Strategic Insight: Regulatory And Economic Playing Field
Picture your company two years ago. Odds are your printing business was running smoothly, and your primary focus was on growth strategies: increasing capacity and accessing new markets. The news featured updates on the rise of a new virus that got its start in China. There had been other viruses, including SARS and H1N1, which were cause for concern, but ultimately had minimal effect on our shores. Two years ago, we had no idea of the profound struggle our industry would face, and how deep and intractable the effects of the virus would be.
Hindsight, we well know, allows us to see with clarity. It’s looking forward that’s difficult. To clarify our sense of where we are today, and how our journey through 2022 may transpire, this article provides insights of key printing industry experts discussing the trends and topics that will affect our day-to-day professional lives in the near-term.
Key Indicators and Realities
The necessity for an economist to help printing companies manage whatever conditions come their way is paramount, and since beginning his role as chief economist with PRINTING United Alliance, Andy Paparozzi has collected and presented data gleaned from the industry, while also placing the industry within the context of the broader economy.
There is perhaps no better illustration that this industry in inextricably interlinked with the economy than the recent challenges with the supply chain. Paparozzi sees supply chain disruptions “continuing deep into 2022, at least.” He says this current reality has been so difficult because our industry was not prepared. “This is so unprecedented,” Paparozzi notes, “because our just-in-time supply chains have been affected from beginning to end.”
He says that while past natural disasters, for instance, provided localized disruptions, the current challenges are occurring on a global scale. While Paparozzi sees some lessening of the current crisis, witnessed in an increasing certainty of delivery timelines, he also believes the supply chain challenges will remain profound, broad-based, and structurally impactful.
Another challenge facing employers across segments is the quest to find and keep employees. While these challenges have been magnified by the strong need for labor in the post-COVID economy, Paparozzi points out that printing businesses were challenged in this area prior to the pandemic. He asserts that part of this reality is that printing has “an old-economy image,” and that it is incumbent on the industry to change perceptions. He says that while printing companies have offered higher wages and better benefits to attract and incentivize new workers, “people still are not that interested.”
Companies on the leading edge of this challenge have “advanced their employee brand and their employee value proposition.” In so doing, he says, they make a compelling case for why prospective employees should choose this industry in general, and their company in particular. “No industry excels without a supply of productive, creative, motivated labor,” he adds.
Another, more recent, challenge facing our industry and others is the impact of inflation. Paparozzi speaks of this economic effect as being a complex challenge. “It starts with transitory elements,” he says, “like supply chain or labor shortages. Then it embeds itself into the economy and becomes more difficult to root out and control.” Once inflation begins to affect prices — as seen in the printing industry — it becomes harder to reverse.
Paparozzi expects inflation to continue, though on a slowing level, and to see elements of transitory inflation diminish. He says printing companies have “held the line as long as they could,” waiting for transitory elements to pass. Now that companies are realizing inflation has become embedded, and isn’t going away anytime soon, they are now having to raise prices.
Despite the ongoing challenges outlined above, positive growth in the commercial printing segment continues. Paparozzi says that at this time — subject to change — he expects industry revenues to grow between 5.2% and 6.2% during 2022, mirroring the slower growth and ongoing recovery in the U.S. economy.
One of the elements pushing the commercial sector forward is a rediscovery of the efficacy of direct mail. Many marketing audiences “are overwhelmed and tired of email, and are instead responding to visually compelling marketing collateral.” Paparozzi says he finds it inspiring that companies are effectively demonstrating the value of print.
Looking to the year ahead, Paparozzi references a series of business “must-do’s” that were featured in the recently released (November 2021) PRINTING United Alliance “State of the Industry Report.” Of particular importance, he says, is the need for businesses to “future proof” themselves and adjust the way they will operate moving forward. This includes, for instance, more remote transactions and less face-to-face interaction with customers.
Further, Paparozzi believes companies must become more data-centric, allowing them to better understand themselves, their customers, and their opportunities. “Opportunity is expanding, but the margin for error is shrinking,” he points out.
Managing Your Greatest Assets
While it is not unusual for business owners and managers to treat human resources issues as something they have to do, versus wanting to do, the events of the past couple of years in particular have demonstrated the profound ways strong and thoughtful attention to workforce issues can strengthen a business. In her role as VP of HR consulting at PRINTING United Alliance, Adriane Harrison has worked to demonstrate the paramount importance of human resources, and the challenges facing printing businesses today.
In response to the COVID-19 pandemic, Harrison notes that many owners and managers are burned out on COVID, and may even be resentful of the disruptions presented by government mandates. “If there is a mandate, they have to follow it,” Harrison says, adding that they may have to put aside their own personal opinions to do so.
