American Printer's mission is to be the most reliable and authoritative source of information on integrating tomorrow's technology with today's management.
Jul 23, 2001 12:00 AM
It may appear that change in the business and technology of
print is occurring at a normal, evolutionary pace. Some printers
remain comfortable in their cocoons, believing print is still the
information king. This viewpoint is deceptive and will ultimately
prove fatal. The change to the future of printing is upon us.
Every printer, regardless of markets served, products or company size, must come to grips with some basic questions: What will my company look like by the year 2005 and beyond? What kind of printer will I be? Who will my customers be? What products and services will they demand? What process and production technology should I be learning about—and implementing today—to meet future customer requirements? What should I do now to position myself for both short- and long-term profitable survival?
How well each printer can anticipate the future—and adjust its way of doing business—is the key to profitable survival in the years ahead.
While many printers say that crystal ball-gazing is a useless exercise, I say that the road to Chapter 11 is paved with those who have not anticipated change—even when it was happening to their companies.
Profit leaders do, indeed, plan for the future. It is possible to see where customer needs, wants and desires are headed. And it is possible to then interpret those requirements into a business and manufacturing model for individual print businesses.
Pioneers, including a digital generation of entrepreneurs with no historic roots in print, are already using emerging technology to provide a widening range of products and services to a new generation of print and alternative media buyers. The seeds of tumultuous change are in the minds of the buyers and on the drawing boards of the printers’ suppliers, including some companies that are printing industry unknowns today.
Clearly FuturePrint—21st-century print—will be much more than a faster, more efficient extension of late 20th century print. The markets for print, printed products themselves, and the technology, production methods, equipment and software to produce print are changing simultaneously at an accelerating rate.
Print is in a battle for information-dissemination market share. Electronic media, including the Web, can substitute for print and are siphoning off reader time and advertiser money. Different forms of print media are vying for the same advertising and editorial dollars. Do-it-yourself reproduction equipment from black-and-white and color copiers to computer output devices and “hallway” presses are snagging a significant portion of what was once offset lithography’s domain.
The past decade has seen more than 10,000 web and sheetfed offset printing locations—mostly sheetfed plants with fewer than 20 employees—go out of business. The death creep is moving upward, now embracing print shops with up to 50 employees. Plants in the 50- to 100-employee category remain stable, while plants with more than 100 employees show very modest growth. Some large web operations, however, also have disappeared.
Ownership consolidations, now slowed by poor economic conditions, account for some closures. But many firms have disappeared for other reasons: poor management, lack of sales, low productivity, technologically obsolete equipment, the inability to obtain sufficient capital to remain technologically competitive and inadequate planning to meet changing market conditions.
PrintCom research indicates a high probability that ownership consolidation, as well as the decline in the number of operating printers, will continue over the next several years. The rate of decline in any one year is highly dependent upon the economy, but it is forecast to average about 1,150 plants per year over the next decade—primarily those with fewer than 100 employees.
Many of the surviving smaller plants, whose output has been primarily single color, have already shifted processes from offset lithograph to digital output. PrintCom estimates that black-and-white lithographic volume has been declining for several years at the rate of five percent to seven percent annually in absolute physical volume. That rate seems to have slowed to three percent to five percent in 2000.
Some of the disappearing single-color work has moved to offset spot color and, to a lesser degree, process color. Some has been replaced by the Internet and other alternative information technology. Some has shifted to high-speed, black-and-white, digital printing.
With the improved, more cost-effective generation of process-color-capable variable-imaging digital presses (including new entries to be introduced at Print 01) it is likely that history will repeat itself and that color lithography will lose print process market share to digital printing. The loss will be most noticeable in the 2003-2005 timeframe.
DOUBLE-EDGED SWORD: PAPERPOSTAGE
Print also faces the challenges of distribution issues and the increasing cost of materials—primarily, but not exclusively, paper.
The July 1 postal increase and the prospects of the U. S. Postal Service (USPS) in financial disarray and also facing quality, speed and service issues does not bode well for the printing industry. The recently imposed postal increase already has resulted in a binge of trim-size and page-count reductions. It may also result in reduced direct-mail volume and the demise of a few magazine and catalog titles.
Historically, print paper prices, now under some downward pressure, have vacillated with the economy and print volume. Fueled by paper mills’ need to meet environmental requirements and earn a Wall Street-acceptable ROI, however, paper prices have been continuously trending upward, becoming an ever larger share of print cost. No long-term relief in this scenario is likely.
The good news is that these distribution and paper issues provide an opportunity for innovative printers to develop distribution solutions and paper options that better control costs. Large printers, in particular, have established logistics units, entered the trucking business and established themselves as mailing experts. All of these move their clients’ printed products to the most cost-effective mail entry point. Judicious suggestions to customers have enabled some printers to consolidate paper purchases into a single source, thereby reducing costs. Others have planned “house paper” programs. And some printers have found they can make cost-effective material purchases on the Internet.
