Commentary & Analysis
Closing the Profitability Gap
Bill Davison of Presstek October 5,
By WhatTheyThink Staff
Published: October 5, 2005
Bill Davison of Presstek October 5, 2005 -- I read a recent column on WhatTheyThink by Dr. Joe Webb with great interest. The segment, How the Other Three-Quarters Live, taking a fresh look at the data, points out that profit leaders (25 percent of the printing community) are 47 times more profitable than non-leaders (the other 75 percent). And this holds true across all of the business size categories. Dr. Webb concludes by saying: As the economic texts tell us, in a pure competition marketplace prices are virtually the same. The same technology is available to everyone, and the only way to be profitable is to have cost structures that are organically and permanently superior to that of your competitors. The profit leaders demonstrate that principle in action. So what does this mean, especially for the smaller printer who has less financial, people and technical resources to attack this problem? It is easy enough to say that you need "to have cost structures that are organically and permanently superior to that of your competitors," but how do you actually do that with the limited resources and the lack of technology expertise many companies are dealing with today? It's easy enough to say you need to have cost structures that are superior to those of your competitors, but how do you actually do that. In reality, it is not as hard as it sounds. As technology becomes both more affordable and easier to implement, there are ways to spiff up your productivity factor without a huge investment or a revamp of the entire operation. As each of these islands of productivity is deployed, operational performance--and thus profitability--will be enhanced, and at a later stage, the task of linking islands of productivity into a unified whole can be tackled. Islands of productivity and profitability Recent PIA data reflects that although we have lost in the neighborhood of 1,000 printing establishments a year since the 1995 timeframe, the period from 2003 to 2004 reflected a loss of 1,538 establishments--more than a 50 percent increase in shop closures due to bankruptcies, mergers and acquisitions and simply closing the doors. While we expect consolidation in a mature industry such as ours, that rapid escalation is alarming. To keep your firm from being on the wrong side of those statistics, and to improve your productivity, profitability and competitiveness at the same time, here are some ideas about how to begin profiting from islands of productivity and profitability: Offer your customers the ability to do business with you online. This makes you--and them--more productive. It doesn't mean that you abandon the personal relationships valued by you and your customers. It simply means offering your customers more options and anytime/anywhere access to your shop. Deploying an online interface to your business also removes geographic restrictions, and with a little bit of marketing and word of mouth, you will be amazed and where the work is coming from. There are lots of options out there--you don't need to build and maintain this one yourself! Offering your customers the ability to do business with you online makes you--and them--more productive. Finish off the film! Make that step to computer-to-plate. There are lots of very affordable polyester and metal CTP solutions now on the market, and more chemistry-free solutions that ever before. By taking that approach, not only do you eliminate the costs and time lag associated with film, but you also take the cost, unpredictability and environmental hazards out of the rest of the platemaking process. Need to remake a plate due to a last-minute change? No problem--with most of these new systems, even the pressman can request a plate and have it within moments. Do a press check. How much automation do your presses support? Today's new presses are more automated than ever before. And direct imaging (DI) presses take that automation to the highest level by imaging plates right on the press, in perfect register. In a recent study performed by research firm InfoTrends/CAP Ventures, respondents reported that makeready on a DI press took less than half the time as a conventional press; DI presses can economically produce quantities as low as 250, and that the average profit margin of a DI press is 40.2 percent. DI presses can economically produce quantities as low as 250, and that the average profit margin of a DI press is 40.2 percent. How functional is your RIP? Do you support the latest versions of PostScript and PDF? How many RIPs do you have? Do you have the ability to control your entire shop, both offset and digital, through a single hybrid RIP that consolidates color management, trapping, imposition and more in a unified interface? All of these things are within easy reach with today's RIP technology and there is little reason to support multiple RIPs for multiple print engines, unless your volume grows to a point where the RIP is a bottleneck. Even then, by ensuring that your RIP is scalable--that is, that you can add additional RIPs yet still control them all from a single user interface--you will be able to invest in a solution that will help your business grow, and grow with your business. By ensuring your RIP is scalable you will be able to invest in a solution that will help your business grow, and grow with your business. And finally, don't miss the MIS. There are a wide array of Print MIS solutions on the market today, something for every shop, and there are a number that are inexpensive and easy to implement, such as EFI's PrintSmith which lists for $5,000. This often-overlooked aspect of running the business can perhaps make the most difference of all. How long does it take you to produce an estimate and how many jobs do you lose because someone else beat you to the punch? Worse yet, how many times do you inaccurately estimate a job and end up losing money? How many estimates do you have out there, and why did you win or lose on particular deals? The estimating portion of the MIS is just one tiny puzzle piece. Print MIS is probably one of the most important investments you can make in your business and it will touch every employee in your shop if you do it right. Print MIS is probably one of the most important investments you can make in your business If you are a profit leader, with average profits in the 10 percent range annually, you are probably already doing all or most of these things. If you are closer to the profit laggards--in the 1 percent range--take a hard look at your business and map out a plan to revitalize it, from your customer interface to your back-end systems. Don't be intimidated--step up to the challenge. It's easier than it has ever been before.