She recommends against individual employers mandating vaccines. First, Harrison says, mandating vaccines can breed ill will, and, in the printing industry, employees can generally be protected through masking and social distancing protocols. If someone in the workplace has potential COVID symptoms, that person should be sent to get tested, and should not return to the operation until the individual’s COVID status has been verified.
The current labor shortage is more than just an economic challenge. HR professionals, and those tasked by companies to address HR issues, continue to battle staffing challenges that were in place even before the pandemic took hold. To access potential employees, Harrison suggests companies look into second-chance employment — such as for formerly-incarcerated persons — which she refers to as a “pool of candidates grateful for the opportunity.”
She further suggests looking toward “anybody who has an affinity for working with their hands,” noting mechanics, HVAC technicians, and those who service other mechanical systems as possible candidate pools. Harrison also urges companies to become known in their local communities. “Being a good employer will sell itself to some degree,” she adds.
While employers are scrambling to find employees and fill vacancies, Harrison urges them to not hire too quickly. “Some employers are really desperate for workers,” she says, “but they should follow regular protocols.” She urges employers to not cut corners on key things like background checks, work histories, and careful evaluation.
As printers continue to struggle to find labor, many are looking to automation to minimize the “human factor,” thus doing more with fewer people. “Automation is good,” according to Harrison, “but we still need people to run the machines.” She notes that a secondary effect of automation is that it can redefine what specific workers do, resulting in either reassignment or retraining. When workers are reassigned, companies should “be transparent and offer work with equally interesting skills. Having talented employees learn more will help the business and retain employees,” she adds.
While 2020 may be best known as the year COVID changed our lives, it was also a year of a profound movement toward social justice, particularly following the killing of George Floyd in Minneapolis. This led many managers to examine their companies and make commitments to improve diversity, equity, and inclusion (DEI) within their workplaces.
To improve DEI, Harrison says companies should have a formal policy in place, noting it provides a roadmap toward how DEI will be addressed. She adds that a recommended “first step” is to diversify hiring, looking into factors such as the lack of reliable public transportation, or a lack of proficiency in English, both of which can become systemic barriers to entry for underserved communities. Harrison also recommends meeting people where their need is. “Churches, community centers, and faith leaders can help you understand the community,” she notes.
One profound effect of COVID-19 has been the shift of many formerly office-bound employees to remote work, which Harrison views as a societal shift: “Once people have it,” she says about remote work, “they may not want to give it up.” For some situations (or businesses) Harrison urges a hybrid model where occasional or periodic in-person meetings are mixed with remote work, thus allowing for the building and strengthening of teams.
“If a manager is doing their job and making sure people are getting their work done,” she points out, “it shouldn’t matter if workers are not in the office for part of the week." Another benefit of remote work is that it can present “a flexible scenario that opens the door to many more caregivers as potential workforce members.” Many people, she says — often, but not exclusively, mothers — have mixed responsibilities, and the ability to balance these responsibilities with work can be a great option for certain positions.
As printing industry professionals who have each spent decades addressing regulatory compliance and other initiatives affecting printing businesses, Marci Kinter, VP of government and regulatory affairs, and Gary Jones, director of environmental, health, and safety affairs — both with PRINTING United Alliance — possess deep knowledge of where the industry’s been and where it’s going. While many companies focus only on regulatory compliance, Kinter and Jones have presented the industry with compelling business cases for excellence and continued business improvement.
Regarding current trends, Kinter says ERP (extended producer responsibility) has been “top of mind” for printers in the packaging segment, and those who primarily use paper. ERP, in short, requires producers to address end-of-life considerations for their products.
Currently, 22 states are taking different approaches to its implementation. Kinter says these approaches could lead to less printing, due to the costs of related fee structures. ERP has also increased interest by customers, she reports, in sustainable practices.
Jones adds that, during the pandemic, “a lot of municipalities had to shut down recycling,” thus increasing the focus on circular economies and product end-of-life issues. While EPR approaches may seem new to many, existing programs like “bottle bills” are examples of ERP. Kinter says a key challenge to ERP programs is, “how do you educate the consumer, and how do you have them understand what to do?”
Given stronger interest among customers for sustainable practices, interest in the sustainability of textiles has gone through the roof, according to Kinter. For flags, soft signage, and other textile-based applications produced in the graphics market, “there is no real end market except for upcycling, which is limited.”
Jones says these types of sustainability-focused realities, “are what is driving [regulatory] interest in single-use plastics.” He adds that some legislation involves charging producers a fee, but that those costs are often “being wrung out of the printer or converter.”
Kinter and Jones agree that, for them, “COVID has been 24/7,” including proposals and rules going into effect, both federally and in the states, as well as the emergency vaccination standard put forth by the U.S. Occupational Safety and Health Administration (OSHA).
