What do you call a printer without a press? Print 21 magazine article

Much of the conjecture about what the printing industry of the future will look like focuses on the technology. But rather than obsessing about equipment, says James Cryer, perhaps what we should really be looking at is the organisational structure of print companies. So, how do you feel about handing all your work over to someone else to print?

During the 1920s my great-grandfather, then the proprietor of WJ Cryers, one of Sydney’s earliest commercial printers, assembled a ‘coalition of the willing’  – namely, Les Baddock (trade bookbinders) and Advance Linotype (trade linotype operators) all under the one roof in Darlinghurst to offer a ‘one-stop, total print management’ service. Although they didn’t call it print management then – that took another 70 years.

It was an early attempt to make it easy for the customer to do business with an organisation where various related services were all housed in the one building. This had many benefits apart from cost savings. It avoided the time wasted in sending a job across town for finishing, it improved ‘workflow’ (another word they hadn’t invented then) and it increased the volume of business through referrals.

It was an adventurous idea that may have been a precursor to the state of flux that our industry is currently going through. Historically though, as an industry, we’ve not been very adventurous in toying with new variants. We’ve never had to be. Print has enjoyed a near-virtual monopoly as the only communication medium available to customers for the past 400 years, so it’s understandable that we’ve become a little complacent.

However, I believe the critical defining feature of success for the printing company of the future will be not so much its choice of equipment but rather its choice of organisational structure. Let me highlight some of the forces impacting on a typical printing company (assuming here, sheetfed offset).

First, it has to manage two opposing forces. One is the demand for a high level of customisation on virtually every job. The other is the need to standardise as many operations and processes as possible. It’s a typical see-saw dilemma: if you try to fuss over each customer too much it drives costs up and blows-out deliveries. If you standardise everything you sacrifice your flexibility and lose value-adding opportunities.

Second, is the need to balance small-ish orders (which are the backbone of the industry) with the need for large orders to deliver economies of scale and absorb those fixed overheads.

Third, there is the conventional wisdom that a printing company must print as much as possible in-house. It’s somehow considered a sign of defeat if your plant isn’t able to print everything. After all, that’s what we do! We’re printers, not outsourcers.

Fourth, again the dreaded conventional wisdom dictates that a printing company should consist of a plant and a sales force.

Against this backdrop is the cold, hard reality that, over time, we’ve accumulated just too many printing businesses, all little microcosms of each other, all replicating overheads, and thus making it impossible to gain genuine economies of production. I suspect the outcome of all this (too many firms operating too inefficiently, and all trying to be generalists, ie ‘all things to all customers’) is that the price of print has remained high, although up to recent times we’ve had nothing to compare it with so we’ve got away with it. (And if you don’t believe the price of print has been too high, consider why so much traditional work has shifted online – and it’s nothing to do with it being ‘greener’.)

But eventually something has to give, and we’re all experiencing the cold winds of change as we try to re-invent ourselves. What follows are some genetic permutations that we may wish to consider as we explore ever more creative ways of driving costs down while preserving margins.

Think outside the plant
Let’s kick-off with an old-friend – outsourcing. We all know what it means, don’t we, and it may have negative connotations (think Indian call centres). Normally it applies to off-loading ‘non-core’ activities that can be done better by specialists (accounting, logistics … recruitment?) But, hang on, why shouldn’t every print job you quote on face this test: should you produce it in-house, or is there a printer out there who could produce it more cheaply? A textbook response is that if the marginal cost of having an extra job produced outside is cheaper than the marginal cost of producing it in-house, you should farm it out. This goes to the heart of another concept, that of opportunity cost. The point being, if you do choose to produce a job in-house (even at a profit), will it displace another job on which there was a better margin?

There is an important message here: every proprietor should regard his own plant as just one option in the choice of lowest cost producer. Just because you have a four-colour press which can do the job is no reason why you should produce the job. All your costs are fixed, so you’ll incur them anyway (very few costs in our game are avoidable in the short-term), so it doesn’t matter if the press is idle for short-periods. (And if it is idle for too long, it may tell you something about your prices.)

Print brokers/managers are another way to drive costs down by placing work only with the most cost-efficient suppliers – ‘allocative efficiency’ in econo-speak - where everybody wins (in theory). Putting emotion to one side, when done properly, it’s a perfectly legitimate way to save costs by allowing some printing companies to dispense with their sales force, thus relieving them of an added layer of complexity. The upside is that it allows them to focus exclusively on work which matches their equipment profile (which is a good thing). The downside is that they lose control of their former customer-base, and there can be accusations of margin-squeezing (hard to believe, I know).

