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Commentary & Analysis

FREE: First-Day Briefings by Heidelberg and MAN Roland Yield Insight into the Mood of the Manufacturers

By Patrick Henry October 12,

By WhatTheyThink Staff
Published: October 12, 2004

By Patrick Henry October 12, 2004 -- Gamblers have set up a mock futures market for the Presidential election in which the candidates’ trading prices rise and fall in step with the fluctuating fortunes of their campaigns. Perhaps printers—strictly for amusement, of course—ought to trade make-believe futures in equipment manufacturers based on their pronouncements at trade shows. If it really existed, the market for these fantasy commodities at Graph Expo would be a bearish one. Opening day (October 10) presentations by the chief executives of the two leading press manufacturers, Heidelberg and MAN Roland, were full of evidence that these giants still see the heavy equipment marketplace as a venue still badly in need of a jump start. So hesitant is the demand for big iron that both companies conspicuously skewed their messages toward the promised advantages of workflow—a commodity that one of the executives described as perhaps the most speculative sell of all, at least as far as smaller printers are concerned. As it customarily does at Graph Expo, the first state-of-the-industry commentary by a vendor came from Heidelberg. Bernhard Schreier, CEO, Heidelberger Druckmaschinen AG, took a broadly upbeat tone by declaring that “everything is recovering” and that “everyone is looking at the future a little more optimistically.” This could be due in part, Schreier allowed, to the fact “we are all used to the disaster” of depressed global markets for print and print equipment. He also brushed aside the idea that trade shows, by themselves, can galvanize an industry confronting as many negative market forces as printing. “Nothing has changed so much since drupa,” he said, adding that it perhaps was possible to see “a little bit of light at the end of the tunnel” from the vantage point of Graph Expo. But it remains to be seen whether the Chicago show will prove to be a “barometer” of conditions ahead for the industry, Schreier said. Three Lean Years According to Schreier, the industry has finally emerged from a “three year crisis economically” and has entered a period in which “it seems to get better for those who survive.” As a spokesman for one of the survivors, he noted that Heidelberg, like many others, has had to “reinvent its business” in order to remain viable. “Everybody has to work on his cost structure,” Schreier said. Just as Heidelberg urges its printer customers to contain their costs through the efficiencies of digital workflow, the company has scrutinized its own operations with an eye toward better performance, “We did our homework in streamlining our processes and capacities,” Schreier said. The result is that “Heidelberg will again be profitable this year.” Now the company will refocus on three primary objectives: intensifying relationships with its most loyal customers; building relationships with printers that do not now use Heidelberg equipment; and driving the quality, reliability, and price performance of Heidelberg products to unprecedented levels. Printers, particularly small and medium sized plants, “can expect a lot from Heidelberg in the future,” Schreier declared. He explained why expectations will not include digital printing, a market that Heidelberg took leave of by selling its digital print equipment portfolio to Eastman Kodak. Heidelberg continues to believe in digital printing, he said, but ultimately came to see it as a “a very slow growing opportunity” that would draw too much investment away from the company’s core competence in sheetfed offset printing. Opportunism: A Good Thing By refocusing on its traditional lines of business, Schreier said, Heidelberg would be well positioned to resume growth as the industry recovers. He noted, however, that “we do not have the means on our own to make the printing industry profitable again,” Returning the company and the industry to profitability will depend upon forging partnerships with other technology suppliers and with customers—especially the customers Schreier characterized as “opportunistic printers.” An opportunistic printer, according to Schreier, is one who knows how to sell print as a part of a package of media and marketing services. Opportunistic printers are creative; attuned to digital workflows; knowledgeable about the businesses of their customers and their customers’ customers; and ever alert to the financial underpinnings of their operations. “We want our customers to be smart printers who know where their costs and profits are,” Schreier said. Thanks to progress at last being made by printers like these, “we believe that out sector has finally emerged from the downturn,” he concluded, The positive momentum is carrying Heidelberg along with it, according to Schreier, who projected sales growth of 5 percent in the current fiscal year and a back-in-the-black balance sheet from cost-saving internal realignments. James Dunn, recently appointed as president of Heidelberg USA, buttressed some of Schreier’s remarks with data from member surveys by the National Association for Printing Leadership (NAPL). Responses from these printers, Dunn said, indicate revenue growth as well as a “firming of pricing and profitability” throughout the industry—a clear sign of a return to general health. But not for everyone, and for a great many, quite the opposite, as Dunn cited other NAPL data projecting the disappearance of almost 11,000 printing establishments from 1998 to 2008. What’s more, the sales growth rate of the survivors continues to lag growth in the GNP. The NAPL data make plain that printers will have to continue to reinvent themselves for a full return to prosperity, Dunn said. But he seconded his boss in declaring, “The optimism is back.” At the MAN Roland press briefing later in the morning, CEO Yves Rogivue radiated optimism on behalf of his company but chafed at the skepticism that some printers display toward the technology trend with which MAN Roland has most strongly identified itself—computer integrated manufacturing (CIM). Reaction Close to “Hostility” Rogivue said he was continually frustrated to discover that “there is resistance, almost hostility, when I try to bring CIM’s advantages to smaller and mid-sized printers.” He noted that some printers tend to “shut down” whenever the subject comes up, insisting that CIM does not apply to them because they are custom print providers in the business of delivering work with requirements that differ from customer to customer. Rogivue said his counter-argument is that even if a print job is custom work, the processes that underlie it still can be standardized—and must be, if the printer is to operate efficiently and profitably. He made an unusual appeal on CIM’s behalf to the editors, publishers, and other trade media representatives who had come to hear him. “I need your help in reaching the graphic communications industry with the CIM story,” Rogivue said, urging the trade media to make printers see that CIM “is not just another buzzword.” Recent industry opinion polls indicate that the majority of printers do not think CIM and its related workflow technologies will loom large in their future plans. The industry’s failure to embrace CIM could have widespread negative consequences, according to Rogivue. Without CIM’s help, he contended, printers cannot cut their costs sufficiently to improve their margins. That leaves them no alternative to scrimping on capital equipment investments—a decision that hurts the equipment manufacturers and the trade media that depend on the manufacturers for advertising, “Everybody loses,” Rogivue said. He said that the evidence needed to convince printers could be found in CIM City, an installation within the MAN Roland booth on the show floor. Here, MAN Roland and a number manufacturing partners are demonstrating how production machinery can be integrated by means of a common digital workflow that controls and shares all of the manufacturing, scheduling, and cost information throughout the life cycle of a job. (Heidelberg is demonstrating its workflow solution, Prinect, in a walk-through tour of a series of workstations it calls “the Prinect experience.”) Rogivue also used the opportunity to show off MAN Roland’s new corporate logo, a metallic, three-dimensional emblem designed to convey stability and strength. Presenting the right image is important, Rogivue said, because “printers have enough to worry about without looking over their shoulders at their press maker’s financial condition.”



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