Any printer that does not have an information-based, aggressive waste and spoilage program is missing an opportunity to more effectively control paper and a series of related pressroom costs. While major publication and catalog buyers have long imposed waste and spoilage limits on their printers, this requirement appears likely to spread to smaller commercial printers in the FuturePrint realm.
In the future, profit leaders of all sizes will pay attention to distribution costs and efficiency, as well as total paper costs. The savvy will market these programs as a value-added service.
THE HAVES AND THE HAVE-NOTS
While all print producers are different, Andrew D. Paparozzi, chief economist for the National Assn. for Printing Leadership, notes that under every possible business scenario, including tough competition and economic up-ticks and downturns, some printers prosper while others falter. Paparozzi, who has studied the differences between winners and losers, reports that the most significant difference is strategic planning and the way in which the leaders track markets, clients and prospects. These tracking procedures allow them to have an early warning system for change, enabling the profit leaders to take preventive actions and avoid being blindsided by the economy and/or changes in customer product and service requirements.
While winners operate a mix of new, almost-new, older and sometimes updated rebuilt equipment, their heavy-duty core production equipment is rarely technologically obsolete. Some will utilize periods of economic downturn to acquire current or very recent used equipment at bargain-basement prices. Virtually none attempt to run a junk shop of legacy equipment. The ability to mix and blend the newest equipment with existing equipment in a planned capital and technology acquisition program is a key factor in these printers’ success.
Not only do the winners plan, they stay the course with their strategic plans during economic downturns and technological upheavals, notes Paparozzi. They don’t deviate from plans. They don’t drastically cut prices. They continue to acquire technology and equipment. They might even accelerate capital equipment acquisition to take advantage of soft market pricing.
Winners also do not reduce investments in training, recruitment of skilled people or marketing efforts when business is soft. During tough times, profit leaders often focus on boosting efficiency and refining planning to incorporate the latest automation and technology that will add value to their customer service. In a downturn they prepare for an upturn, and in an upturn, they prepare for a downturn—it’s a continuous planning and implementation effort.
Print is not a homogenous industry. Rather, it consists of market segments and sub-segments, geographic idiosyncrasies, unique competitive situations, and specific individual customer requirements. Strategic planning must focus on specific markets, customers and customer types, as well as defined products, and the individual printer’s aspirations.
PLANNING MAKES YOUR GARDEN GROW
FuturePrint planning should be specific and reach out three to five years. The plan must integrate marketplace requirements with the best technology and manufacturing opportunities. It also needs to be flexible and structured in such a way that the printer can take advantage of developing opportunies.
To survive profitably in a highly competitive business, with churning markets and changing technology, planning is critical. Competitive information, marketplace data, customer intelligence and broad technology knowledge are the keys to successful planning. The key to a successful print business is consistent, continuous implementation of the plan.
Fundamental to any planning—and before any technology purchases—is an interactive definition of the markets to be served and the type of printer the company wants to be.
Print markets often are defined by products and/ or printing processes. To facilitate planning, the marketplace to be served should be defined in as much detail as possible. The definitions should be created while considering business and marketplace requirements, as well as the printing specifications for the work. Customers should be defined by name, rank, serial number and by general characteristics, which can be a basis for identifying potential clients.
Printers will, ultimately, be defined as one of the following types:
Commodity—generally implies relatively large volumes and low margins, serving a highly competitive but somewhat standardized marketplace in which many competitors are production equals. In this category, seemingly minor advantages in cost efficiency separate the winners from the losers. The opportunity to differentiate is possible, but limited and difficult to achieve.
Value-added—implies doing something more than printing, either on the front or back end of the process. Includes a wide variety of specialists whose market knowledge and specialized production techniques (and perhaps equipment) are key factors for success. Advantage is achieved by differentiation with value-added component. This category includes variable-imaging digital printers.
Smorgasbord printers—frequently defined as doing a little bit of everything for everybody. While there are some printers who have found unique niches within this category, most smorgasbord printers do not differentiate themselves. They sometimes claim to be the best, cheapest, fastest, highest-quality printer in town. Being a smorgasbord printer can entail a specific strategy, but most printers in this group are there because they do not know what else to do and lack a company-defining strategy.
COVERING THE MARKETPLACE WITH STYLE
Every printer also has a business operating style that influences marketing, technology and manufacturing. Basic print operating styles include:
Independently owned value-added print businesses operating on a standalone basis, which can be any size, provide as much value-added as possible. Some printers with this operating style are value-added niche market specialists.
Independently owned with strategic partnerships to provide as wide a range of services as possible. Companies with this operating style often provide the “marketing front,” utilizing services of independently owned printers and specialists.
Multiplant and mini-conglomerate or consolidated operations. Many multi-plant operations, including those of the consolidators, often are the equivalent of independent standalone printers tied together by common ownership and some degree of centralized purchasing, financial services, human resources and administrative support services. On a day-to-day production basis, most of these plants function as independent entities. Many plants with this operation are provided with “significant corporate guidance” for technology and capital equipment acquisitions.
