The Fong DynastyJune 1999
In terms of supplier connections, we value the same service and relationships our customers do. So, if prices are maintained reasonably in line with other vendors, we prefer to stay with the vendor who has demonstrated reliability and loyalty to us.
PI: How has industry consolidation affected Optronics?
Fong: The consolidation of vendors means it's of paramount importance for Optronics to benefit from partnerships with other companies who provide complementary products and services. Working together with press manufacturers, consumable vendors and front-end software developers enables Optronics to be part of a complete workflow, providing customers with a complete solution.
Industry dynamics provide an advantage for Optronics. Many of the plates produced on platesetters are expensive, long-run plates. However, many commercial shops are managing shorter runs that don't require plates which can produce a half million impressions.
Optronics platesetters can be fitted with any of several wavelength choices of thermal and visible light. This allows the customer to select the best plate for his operation, and substitute imaging heads at a later date if circumstances warrant. For example, you can start with visible plates, and switch to thermal next year. You can't do that with other platesetters.
PI: Talk about the activities at Fong Brothers Printing. What are your revenues and to what percentage has Fong Brothers gone digital?
Fong: Last year was one of stellar, record financial performance. Revenues increased nearly 15 percent, and we sustained a healthy bottom line. This is due to our continuing focus on speed and service. Our prepress capabilities have been completely upgraded at our printing facilities in San Francisco, enabling us to run approximately 90 percent of our work digitally. We assembled a complete Web server with asset management to better satisfy our customers. Our digital proofing capabilities were also enhanced, so that our workflow could be accelerated.
Of course, with an investment in Optronics, it's no surprise that we invested in two Aurora platesetters, which serve up plates for our new 40˝ Komori press with auto loader. When you tie that with our Aurora PlateSetter, you have a very powerful on-demand system. We are able to mount plates faster, and the press is quicker to set up: We've accomplished makereadies with as few as 50 sheets. This allows us to print 3,000 to 4,000 sheets cost-effectively. So, we use the Komori for clients who desire print-on-demand color within four hours, or our DocuTtechs for black-and-white work.
In China, we recently opened a new, 55,000-square-foot printing plant. It mirrors the computer-to-press workflow of our plant in San Francisco, with the Aurora platesetters and the Komori press. Its all-digital emphasis is truly revolutionary in China. As a showcase, it supports our distribution efforts, and it has been operating exceptionally well.
PI: You mention distribution. What about your distribution efforts? What's new with your other businesses regarding opening new sales channels and promoting greater revenue streams?
Fong: Several years ago we opened five regional sales offices to represent manufacturers of American-made printing equipment. These offices—in Singapore, Hong Kong, Beijing, Shanghai and Southern China—market equipment to printing plants throughout Asia.
Headquartered in Hong Kong, the Fong Brothers Graphics Division is contributing excellent revenues for the company. Optronics is turning around very nicely. The sales and marketing group is forming strong strategic and distribution alliances. We're also working on some intriguing engineering innovations that the industry will see as time progresses.
PI: What are your thoughts regarding the impact the Internet and e-commerce will have on commercial printing?
Fong: I'm a true believer that printers need to embrace e-commerce and the Web to conduct business. It's the way we all are going to manage business in the future. In fact, we organized a Web business five years ago, and formally created a new division for Fong Brothers, our Web Group, a couple of years ago to provide strategic marketing and design based on the Web requirements of our customers.
The way I view it, we need the capabilities to create business opportunities for ourselves and our customers: "Anything.com." Our customers wish to repurpose the images and content they have already generated in print. So why shouldn't we be the ones to help them do it?
Shortly our Web capabilities will be even more apparent in the efforts we're making to service customers' jobs themselves. A customer will be able to obtain a quote through the Web, send files via FTP to Fong Brothers, receive proofs and actually track his job from prepress through postpress. This will significantly assist the customer's access to information, accelerate approvals and ultimately hasten turnaround for our short-run jobs.
PI: How about the impact on the amount of printing you'll see as a printer, relative to the Internet?
