COMMERCIAL PRINTING -- Running Lean and Mean
The PIA economist also agrees that some printers will benefit more than others from the economic turnaround. He says the association's latest ratios study provides dramatic evidence of the continuing gulf between profit leaders and profit challengers in the printing industry.
"Profit leaders (those firms in the top 25 percentile of profitability) typically earn 10 to 20 times as much profit per dollar of sales as profit challengers (the other 75 percent of printers)," Davis points out.
Even as print sales have finally started growing again following two years of decline (2001 and 2002), the industry remains very competitive. The number of plants going out of business in a typical year creates a perpetual "going out of business" selling environment for competitors, creating tremendous pricing pressures, Davis explains. He contends that printers need to focus on the bottom line and commit to the "six secrets of success" exploited by the industry's profit leaders:
1) Have a well thought out strategy and specialize by customers/products.
2) Focus on manufacturing efficiency to produce the printed product cheaper than competitors. (Typically, profit leaders are around 3 percent more efficient than profit challengers in producing the actual printed product, Davis says.) The sources of manufacturing efficiency include use of appropriate technology, emphasis on workflow efficiency, right-sizing operations, seasonal sales patterns and benchmarking against industry leaders.
3) Focus on support efficiency to cut down on administrative costs. (Profit leaders are 12 percent more efficient in this area.)
4) Be a learning organization. (Profit leaders spend more than twice the percentage of payroll on training and education.)
5) Have a share-the-wealth strategy. (Offering bonus and profit sharing plans to all employees will create a culture of teamwork.)
6) Look to ancillary services for additional revenue. (Ancillary services account for more than 7 percent of total industry revenues and are projected to account for a larger share in the coming years, Davis asserts. It has been estimated that there is five dollars in ancillary services associated with every marketing dollar spent on print.)