Printers worldwide buy new press or prepress equipment to enter new markets, or to help them become more efficient, lowering manufacturing costs and factory expenses. Alongside this they push suppliers for better prices on consumables to lower materials and outwork costs.

However factory overhead, labour and materials expenses only accounts for two-thirds of Printshop outgoings.

Largely ignored is the 26% spent by every printer each year on support expenses. This covers sales, management and administration costs. 

With the trend to short-run work, these costs are rising. In fact according to the latest Australian print industry benchmark surveys, for many digital printers, these costs are nearer 33%, which largely explains this sectors poor profitability. It's said to be "small and digital" is the worst place to be in the industry.*

American print industry ratio studies have consistently shown that controlling support expenses, is where the industry profit leaders excel. Their superb margins are directly related to implementing IT systems that lower sales and support costs, whilst improving customer service.

So, where do we start to reduce these costs? 

As Dr Joe Webb and others often mention, there's an unwillingness to consider or embrace 'new' tools or methods to keep these overheads under control. Just 'working harder' doesn't cut it any more. The hesitancy comes from an inability to see the need for an IT or MIS infrastructure. At best, we buy a $10,000 desktop quoting package for our estimator and feel satisfied.

In the process, we avoid the really important question - What overhead tasks are necessary, and do we really need human beings to do them? i.e. How many could be automated?

As other manufacturing sectors have already discovered, automation of front-end tasks improves customer service, reduce errors and overheads, thus providing a huge competitive edge...

Print Industry tasks that could be automated or semi-automated include:

Unfortunately, there's no single, magical solution out there that does it all. And it's well outside the expertise of our existing industry suppliers. Good IT systems to achieve the above are a blend of 6 or more software components. Here, detailed planning is the key to success since no two sites are set up the same. It's an area we specialize in, providing independent consulting and system integration services. 

Does this automation mean layoffs?

Sometimes. I recall doing an MIS demonstration some years back to a 50 year old print company. Two estimators, an accountant, admin and a sales person were sent to evaluate my system. The company owner wasn't interested. Unfortunately for those watching, all except the sales person would have been made redundant within weeks of installing our developers system.

The pitch was it would generate 100% accurate quotes within the hour instead of days, track jobs, and also provide management with an instant view of customer, staff and production status, as well as take care of all admin chores. But they did nothing. I suspect their poor sales processes and needlessly high overhead costs were a big factor in their closure a year later. The lesson? Sometimes tough calls have to be made by company owners. They may need to go outside their comfort zone and even question the decisions or recommendations of their own staff. 

Making short-run super-profitable

For those that have gone down this front-end automation path in the US, it simply allows the shop to take on more jobs, with less effort, especially those lower-value jobs that were only marginally profitable in the past.  Our digital and offset systems manage the production aspects well, but the additional workload it creates in sales and admin has been largely ignored.

In some areas, like admin and accounts, workload virtually disappears overnight. Here, staff could be re-utilised telemarketing. Those in management or estimating are allowed to focus on complex or major client jobs/quotes, allowing the 'system' to attend to the bulk of everyday enquiries. That's often the key.

Change is the only constant

It's basically software, not people that were added to achieve all this. The need to slowly build up an IT infrastructure. It's another inevitable change to our industry, making better, stronger companies. We've all gone through change before. Postscript revolution in the 90's, Digital Press and CTP in recent years, all improving production efficiency and customer service. Now, finally, the last piece of the print manufacturing pie is being overhauled. Sales & Management Automation, through a suite of smart MIS and online services.

All, for the long term survival of printers and the industry...  

Comments (3)

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written by Darrel, May 18, 2007

Makes sense. Our accountant thinks our total sales/admin support overhead is closer to 35%. 10 years back in the good old days is was around 25%

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written by Andy, May 18, 2007

Is anyone at this level here in NZ?

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written by Ken, May 04, 2007

Radical stuff. I'm sure my existing supplier would disagree, but perhaps for their own self-interest.