Fong: Actually, I think the Web and e-commerce can yield printers more printing, not less. There's a lot of printing demand for niche market segments already. For example, Web requests are driving the catalog business. And look at the effect the success of companies like Amazon.com and Land's End is having on packaging. So, those who embrace the Web will find increased market share. The people who hold the data—digital files, images, etc.—will wield a lot of power.
PI: What are your thoughts on the digital prepress market? What power exists for digital prepress, in regard to equipment investments that result in better prepress productivity, thanks to digital technologies?
Fong: Focusing on a digital prepress procedure is really the only way a company can be successful in our industry. Our company initiated a digital workflow program in 1986. It's the best way to provide service, so often defined as speed, to our customers. The foremost thing we can do is possess the data, which means that asset management is crucial. In fact, we're willing to retain competitors' jobs in our system and allow other printers to pull files for jobs we're not printing. The move to Optronics platesetters and Komori presses was extremely important for us.
Printers will need platesetters to deliver jobs faster and increase production capacity. Turnaround times are being squeezed, and we found that platesetting plays an essential role in expediting work. When we installed our Komori press, we learned something else that was very intriguing. Some of our magazine customers require 20 sets of proofs. Most printers would naturally send the files to a digital proofer. We experimented and discovered that it's less expensive to create plates and print traditional press proofs directly to the Komori press. Assuming you have CMYK in the units, it takes less than an hour to mount plates and print the sheets. And our customers, of course, love receiving a press proof for approval.
PI: How did all of this affect your decision to purchase Optronics?
Fong: Back in 1990, we investigated a number of imagesetters for digital output, using a very large, difficult file. Optronics imagesetters achieved the best results, culminating in the purchase of an Optronics imagesetter for Fong Brothers Printing. When we introduced that printing technology in China, we were given permission to sell Optronics imagesetters and platesetters as well. They performed very well for our customers and were financially successful for us.
When Intergraph announced they wanted to divest of Optronics, we recognized that computer-to-plate technology would continue to grow in importance. I also strongly believe in Fong Brothers' credibility and wanted to secure CTP technology for the Chinese market. It was important to assure our Optronics customers in Asia that they would continue to be serviced well.
But, most significant, we believe that Optronics platesetters—in terms of imaging, ease of use and cost—perform as well as anything in the marketplace. In fact, we allowed a printer in China to conduct a side-by-side comparison with another platesetter. The Optronics Aurora platesetter was selected because of quality, reliability and price. Perhaps it's something we should allow printers to do in the States. It's the next generation of Optronics products we're staking our fortunes on.
As a company, Optronics' management possesses the same innovation and dedication to quality they have always been noted for. We're currently in the process of retooling and rebuilding. Some of these efforts are coming to fruition, and you'll see them shortly.
PI: Where has Fong Brothers found opportunities in printing?
Fong: We find that we're doing a lot more color printing. The Internet has taken away some of our traditional black-and-white documentation business among our Silicon Valley customers, but we've seen many of these jobs converted to full color "instruction sheets."
We're also conducting much more traditional commercial printing: direct mail and marketing collateral. Lately, we've seen more finance and banking business. Our on-demand digital printing capabilities provide us with substantial business, because clients are looking for quick turnarounds. If you treat your customers well and provide exceptional service and speed, you can develop a very strong, loyal customer base from customers seeking digitally printed materials.
PI: What are your thoughts on the paper market? How does Fong Brothers deal with changes in the paper market?
Fong: All printers know that paper prices rise and fall like a roller coaster. In the past, we tried to purchase paper in large quantities and stockpile an inventory. Prices are so volatile and hard to predict that we decided to acquire paper utilizing "just-in-time" techniques. That way, we don't retain a large inventory at any given time. However, paper prices really don't trouble us.
Paper prices are much more important for long-run jobs, such as magazines or newspapers. For commercial printers who focus on shorter-run jobs, it represents only 30 percent of the cost. So, pricing costs don't influence customer loyalty as much as the service we provide for them. And now, we've observed that the industry—even magazines—are negotiating shorter runs. Nowadays, a press run of 10,000 pieces is an attractive job.