Chain printers, ranging from franchise operations to a series of corporate-owned, print-producing locations that may number in the hundreds. Kinko’s is an example of this type of operation.
CHOOSING THE RIGHT EQUIPMENT
Once markets, styles, customers and production requirements have been defined, the most cost-effective technology can be selected. Attempting to evaluate and implement improved or new technology that will carry a printer forward is akin to going on a scavenger hunt.
While technology appraisals should be done for specific individual printers, there are three trends that apply to most, if not all, print markets.
1. The addition of value-enhancing services to provide a series of ancillary offerings that can be packaged along with printing as a turnkey customer service
2. Digitally controlled, conventional process production 3. The slow movement to automated custom manufacturing or computer-integrated manufacturing (CIM).
Once upon a time, the primary responsibility of a print buyer was to coordinate the purchase and production activities to create a complete printed product. Today, print buyers are opting more and more for complete turnkey packages. Printers that see this as a way to add value to their services are eagerly attempting to add everything from prepress training, translation, graphic design and even full creative assistance. At the delivery end of the business, printers have been adding fulfillment activities of all kinds—kitting, mailing and tracking services.
Some printers are evolving beyond print, adding Internet-related services and digital asset management. Increasingly, there is a demand to accommodate “neutral” or cross-media publishing. While print remains the core business, the addition of ancillary services can increase sales volume and be highly profitable.
These services also help build partnerships between print buyers and print producers. This approach, however, is not entirely risk free. Printers offering new services must commit to specialization and acquire the skills necessary to succeed. The skills required of some ancillary services are not equivalent to those needed for printing. Providing ancillary services requires proper planning and recognition of the needed business acumen.
A cadre of ancillary services however, is likely to be one of the hallmarks of successful printers in the future.
COMPUTERIZED CUSTOM MANUFACTURING
Print is evolving from an analog batch production process to a fully digital prepress function and digitally controlled pressroom and bindery. Today, “conventional” prepress is digital prepress. Business management and production control systems are increasingly computerized. The utilization of the Internet for the procurement of print materials, e-production control and multiple levels of e-communication is inevitable for survival in the future.
Today, print is decked out with automated controls but most have created isolated islands of batch production. The next step in the development of automated manufacturing is the integration of all operations. This process started for conventional lithography at Drupa 95 with the creation of a consortium: CIP3, now CIP4 (the International Cooperation for the Integration of Processes in Prepress, Press and Postpress). Annual dues for printers are $150; see www.CIP4.org for more information.
Progress has been slow but steady. Print survival depends upon reducing costs, speeding up production cycles and providing consistent quality. Automated manufacturing is the way to achieve these goals.
In a viable production system, process-color-capable, variable-digital printing equipment embodies CIM concepts, particularly when inline finishing is a part of the system. In one continuous workflow, the production operator starts with an image on a prepress screen and ends up with a finished product at the end—all using a continuously flowing production stream.
The nature of the variable press is such that a completely individualized or custom one-off product can be produced economically. For some market segments, this is the wave of the future.
MOVING TOWARD THE FUTURE
How does the printer move from the traditional print world to CIM and from mass production to customized manufacturing? By recognizing the risks and knowing that a broad digital education is required.
The first step in the process is to understand the risks and rewards, the print customer’s needs. An understanding of how to produce customized products is a necessary part of this first step.
Selective binding and signature-gathering techniques can customize products. They also can be produced with the use of variable-imaging inkjet on the bindery line. More sophisticated customized products can be produced with variable-imaging digital presses.
There is, however, a problem with the production of individualized custom products. The market demand is not always evident. The printer must sell the concept. Although some of the trade associations do run a limited number of courses on the subject, sophisticated training is not readily available.
CIM is a natural fit for the traditional printer. Basic information can be obtained from any of the major press manufacturers, bindery equipment suppliers and the CIP4 organization.
Ask your equipment supplier for information about all of its automated machinery. Ask for an explanation of how the equipment can be integrated into a continuous workflow. Ask if it is CIP4 compliant. Ask for an explanation and timetable for the vendor’s CIP4 plans. Answers to these questions may require a session at a supplier’s U.S. corporate headquarters.
If a visit to a supplier’s operation is inconvenient, some of the information can be obtained at major trade shows such as Print 01. The show will be a good place to get a bird’s eye view of which manufacturers are leading the parade toward CIM—look for the CIP4 logos in exhibitors’ booths.
Print 01 is being held Sept. 6-13 in Chicago. For more information, contact the Graphic Arts Show Co. (GASC) at www.gasc.org.
Future printers will create scenarios describing how their companies will look by the year 2005 and beyond. They will define what kind of printer they will be and what their operational style will be. They will understand their customers and maintain a profile of prospect characteristics. Future printers will keep a sharp eye on technological developments, upgrading their equipment in order to meet customer requirements. Future printers will anticipate the future and begin now to adjust their way of doing business.
Printers who take an aggressive stance are likely to be around in 2005 and beyond. Printers who fail to prepare for the future are likely to be among the 5,000 to 6,000 plants that are forecast to close between now and the end of 2005.