Fulfillment Services— Are Printers ‘Getting It’?March 2007 By Tom Quinn
The promised reward for printers diversifying into fulfillment is that it takes them out of the commodity-driven print marketplace. That selling these solutions will take the focus off of print pricing, and that both print volumes and profit margins will increase with print/fulfillment clients. I can report this, in fact, to be a true statement. Fulfillment surveys conducted in association with the annual MFSA/NAPL Fulfillment Conference have substantiated this in both its 2005 and 2006 surveys.
However, it is my premise that most printers are not reaping the rewards of establishing a fulfillment operation. Here are several facts to substantiate the premise:
• 88 percent of printers adopted fulfillment at their clients’ request. Many of those 88 percent admit they were placed in a defensive posture to keep the printing.
• 50 percent of the printers surveyed in 2006 did not know if they were making a profit in their fulfillment operations. And 25 percent did not have a separate P&L.
The cost of entry for fulfillment is very low compared to the printing process. An investment of roughly $200,000 can provide a very well-equipped fulfillment center.
The fulfillment business model is a service model, whereas printing and mailing businesses rely on manufacturing models. The primary differences are that the service model generates revenue through storage, labor and systems, while the manufacturing model generates revenue based on machines.
Fulfillment services should generate bottom-line profits two to three times that of a printing operation. You should definitely be in double digits.
So let’s go back to the question: are printers ‘getting it’? If your fulfillment operation is continuing to grow and measuring 10 percent or better bottom-line profits, then you are getting it. If not, read on to find some of the probable causes why you’re not meeting minimum industry standards. The decision to enter the fulfillment industry is not quite as easy as it looks. Here are five areas to concentrate your improvement efforts.
FULFILLMENT SOFTWARE NOT IMPLEMENTED CORRECTLY. Most of the printers I’ve visited have purchased one of the 3PF packages available. They’re very comprehensive software packages able to complete various fulfillment applications—from literature fulfillment to online stores requiring credit card processing. The key element of each of these packages is that they provide clients the ability to order directly from their desktops through a Web portal.