If you don’t like selling your soul to the devil, another strategy is for companies with complementary products (ie not competing) to form voluntary alliances or coalitions to share some back-office overheads and to allocate work more effectively. This allows individual brands to flourish, giving clients the sensation of choice, while at the same time streamlining the admin costs. The purest form of this model is where there is one single order-entry/job planning department which farms out work to the lowest-cost producer within the group. (We all thought the big PE players would go down this path.)

Join the hub
Another possibility is a variant on the concept of trade printers who have been around for years. The ‘killer punch’ variant, however, is the contract-print group, a dedicated ‘team’ that produces your work (or some of it) to order, just like an outsourced extension to your plant. They think and act like your production department but (just like print managers, dare I say) they come in with the promise of producing your work cheaper/faster than you can. This is starting to look good: you can ‘retire’ to the front office - or long lunches - without having to worry about your production department because you don’t have one! And it’s a perfectly valid way of making a cheaper product, through specialisation.

If that’s too radical, try the ‘hub-and-spoke’ model. This is another more modern variant of the trade printer where participating printers send work that is too specialised or excess to their capacity. The question is: how does it compare with the traditional trade supplier? The special twist which the ‘hub’ model offers is that it usually prefers to deal with a defined ‘membership’, ie selected participants who can derive a special price advantage over other non-members.

Typically, the hub becomes a ‘co-operative’ which cannot make a profit, so the ‘profit’ is leaked back to the members via the ultra-low price it charges them (far lower than, say, a trade supplier). The trade-off, however, is that to join you must pay a one-off entry fee which may be more or less than, say, $100,000. The choice between using a trade supplier or becoming a member of a hub becomes a simple break-even equation (lower volumes favour the former, higher volumes the latter). It’s not unlike the choice facing a home-buyer - rent or purchase? Incidentally, the shares in the co-op have value, can be bought or sold, and will appreciate if the business prospers, so it can offer a ‘superannuation’ benefit over and above its cheap prices.

A hybrid version of the hub-and-spoke model is to have a two- or three-tiered membership – a bit like gold, silver and bronze credit cards. Rock-bottom prices for those who pay full-membership, slightly higher prices for those who wish to pay a modest entry-fee, and normal trade rates for those who don’t wish to become a member but just use the hub like a trade printer.

Let’s get radical
Another option requiring even more radical surgery is to divide the entire industry into two tiers - production and sales. In this version, instead of having lots of printing companies each consisting of production and sales, every sales rep in the industry quits and immediately re-forms into sales teams or groups, each specialising in various printed products. So there would be the ‘annual report’ boys (and girls), the ‘packaging’ sales guys, the ‘book’ reps, the ‘label’ reps, and so on. This would have the effect of marshalling all the available sales expertise (pertaining to each product) under one roof, making them a focal point for clients to go to, seeking out expert help. Work would then be farmed-out to specialist printers who would become extremely cost-effective, along similar product groupings (ie the carton printers, the label printers, the annual report printers, and so on).

Apart from obvious, dramatic cost savings, it may uncover a problem that nobody admits to: most printing companies struggle to be both good printers as well as good marketers. Most proprietors (I know I’m generalising) are either comfortable down on the floor or out with the reps, but not both. Why persist with this two-headed monster? It only grew as an accident of history; smash repair companies don’t have teams of sales reps. This split into ‘manufacturers’ and ‘sellers’ is not unique. The automotive industry recognised this years ago with manufacturing plants which focused only on making cars (you can’t buy a car from the plant) and ‘retailers’ (called dealers) who don’t try and build you a car.

A final thought. Why not borrow from the accommodation industry and enable printing companies to sell blocks of time – ie excess capacity – to the highest bidder. This is the economist’s dream come true – mopping up spare capacity by offering blocks of press-time on the internet, and selling it at relatively low rates that yield higher returns (higher than having the press stand idle!) A kind of ‘Last Minute.com’, it matches suppliers (ie those with excess capacity) with print buyers seeking a bargain. The trade-off is that the bargain price is only available on the seller’s terms, which may dictate a not-before date or a particular stock. But if the two parties can agree, everyone’s a winner.

Let there be no doubt, the idea of a printing company being defined as one with dedicated presses plus admin staff, plus sales reps, all housed on one site, containing a mass of fixed machinery will soon be replaced by more fluid variants. This brave new world of print doesn’t mean there will be fewer brands. There may be more. I’m simply exploring ways in which the costs of production can be reduced and, as the concept of outsourcing has proven, clients increasingly don’t care in which manufacturing engine room it happened to be produced.

So, what will be the optimal shape of the printing company of tomorrow? Sadly, it’s looking more like a yuppie, probably female, propped up under a palm tree on a sun-drenched coral atoll feverishly tapping into her Blackberry while her assistant busies himself getting her another gin sling.