Two Keys to Fighting Outsourcing: Benchmarks and Vision
The competitive threats to in-plants are not diminishing. The reason: print volumes are not returning to pre-recession volumes, so fewer in-plants are achieving their goals (i.e,. financial break-even), leaving the door open to an outsourcing or facilities management company.
This usually leads to an analysis of the situation that plays out in one of two ways. If you're lucky, you may get an objective analysis by an independent source. If you're unlucky, the analysis may be done by the outsourcing or facilities management (FM) company. Some in-plant managers say that this is like the fox guarding the henhouse. Either way, the more you know about how your in-plant's performance compares to industry leaders, the stronger your case that your in-plant has value—and the more likely it will survive the scrutiny of the evaluation.
Even if you're satisfied with your performance and don't see any outsourcing or FM threats on your radar screen, you still should consider analyzing your in-plant's performance against other in-plants and leading companies. You may not use it today or tomorrow, but getting into the habit of tracking performance and benchmarking against leading companies is a best practice that is always good to follow, because only solid, quantifiable performance and benchmarking data can counter outside attacks.
Don't wait until you're under the gun. Even if you're doing well, there are probably areas that can be improved and new services you should be researching. Be proactive, and be prepared. It's a position of strength to know your strengths and weaknesses, especially when you can demonstrate that you are working to improve your performance and address your customers' changing needs.
It is not unusual for someone providing an FM or strategic outsourcing solution to offer to do a free make vs. buy analysis. This compares your costs to manufacture to their costs if they took over or bought the same products. Their goals are simple: If they can demonstrate a savings of 20-30 percent, they will offer to split that savings. That means they would take half as their fee and your company would save the balance.
The easiest way to combat these threats is to ensure that your prices are competitive. This is why you should think carefully before implementing a price hike. And be aware that those posing threats may talk about how much tougher it is for the in-plant to remain competitive because the salaries and benefit plans of in-plant staffs may be much higher than those of employees in commercial shops. Since this is often accurate, the best way to counter this argument is to talk about productivity.
One of the few silver linings of the declining volumes of print is that it is creating a great used equipment market. That means if you have an old and outdated piece of equipment that is slow and cumbersome you should be monitoring the equipment sales in your area. And whenever an equipment manufacturer talks to you about its latest and greatest equipment, you should remind them that you are looking for high-quality used equipment. But keep in mind these opportunities come and go quickly, so you may have to figure out a way to close a deal right away when something becomes available, i.e., you may need to have a purchase order ready to go at a moment's notice.
Fixing Poor Performance
Poor staff performance is a tougher issue to overcome. There may be people on staff who have long tenure and are less motivated to hustle. Sometimes additional training can help them improve performance; in other cases, incentives work. This may be tough to push through the parent organization, but some companies measure performance and set production goals using incentives.
For example, one staff member may average 100 outputs a day, but if they improve that average to 125 outputs a day for a week, they receive a $25 gift card. Incentives work. But the toughest question still involves those employees who fall well below average performance and do not improve. Unfortunately, there is no easy answer to that problem.
While benchmarking performance offers a great insight into your competitive position, it does not provide a road map of what direction you need to follow to maintain a leadership role in the future. That requires a different approach, one that looks at industry leaders and what they are doing.
In the 2012 NAPL Digital Services Study, Second Edition we see a consensus of opinion across all printing companies that three services are essential for growing digital services: Web-to-print, variable data printing, and 1:1/cross-media marketing. And contrary to popular belief, this is not just for the big guys. In every company size category, digital dominates the list of services expected to grow fastest. For example:
- Variable-data printing ranks first in every company size category.
- Web-to-print ranks in the top three in every company size category.
- Static digital printing ranks in the top five for all but the largest companies, where it is replaced by database management to –support 1:1/cross-media programs.
- 1:1/cross-media ranks in the top five in all but the $5 million+ to $10 million category, where it ranks sixth.
The answers to the 2012 survey speak volumes about the changes in demand and the growing importance of digital services:
- In both the 2006 and 2012 surveys, variable-data printing was the top answer, growing from 57 percent in 2006 to 62 percent this year.
- The number two choice this year was a tie between Web-to-print and static digital printing at 41 percent. In comparison, static digital printing was the number four choice in 2006 (although selected by nearly the same number, 40 percent), but Web-to-print was mentioned by just 19 percent, coming in at number nine on the list.
- Mailing fell from the second spot in 2006, at 44 percent, to number six this year, at 26 percent.
- Four-color or more lithography dropped from number three (at 43 percent) in 2006, all the way to number 10, selected by just 18 percent—fewer than half the percentage of 2006 respondents.
- Fulfillment fell from the number four spot, at 39 percent, in 2006 to number seven, at 22 percent, this year.
As the saying goes, "there is more than one way to skin a cat," and there is more than one way to fight threats from outsourcing and facilities management companies. When we evaluate an in-plant, we take three key steps:
- Benchmark its financial and – operational performance.
- Listen to the voice of the customer through surveys and focus groups.
- Evaluate its strategy and vision.
In-plants that perform well in the benchmarking step, and position themselves to be responsive to their customers' changes, will not only survive these threats, but thrive.
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Howie Fenton is an independent consultant focused on analyzing and benchmarking operational performance. For 27 years he has served as a trusted advisor who helps companies implement best practices to reduce costs, streamline operations and increase value. To learn more, visit HowieFentonConsulting.com or email him at