PIA Sets the Table --Dickeson
Take a hard look at the included table. Ronnie Davis and Steve Kodey, of Printing Industries of America (PIA), provided us with the basic data. It's taken from the last 10 years of annual Ratio Studies PIA supplied its members.
In 1992 the series was modified to report sales by printing firms of "manufactured" products. The classification of "profit leaders" as companies with 8 percent profit and above on sales was changed. Profit leaders became the top quarter of reporting firms with the highest percentage of profit on value-added sales. Value-added sales are manufactured sales less Direct Order Additives.
First, the table tells us that for the past 10 years there's been only minor variation in value-added as a percentage of total manufactured sales for either the top 25 percent or the lower 75 percent of reporting printing firms. How can this possibly be? There have been major technological advances in these 10 years.
|Value-added as % of Sales
Source: PIA Ratio Studies
Materials prices have fluctuated. Is this saying that although technology has increased print productivity, and material prices have fluctuated over the 10 years, that those changes were passed through to print buyers? Yes, that's what it shows. Disagree?
Second, the table shows only trivial difference in average pricing (0.41 percent) between the top 25 percent and the lower 75 percent of firms over the years. Incredible! The top 25 percent averaged 63.83 percent value-added margin on manufactured sales while the lower 75 percent averaged 63.42 percent.
What is it then that makes the difference between upper and lower groups of printers? Either the upper 25 percent have less capacity or are using their man-hour capacity at a higher utilization rate. We've said for years that "our industry is plagued by over-capacity." Now change that, please, to "our industry is plagued by under-utilized capacity."