MFSA/NAPL Conference — Survey Results Are Fulfilling
A significant divergence comes in as the fulfillment client profiles are analyzed. M&F specialists average 25 fulfillment clients, while printers are double that number. This means that the average client revenue of the former is $85,800 vs. $31,100 for printers. This economy of scale difference is significant and surely drives higher relative administrative costs, which tend to be fixed, for printers. Both groups have solid dependence on their top five clients, with the averages being around 75 percent.
Detailed operations showed divergence between the M&F crowd and printers; skid capacity utilization was 82 percent vs. 67 percent, with half of the printers at barely more than 30 percent utilization. The flexibility and versatility were reflected in the ranges of weekly pick-and-pack orders between the average and the high; M&F at 163 percent and printers at 86.8 percent.
Reported fulfillment price trends are revealing. Over the past three years, M&F specialists report 10 percent price increases, while printers claim 23.8 percent bumps. And yet, the average increase that stuck this past year (and expected for the next) is only 1.1 percent to 1.2 percent for the former and 0.7 percent to 0.8 percent for the latter.
The author draws five debatable conclusions from these price responses. 1) The price increases will not cover expected inflationary increases and, therefore, adequate margins must still exist. 2) Operating efficiencies climb with knowledge of ordering patterns and, hopefully, climbing volumes. 3) Buyers are effectively resisting increases, possibly with a threat to leave. 4) Relative profitability for M&F specialists must be higher than printers, with the former realizing 50 percent greater annual price increases (+1.2 percent vs. +0.8 percent) on average clients whose volumes are 275 percent greater ($85,800 vs. $31,100). And, most importantly: 5) Most M&F specialists appear to understand the higher value of their fulfillment services in the eyes of their clients much better than printers.