While a big equipment trade show might typically inspire an article highlighting new product announcements, the panel discussions and presentations by leading print prognosticators were what piqued by interest at Graph Expo 2006. I hope you will find their insights as challenging and informative as I did.
Official Numbers For Naught
Economists covering the printing industry universally suggest that 2006 will see lower revenues than in the previous few years. Richard Romano, analyst and researcher for The Industry Measure, reported in their industry briefing that Merrill Lynch has downgraded their expectations for advertising expenditure growth from 5.1% to 4.7% for 2006 and from 3.5% to 2.8% in 2007.
In his annual “Renewing the Printing Industry” presentation, Dr. Joe Webb predicted that print revenues for 2006 would not be anywhere near 2003 or 2004 numbers. He expects the commercial printing segment to be $91–92 billion in 2006 and $87–88 billion next year. While total print numbers are actually higher, there is a continued shift to office superstores and desktops, which don’t report aggregate print values. On the bright side, average annual revenue per employee is up to $205 000 per production employee and $144 500 per employee on average due to continued efficiency gains and the disproportionate increases in non–print revenues from so called value–add services. Webb was quick to add, “Value–add is a myth. Buyers deal with the whole company.”
The annual PIA/GATF Financial Ratio Studies show both the industry profit leaders (the highest quartile) and the all–industry averages. In virtually every year for nearly a decade, the lower 75% of the industry is at or below break–even. To put it another way, about 30% of all printers are generating 100% of the industry’s profits. Andrew Paparozzi, NAPL’s Chief Economist, continually reports that printers in the highest quartile are consistently experiencing double–digit percentage growth. His results point to the conclusion that the leading printers are also generating all of the growth and progress in the industry.
Webb contends that printers have a choice of seven different client–driven business strategies. The first four are communication–based: sender—design, creation based; message conduit—connects sender and receiver; receiver—database creation/management, publishing services, and feedback—warehousing services. The final three are production–based: communication logistics––managing the details of marketing services; corporate outsourcing—removing the logistics burdens from the shoulders of clients; and commodity printing—being a low–cost producer. Success in any area rests on recognizing which strategy you are following and building a corresponding and appropriate business model.
The industry is abuzz with the success of VistaPrint and their Internet ordering and computer–integrated manufacturing business model. Webb noted that VistaPrint is taking advantage of two situations: every 0.1% jump in e–commerce retail results in a loss of $1.8 billion to commercial print and the US economy is currently generating 78,000 net new businesses every month, which are all are potential VistaPrint clients.
A heavily automated printing plant facility that has been in the planning stages for four years was officially announced at Graph Expo by two of its major equipment suppliers, Muller Martini and Goss. Cox Target Media will be opening a 470 000 square foot plant in Largo, Florida to produce the proprietary Valpak coupon product. This plant has the capacity to more than double the current 20 billion coupon output to 54 billion in half the current manufacturing time in a near–“lights out” manufacturing environment. There will be minimal work–in–process, as rolls of paper will be converted into coupon–filled envelopes with no human hands ever touching the product.
Two Goss Sunday 4000 presses, each with eight units, will be capable of generating six signature streams of product; each stream will be accumulated into Muller Martini’s patented print rolls at 2 500 feet per minute. These press configurations are designed for “zero make–ready time” as four units will be running the 10 000 quantity process color order in concert with the other four units cycling through their automated plate removal and rehang tasks “off–impression” every 12 minutes. The double circumference presses will print as many as 88 coupons per cylinder revolution. Each press will consume 12 tons of stock an hour.
The Cox SAP management information system will be working in conjunction with the Dalfuku logistical system to manage the automated guided vehicles (AGVs) moving the print rolls on monorails to populate the eight–story, 200 000 square foot storage silo for interim and finished product. Robotic cranes pick up the print rolls and bring them to one of nine high–speed envelope collating systems to feed into one of four unwinding stations at each collator. The entire manufacturing cycle is designed to provide a four–hour turnaround, which is half the current manufacturing time frame.
Twice the capacity at half the throughput time with half the labor content is an audacious goal, particularly with the predicted start–up date of first quarter 2007.
Heidi Tolliver–Nigro, senior analyst for The Industry Measure marketing research firm, reports that most of the printers making money in digital print treat the process as a compliment to their mainstay lithographic cash cow. The Industry Measure’s current annual survey indicates that the actual use of variable data peaked during the fourth quarter of 2004 at 21% of the printers surveyed. The current regular usage is down to 17%, with a full 63% of those firms limiting their variable data printing to simple address lists for mail distribution purposes. Thirty–six percent of printers acknowledge doing some variable data printing at some time in the past while 11% actually outsource the requirement. Of those firms doing variable data production printing, 80% do it on small desktop units with only 32% of those responding doing any digital color copying. A full 97% of all digital color printing is static printing, not variable data.
NPES’ marketing research arm PRIMIR reported during the Executive Outlook 2006 conference the day before Graph Expo that digital print had doubled from the 2001 tally of $7.8 billion to $15.3 billion in 2005, for a compound annual growth rate of 18.6%. This is the highest growth rate of any printing process, but represents only 8% of all North American print revenues in 2005. Wide format printing has grown at 16.1% a year over that same time period to $4.9 billion. Be cautious about big print engines, though, until you can prove your expertise to a receptive local market.
At least a half dozen major conferences in recent years have had featured speakers and/or panel discussions of successful print practitioners talking about lean manufacturing practices and culture. IPA, the association for graphic solution providers, hired consultants to develop a print–centric tutorial package comprised of webinars, a handbook, and coaching to help the industry to understand and adopt the powerful graphics workflow improvement program called e–LEAN™.
For more detailed information, there is a 12–page downloadable file