Heidelberg Launches Digital Subscription Business Model
Heidelberg says that under its new Digital Business Subscription Model, it offers printers an alternative to the usual practice of buying and depreciating printing machinery.
Instead of selling, Heidelberg provides everything needed for print manufacturing - a Speedmaster press, Prinect workflow software, Saphira consumables, parts, consulting and field support services - for a fee built around a cost-per-sheet charge that is calculated to be lower than what the shop is presently working with.
Combined with the cost-per-sheet charge are a monthly base fee and an additional impression charge for production in excess of the monthly base fee. This three-part charging structure is intended to provide increased profit for the printer, which includes the technology and consumables supplied by Heidelberg.
Heidelberg calls it a “pay-per-use” model. By partnering with printers on a pay-per-use basis, says Dr. Ulrich Hermann, Chief Digital Officer for Heidelberg and member of its management board, “we are selling productivity.” The print shop receives an “intrinsically optimized” system that lets it concentrate on increasing production efficiency without having to take ownership of anything except a determination to maintain the per-sheet cost and to produce a specified volume of sheets.
According to Hermann, print shops prosper when they focus less on depreciating assets and more on modernizing their business model, satisfying customer needs and boosting productivity.
“Printers must ask themselves whether the real objective is to invest in printing equipment for the sake of tax depreciation advantages, or whether it is to produce beautiful printing for their customers while operating their equipment at its highest level of efficiency,” he says.
“The correct choice is obvious. But, until now, the industry’s traditional approach to equipment ownership has tended to block printers from fully committing to it.”
Heidelberg’s research indicates that overall equipment effectiveness (OEE, a fundamental yardstick of manufacturing efficiency) stands at an average of about 30% for the printing industry as a whole. Shops taking part in the Digital Subscription Business Model, Hermann says, have a path up to 70% OEE - the hallmark of the best performing and most profitable users of Heidelberg equipment.
The first step is to arrive at a cost-per-page charge that reflects how much productivity the participating shop stands to gain. Heidelberg establishes this by working with the customer to analyze current operations and to project what can be expected once the suite of optimized components is in place.
This sets a benchmark for producing more sheets at a lower unit cost per sheet over the five-year life of the agreement. To help keep production on target, the participating shop’s performance is digitally benchmarked monthly against operating data from Heidelberg’s worldwide network of more than 10,000 connected presses.
Hermann emphasizes that the volume-based cost-per-sheet fee, payable monthly to Heidelberg, is not a click charge. A click charge, he explains, comes only from costs that the manufacturer wants to recover. The subscription fee is based on the participating print shop’s real costs and represents a mutual profit partnership for the customer and Heidelberg alike.
Hermann says that the Digital Subscription Business Model arose from Heidelberg’s understanding of how its responsibilities to its customers have changed.
“Once, it was enough for a manufacturer to sell a press without knowing exactly how the customer would use it or what impact it would have on the long-term health of the customer’s business,” he says. “Now, however, the manufacturer must orchestrate all products in a smart way to improve customer outcomes on a sustaining basis.”
According to Hermann, the Digital Subscription Business Model creates an arrangement in which the participating shop can rely on a robust production system with a stable cost base to maximize OEEs, margins and customer satisfaction. Because the agreement is renewable, the shop gets the ongoing benefits of Heidelberg’s most advanced technologies without worries about obsolescence or financing new capital investments.
Heidelberg is already testing the Digital Subscription Business Model with customers in Europe and has recently launched subscription in North America. For more information, visit the Heidelberg Subscription page.