MFSA/NAPL Conference — Survey Results Are Fulfilling
Results of the 2007 NAPL Fulfillment Practices Survey provided a valuable reflection of today’s Mailing and Fulfillment (M&F) market. Survey results suggest there are two views to the M&F story—one that reflects the efforts and actions of larger, more successful firms and another that provides a snapshot of the fulfillment industry as a whole.
The practices and expectations of larger firms are a valuable reflection of this dynamic and evolving value-added service, both from the view of printers wanting to get into and improve their fulfillment offering, as well as the fulfillment buyers who want to compare their own service provider.
Thumbnail summaries like this highlighted the third annual joint Fulfillment Conference, sponsored by the Mailing and Fulfillment Service Association (MFSA) and NAPL (National Association for Printing Leadership). The event drew 161 paid registrants to Louisville, KY, from April 25 to 28.
The 2007 featured keynote speaker Tim Fischer, NAPL’s executive vice president, presented the results of the survey, which included 31 M&F specialists and 44 commercial and niche printers, a 20 percent increase in participants vs. last year. The 2007 survey was compiled by NAPL’s Printing Economic Research Center, headed by NAPL Chief Economist Andrew Paparozzi. A summary of the survey is expected to be published this summer.
(Note: Conclusions cited in this article are those of the writer and not necessarily those provided by the NAPL survey.)
M&F Revenues Rising
M&F specialists with less than $10 million in sales, and whose sales in mailing and fulfillment were 75.7 percent of total revenues, comprised 92.8 percent of the participants. On the other hand, 62.5 percent of the printer participants had total sales exceeding $10 million, with mailing and fulfillment revenues accounting for 15.9 percent of their total. On a direct comparison, M&F folks averaged fulfillment revenues of $2.1 million vs. printers with $1.5 million, and $2.6 million vs. $1.7 million of mailing value-add. This would suggest a comparable economy of scale in these two value-add segments.
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.
Pricing comments from leaders were noteworthy. “Complexity of project, quality checks and security requirements” drive costs and prices. “Containing overhead costs, while passing along client-driven overhead costs” is essential to sustained profitability.
It is interesting to note that two-thirds of the M&F specialists set up their fulfillment operations as a separate profit center, while only 42.9 percent of printers do.
Fulfillment Profit Center
The profit leaders of both groups (30 percent) report that their fulfillment is more profitable than other parts of their business. (Nearly 24 percent of printers simply don’t know!) Both groups (about 38 percent) report increased profitability trends for their fulfillment centers the past three years, with nearly 60 percent expecting improved profitability for the next two years.
The driving impetus for printers to expand into fulfillment was evidenced by the response that 73.5 percent of the inventory stored by printers was also printed by them. For fulfillment clients who also buy printing, 74.4 percent of those printers report that the print volume from the same clients has increased, with 65.1 percent reporting that these same clients’ profitability to the printer is also improving. Loyalty is another reconfirmed fact, as turnover among clients buying both fulfillment and mailing is 3.3 percent, while turnover among clients buying only printing is 9.6 percent.
Both groups report an increasing trend in more complex fulfillment projects (65.5 percent for M&F; 56.8 percent for printers), and a full 25 percent of both groups report turning down fulfillment projects that were perceived to be too complex.
Global Fulfillment Scene
Peter Gillet, managing director of the United Kingdom’s MarketPoint Global, provided insight on the international fulfillment scene. Global marketing strategies and database management exist, but “all campaigns are local,” commented Gillet. His suggestions on how to find international partners to implement these local campaigns suggested an extraordinary opportunity for MFSA and NAPL to serve as facilitators in this process.
He advised: Prepare prospect list from industry organizations; e-mail profiling questionnaires to narrow the list; visit several industry groups to get the “feel” for their organization; and try to make your business a big part of their business for a win-win relationship.
In the panel discussion on “Building a Fulfillment Sales Force,” Rob Young of Transcontinental Direct, in Warminster, PA, profiled his company’s successful sales professionals as “great communicators…with intellectual bandwidth to manage complex program(s), who understand and are motivated by annuity-based selling and compensation.”
Tours of local fulfillment operations and printers with fulfillment services were also held. These included a midnight tour of the UPS WorldPort during peak operations, where more than 300,000 packages are sorted each hour. Tours also highlighted the unusual ISO 9001 certified fulfillment operation of Fulfillment Concepts (FCI); the extensive fulfillment and printing operation at Papa John’s Pizza; and the innovative returns processing and commingling book fulfillment warehouse of aNETorder/American Mailers. PI