While they say the pandemic has taken much of their time and attention, they are finding that many printing companies are “moving on.” “They’re not mentioning it at all,” Kinter reports. “The focus is on workforce issues and substrates.”
“Safety issues are still a major concern,” adds Jones, who says that both equipment safety and the reporting of injuries and illnesses are of particular concern. He is currently working with six printing companies who have been fined due to machine-related injuries.
Jones says that physical, in-person OSHA inspections are now back underway following an extended COVID-related hiatus.
Looking toward the year ahead, Kinter expects OSHA to focus on employee training, and notes that many companies neglect to do it. She also expects to see movement from OSHA on its infectious disease standard, its lockout/tagout requirements, a heat-related illness standard, and possible changes to the Hazard Communication Standard, which Kinter says “would have more impact on suppliers.”
Kinter and Jones both say an ongoing job for them is to convince fully-digital print shops that they, too, must comply with environmental requirements. Jones points out that as digital presses get larger — he uses the example of a digital inkjet web press — they may become devices that require air permits. “When you’re pumping ink from 30-gallon drums, you’ve moved into a whole new regulatory space,” Jones says. While these are growing pains inherent to an evolving technology, he adds it is also a vendor education issue.
Asked if there is one specific thing printing companies should do now to keep their regulatory efforts in check, Jones urges printers to do training on equipment safety and then document that it was done. “It’s a common deficiency that we find,” he reveals. “If there’s an equipment-related injury, that’s the first thing that will be asked.”
Kinter urges printers and converters to “take the time to do a comprehensive environmental, safety, and health audit.” Doing so, she says, will help ensure the company is in line in the event of an injury or employee complaint. “It will also show due diligence,” she says.
Sealed, Posted, and Delivered
To understand the current state of mailing, and particularly the U.S. Postal Service (USPS), is to understand a duality, according to Leo Raymond, Mailers Hub owner and managing director, who works with printers and marketers to maximize the efficacy of mailing initiatives.
“Frame everything in the context of what is said officially,” he says. The USPS, Raymond adds, indicates it’s doing a great job, but that’s not what people are seeing. He says that while the USPS sees its own reports showing the mail going through its sorters, “the trouble is a lot of mail is not a part of that system, such as mail that doesn’t have an IMB (intelligent mail barcode).” For those types of mail, he says, the news is not as good, causing people to question the Postal Service’s self-reported success rate.
For direct mail — an area connected strongly with the printing industry — the IMB is very often included, Raymond says, and this type of mail, particularly if it was sent relatively close to its destination address, is seeing good delivery results. Conversely, the mailing of publications and periodicals has seen very poor service, he says, because USPS is “having trouble with flat-size mail.”
Much of this difficulty, Raymond points out, is due to a fleet of flat mail sequencing systems that was purchased, but has never functioned well for the USPS. This issue was compounded by a decrease in volume, and size variability, which resulted in the Postal Service getting rid of those units. Raymond notes USPS is “trying to use more of the sorting machines, but is not forthcoming with official pronouncements” about its success in doing so.
The idea of eliminating Saturday mail delivery is a common cost-cutting concept, according to Raymond, because “it can cut delivery costs by one-sixth.” And while the concept has been included in a postal reform bill and has been put in as a rider in appropriations bills, Raymond sees eliminating Saturday delivery as a “third-rail issue.” While he sees Saturday delivery continuing, it may be due more to union pressure than to public outcry.
Raymond says the only recent postage change “of any consequence” is that 6x9˝ cards can now be sent at a First-Class postcard rate, noting that the change has resulted in a cost reduction.
Regarding the resurgence of direct mail, Raymond thinks “people are discovering that paying per click is not as effective as putting a mailed piece in people’s hands. There’s too much spam, too many phone calls.”
He adds that, while direct mail costs more, marketers are finding that their return on investment is proving its value. Companies that can be creative with the look and feel of mail, and find ways to integrate campaigns, such as through Informed Delivery or omni-channel approaches, have an advantage in the direct mail space. Regarding the efficacy of direct mail, Raymond says, “the best people to ask if it works are those who pay for it.”
Looking forward, Raymond thinks the USPS “is taking things in another direction.” He says that while USPS shares its good news, the current Postmaster General, Louis DeJoy, makes little mention of “hard copy mail, strong price increases, reduced interest in First-Class mail, and a stronger focus on package shipping.”
Raymond concludes that he’d be concerned if he was a printer serving the First-Class-dependent transactional space. “The Postal Service’s own methods have handed excuses for customers to leave using the mail,” he notes. “It you’re a transactional producer, that’s not good. It’s a different proposition than direct mail.”