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We hardly discussed ye

Feb 1, 2006 12:00 AM


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Gorelick's Management

Recent industry literature is consumed with JDF, DIM, PDF and other industry-specific alphabet soup. My opinion is that these are, at best, tools, not solutions. We are subjected to results of surveys (largely unsubstantiated, with no reporting of methodology, size of sampling or number of respondents) reported by economists and other self-proclaimed industry experts, some of whom haven’t been in a small or midsize graphic arts plant in years. The closest they’ve come is a manufacturer’s news conference to discuss the latest electronic wonder . Everyday management challenges are lost in a haze of hype. This column addresses one of the critical issues that has escaped those busy following the latest technology, the fortunes of equipment manufacturers, and the fortunes of consolidators and large publicly-traded print companies: seasonality of demand and its implications.

The Computer Age
The root of the seasonality challenge is the migration of informational printing to the Internet. As recently as 1983 or so, it was axiomatic that you might never become wealthy, but you’ll always do well in this industry because people need and use printing every day. That claim was real and credible; demand for information printing two decades ago existed every day of the year.

Then computers came along. Pre-printed forms used for shop floor data collection in manufacturing facilities and cash register receipts disappeared virtually overnight. This quickly was followed by the erosion of most printed information, a process continuing to this day.

Until the mid-1980s, a family’s purchase of an encyclopedia was considered a major investment in a child’s education. In the Electronic Age, the price of an encyclopedia on a CD plummeted to less than the sales rep’s commission on the printed version.

The Internet has become the predominant source of information while print has evolved into a medium dominated by promotion and persuasion. Among the consequences: Print now has a seasonality that it has never before experienced.

Money management
Research indicates that the average printer today has a gap of 2.4 times between the best sales month and the worst sales month in any given year. As the volume of manuals, directories, schedules, price lists, parts lists and other printed information continues to decrease, printers can expect seasonality to become an even greater challenge in the months and years ahead.

The need to manage cash is at least as urgent as the need to manage profit. This phenomenon is independent of the general economy. If the current trend continues, the average commercial printer might experience a gap of three times between a year’s best sales month and worst sales month.

There are some steps than can be taken to deal with the roller-coaster ride of cash flow:

  • The traditional industry practice of staffing for production peaks should be re-examined. The risks of excess staff during slow periods are elevated. Companies should take steps to operate at break-even during the poorest sales months.
  • Cross-training to create a more versatile staff is another important step, particularly in small and midsize companies.
  • The escalating peaks and valleys of production are driving the adoption by printers of customized distribution, or post-bindery services. Activities such as kitting, storage, mail list maintenance and bulk fulfillment tend to be less seasonal than printing.
  • The cash flow issue should encourage graphic arts companies to do everything possible to accelerate the invoicing process. It’s a wonder that a printer can produce a complex, difficult process color job in two days but can’t generate an invoice for two or three weeks. (Waiting for a bill from your company’s trade suppliers? Don’t tell that to customers. It’s evidence of lack of ability or willingness to manage a company’s suppliers.)
  • Collections should be pursued aggressively. Conversely, customers that consistently remit payment within terms should be thanked formally. Cash management should include creation and conscientious maintenance of a directory of the names of individuals responsible for accounts payable at every active account.
Seasons change and so should you
The seasonality challenge rivals technological developments in its importance to the industry, but it has received inadequate attention. The consequences involve staffing, training, pricing, cash management, management of suppliers, speed of invoicing and other aspects of daily operations. It’s an issue worthy of immediate attention.

Dick Gorelick is president of Gorelick & Associates and the Graphic Arts Sales Foundation. He can be reached at info@gorelickandassociates.com.


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