Click go the sheets boys, click click click - magazine article

There is no such thing as an offset printing click charge - at least, not officially. The stream of gold that powers the digital printing industry, that ensures that every time a page is printed the machinery supplier gets a payment, is denied to offset press manufacturers. An offset printer buys a heavy metal press, pays it off and that's that ... nothing more to pay except for consumables. Digital printers may buy the box outright but they are never free of the 'click charge', a silent mortgage payment for the life of the machine.

Over the years, executives from offset press manufacturers have often expressed a certain jealousy for the apparent ease with which their digital counterparts have a guaranteed income stream for the life of the machine. I recall Rod Spencer, a doyen of the Australian industry before he retired after more than 30 years with Heidelberg, lamenting: "If only I could get an offset click charge ..."

The benefits are obvious; a continuing income stream as opposed to the roller coaster of large capital investments. A constant income from click charges evens out the budgetary challenges that bedevil machinery manufacturers. But it was never going to happen. Traditional printers resent any hint of a click charge; in fact, it is frequently cited as one of the reasons why many do not entertain an entry into digital printing.

But as his Bobness once sang, The times they are a-changing, and while there may never be an official offset click charge, the cost per sheet printed is becoming more fully recognised and the economics from both sides - printer and press manufacturer - are better understood. Much of this has to do with the upsizing of the offset printing industry, both in scale of enterprise and in the popularity of large productive presses. It is a remarkable fact that last year there were more large size printing units (102/105 cm) installed in Australia than there were half size or even small offset. The proliferation of long perfecting machines has transformed the industry and has enabled Heidelberg, the largest of all sheetfed press suppliers, to open up a significant gap between itself and the rest of the field.

Crunching the numbers


Andy Vels Jensen has just had the best year of his seven years as managing director of Heidelberg ANZ (HAN). Posting over $200 million revenue, of which $110 million was from new sheetfed offset presses, he has developed an enterprise that is held up as a paragon for the global company. Recognised in a recent survey as providing the best Customer satisfaction and loyalty rates within the Heidelberg world, HAN recently hosted 22 staff from such markets as UK, Germany, USA, Russia and the Nordic countries, alongside colleagues from the Asia Pacific region, here to be trained in the HAN business development and consultancy sales approach.

Part of Vels Jensen's success is the ability of his team to recognise and change to meet the market's requirements. In addition to being the first to deliver long perfecting presses when printers were looking to dramatically increase productivity, HAN was able to anticipate the consolidation that is currently re-shaping much of the industry.

"We saw it coming," he says. "One could smell it, feel it, three to four years ago. We moved to split the sales and service organization into two parts and developed the business development approach for the big printing companies. In short, we try to make the hardware component as insignificant as possible in the eyes of the buyer. Everything else, from support to the close partnership to the consultancy we provide, should be more important than the grey steel itself."

The Business Development team is made up of 12 key individuals, including 8 business analysts who crunch numbers on investment outcomes and devise operational strategies for Heidelberg customers. The emergence of a generation of professional managers, backed by investment finance, has brought a new discipline to the capital equipment sector of the industry. ROI has become the mantra for all decisions and managements need to know exactly how much the press is going to cost over its lifetime. They are looking for a total cost of ownership on which they can base decisions, and if this requires an agreed depreciation for the number of millions of impressions over the years and an agreed reinvestment outcome at the end of the period, then so be it.

And if this happens to produce what could pass as an offset click charge then printers as well as press manufacturers are going to be one step closer to fully appreciating the real cost of doing business.

Know where you stand


Developing a benchmark for a printing company to measure itself against the industry is an essential part of the Heidelberg analyst's role. It is a cooperative venture relying on good faith and trust from both sides. That so many Australian and New Zealand printers have opened their businesses to the scrutiny of HAN before making investment decisions is a measure of HAN's success. By now, the analysts have accumulated a veritable treasure trove of statistics about operating turnovers, profit margins, selling prices, inventories, workflow throughputs, levels of bad debt and investment returns from a cross section of printing companies in the region.

"This means we have the tools to look at a printer's business and produce a business plan based on what they should be achieving in efficiency, productivity and returns," states Vels Jensen. "We can develop and present 'what if' scenarios to customers wanting to improve their business. Not brochure data or supplier data, but actual production data from real users. Any investment is revisited with the client after six months production with the new equipment to make sure the plan we developed together is actually coming to life.

"We don't drop boxes. We don't want to and can't afford to take machines back. Neither the customer nor the industry can afford it, so all investments must be made for the right reasons, and these days they thankfully are. We have walked away from sales that did not stack up or required way too creative financing," he adds.

A sign of how much the printing business climate is changing is that, along with record investment levels, HAN is enjoying record low levels of bad debt. Vels Jensen takes this as proof that printers are buying equipment for the right reasons.

