although printers state they believe improving production efficiencies will improve their overall operations, frequently they shy away from investing the dollars needed to truly digitize their workflow.
The time has come for web printers to bite the bullet and target digital technology as a tool to improve customer services and, therefore, increase the bottom line. To delay is to jeopardize the long-term success of a graphic arts firm.
What is, perhaps, most interesting when looking at the problems faced by web printers is that paper pricing, once of overwhelming concern, is receiving less attention. And environmental issues, always a big concern in the past, was not listed as a problem by any of this year's survey respondents. Even capacity issues do not present the pressing concerns of past years.
Web offset printers obviously face a huge array of challenges in moving their businesses forward into the new millenium. Competitive pricing issues, lack ofskilled employees and digital technology head the list of worries that keep printing industry managers walking the floor at 3:00 a.m. More than ever, business is not "as usual." As a matter of fact, we are forgetting what "usual" means, or at least redefining what the "usual" state of the web printing industry is. Printers in this large-volume segment of the industry should vigorously take stock of where their firms should be going during the next decade. Simply building a better mousetrap (or printing a higher quality sheet) will not assure success. Take a few risks. Find services and products that truly make your company unique. Invest in the digital tools to improve and speed your internal operations. With these strategies in place, your web firm will be positioned for the next century.