And it is not only large-size printing companies taking advantage of the sophisticated benchmarking and business modelling. A3-size printers are just as subject to ROI pressures, perhaps even more so. Investment in a new press, prepress, integrated workflow or finishing equipment is a more significant decision for smaller printers than for a behemoth. Often what is required is a business plan with an innovative dash of marketing.

"You cannot be oblivious to the changing environment. Business does not come knocking at the door, you have to develop new methods to attract business and adjust to customer needs," says Vels Jensen.

A new mix of business


A total of 40 per cent of HAN's cost coverage today comes from consumables, parts and service. This is up from 20 percent six years ago and is a harbinger of Vels Jensen's ambition to develop the total cost of ownership (TCO) arrangement. In this scenario, printing companies will not restrict their engagement to buying a press but will sign on for all consumables, parts and service for the lifetime of the machine. Lifetime in Vels Jensen's view is now more like 4-5 years than up to 10 years as was the case in the past. This can be expanded to prepress and postpress, the latter already a major revenue source for the company.

So far, despite increasing consumables sales - plates, ink, blankets, pressroom chemicals - the TCO concept is still in its infancy as printers continue to shop around for cheaper deals on plates and inks, but there is little doubt that it is a business model whose time will come sooner rather than later. By purchasing equipment, consumables, service and parts from one source, customers are provided guaranteed performance.

"We ensure that the performance of our equipment, especially when backed by our consumables and support, is second to none," says Vels Jensen.

The current price wars driving the prepress sector are providing opportunities few printers can resist and despite being pleased with the success of the Heidelberg Suprasetters in the market, Vels Jensen sees little upside.

"They [prepress vendors] have allowed themselves to be driven so low there is no profit to be made selling CTP units. This puts support structures under pressure," he claims, adding that he expects some major realignment in the sector in coming years.

Vels Jensen is more optimistic about the state of postpress. Last year brought about a 75 percent dollar increase in folder sales over the previous year. Interestingly, HAN holds the Heidelberg record when it comes to fully-automated folders as a percentage of total folder sales. Nearly all the Stahlfolders currently being sold can be linked into CIP4 for fully-automated operation although many are still standalones as postpress continues to resist integration into the end-to-end workflow.

Investment pays off


Vels Jensen puts much of the current success down to the many years of investment in service, support and backup. There are 175 people involved in service, by far the greatest number for any supplier in ANZ. It is a resource that cannot be matched and whose value is often only seen and recognised when there are major projects to be undertaken. He points out that when the Blue Star company, Craftsman Press, migrated to its greenfield site in Clayton, Victoria, last year there were 5,000 man hours across 40 different people from within the organisation required from HAN to make the move. The current build by GEON of its new Auckland press plant will similarly take a huge amount of press engineering expertise that can only be delivered by a company with such a standing workforce.

The latest development from HAN is 'systemservice24plus', officially launched at PrintEx in Sydney, a service package that far exceeds the industry standard in the marketplace and which delivers a set of nine innovative services for a period of 24 months.

"In other words, sheetfed presses are now fully covered for 24 months, rather than 12 months, allowing our customers to run their equipment with optimised service conditions and maximum cost benefit," explains Vels Jensen.

It's a different world


A fair share of HAN's record revenue comes from its second hand business where the changing face of the industry can be seen as clearly as anywhere else. Of the 9,000 printing units - of current models still being manufactured by Heidelberg - that the company has installed here over the past decade 'only' 6,000 remain in the country. The rest have been taken in trade by Heidelberg, as well as others, and shipped overseas. As Vels Jensen points out, ten years ago a printing press had four to five owners; now it has three or four - two in Australia, often only one, and a maximum of two overseas.

Presses are also working harder with the average full-size Heidelberg press in Australia printing 26 million impressions a year - in the USA there is an XL105 that has done 100 million impressions in a year! - with the hardest working presses doing in excess of 45 million impressions/year. HAN's database tells the story: because of falling print prices, a printer today has to print 22 percent more sheets to make the same revenue as five years ago. This adds up to one of the most compelling reasons why printing companies are continuing to invest in the latest automated equipment to produce sheets on the floor.

To those who cry there is too much kit leading to over capacity, Vels Jensen retorts that a notional 24 hours a day, seven days a week full capacity is not realistic or even desirable in all Australian and NZ industries. With the right mix of profitable work, sophisticated plants and smart operators can be highly profitable on less than the industry average of 70 percent utilisation. Conscious of the many owner/operators who still form the backbone of the industry, he also advocates a work/lifestyle balance inimical to the flat-out, around the clock style of operation.

"If the flat-out, integrated manufacturing model based on volume does not work for you, there are still plenty of opportunities within this engaging industry. Each to his own ..." he comments.

As the architect and driver of a successful business unit within the most successful sheetfed press manufacturer in the world, it is quite likely he knows something about what it takes to be a success in this industry... and perhaps indeed any industry, as print in the end is not that different from other manufacturing sectors in Australia and New Zealand.

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