A New In-plant Challenge Emerges
I once wrote an article for this magazine in which I noted that "the state of the in-plant printing market is healthier than it has been in the last few years — not because of any projected growth in in-plants, but because in-plant managers are reporting that they are under slightly less scrutiny."
Recently, however, I've seen a disturbing trend in which in-plants that were performing well and did not appear to be under scrutiny were suddenly surprised to hear that they were closing. They were achieving their goals; some reported huge savings, and others talked about how happy their customers were.
There was a university in-plant in the Northeast that was saving its organization over $200,000 a year, a transactional printer in the Midwest that had recently consolidated printing facilities, saving the parent organization several million dollars a year, and a school district printing office in the South that had flourished by excelling at insourcing. All were now being significantly downsized.
But perhaps the worst part of this story is that many of these in-plants never saw it coming. They were shocked and surprised when they were called into their bosses' offices and told to prepare RFPs for outsourcing. In other words, they were blindsided.
I don't know about you, but in my opinion that is sinister. Their bosses never told them they were dissatisfied and were considering closing the in-plants. In some cases, they were even praised for their accomplishments. It's almost like the misdirection part of a magic trick when you look the wrong way only to be surprised at the end. In this case, the managers were lured into a false sense of security and distracted from preparing a case proving their value. They looked the wrong way until the day when they were told to prepare for outsourcing.
The irony is that no one thinks this can happen to them. They assume that these other in-plants were clearly doing something wrong and if they had any problems they would have heard about them. It's surprising to find that talking about these case histories in presentations is not motivating because most of the in-plant managers don't believe it is a problem that will affect them. Several times this year, managers have walked up to me and said, "That was interesting, but I don't think that's going to happen in our organization. We've been around for long time and have a really good reputation." I've tried to explain that this is exactly the same situation that occurred with these other in-plants, which resulted in them being blindsided.
Sometimes when talking to these administrators, there are hints of what they are thinking about. One question I find effective and revealing of someone's true feelings and possible predisposition is to ask, "What do you think are the strengths and weaknesses of offering in-plant services?"
Of course, it's not foolproof but I find that when the first responses focus on happy loyal customers, ability to break even or make some money, conversations about being strategically aligned, or discussions of speed and convenience, I walk away thinking that the in-plant is not under scrutiny.
However, when the first thing out of someone's mouth are comments about declining volumes of work and complaints about pricing, on-time delivery and losing money, my suspicions are triggered.
What can be even more surprising to in-plant managers who thought they were doing well, is when they ask their bosses what is their motivation to close, how quickly the management will rattle off reasons, supporting their arguments with evidence, typically focusing on financial performance, customer satisfaction or pricing.
But perhaps the most common argument, and the most difficult to address, is the question about core competencies. In other words, the inevitable question: "Is printing or mailing our core competency?" The obvious issue for the in-plant community is how you can battle this complaint.
In my opinion, those who are most likely to win are those who are prepared for battle. In The Art of War, written in China 2,500 years ago, Sun Tzu says, "The general who wins the battle makes many calculations in his temple before the battle is fought. The general who loses makes but few calculations beforehand." So let's go back into our temple and prepare for this battle with logical arguments and substantial data.
Preparing For Battle
To prepare for this battle, you have to understand the attack strategy. A good example comes from one of the top consulting companies outside our industry, Accenture. In its white paper, "Core Competency 2.0: The Case for Outsourcing Supply Chain Management," Accenture offered the following questions as a guide to deciding whether to outsource:
• Is this your core competency?
• Is this strategically aligned with your mission?
• Who will improve the functionality the most in the future?
• What is the risk?
In my experience, the first two points are most often discussed, and the argument that is most difficult to address focuses on the question, "Are printing and mailing services part of our core competency?"
At the IPMA conference this year, I made a presentation about benchmarking operational and financial performance. The underlying theme was to use measurements and benchmarks to prove that printing and mail services were your core competencies. In other words, if the administrator in charge of the in-plant says that printing is not your core competency, you should be able to reply, "It is my department's core competency and we can prove that our pricing, responsiveness, customer satisfaction and productivity is as good as anyone's and likely better than most. And by the way, I have the data to support that."
Having that data to support your assertions is really the key to starting this dialogue. There are different ways to prove that what you do, you do very well. The most common method is to compare performance to industry leaders. This is often described as benchmarking performance. This is an area that my company, NAPL, focuses on, in both our consulting and in our research studies.
In each of our research studies, we analyze how industry leaders answer certain questions compared to the rest of the industry. One of the conclusions that we came to in this year's State of the Industry Report is that industry leaders measure and compare their performance to others and are not afraid to acknowledge what they do well and what they are working to improve. Some of the areas that leaders identified as problems they are working to overcome include: poor follow-through, insufficient skills, overcoming resistance to change and procrastination.
This is something we see in our consulting projects too. The leaders are the ones who are most interested in benchmarking their operational and financial performance. It is the leaders who have most often asked for objective assessments or report cards that show what they are doing well and where they need to improve. And it's the leaders that use those report cards to take action, while the rest of the industry does not.
If you're interested in performing like a leader, use report cards that measure your performance and then take action on the things that you need to improve. The areas that typically require the most attention are pricing, listening to the voice of their customers and increasing productivity to maintain competitive prices and increase customer convenience.
The irony about competitive pricing is that everyone says they monitor and change their pricing, but few actually do. Almost every time I ask a manager if he or she thinks their pricing is competitive they always say it is. When asked to demonstrate it, they often have to search through piles on their desks to find the few comparisons that were made a year ago. In my opinion, this is not a rigorous strategy for monitoring competitive pricing.
Leading in-plants may take different approaches, but they all result in the same outcome. Some in-plants do a survey once a year of their most popular products. Others have built their own systems that allow them to automatically monitor their pricing on an ongoing basis. And others simply buy readily available national pricing studies.
For example, the last IPMA published pricing study was done in 2011 and showed that the most popular price category for letter-size, black-and-white toner pages was about $.03. A more recent NAQP study asked what is "the lowest price per copy you would ever quote for a large job which is competitively bid?" It found that the average price was $.0318.
There are commercial bidding software systems such as P3 Software and do-it-yourself systems. A few years ago at an in-plant peer group meeting, Abbas Badani from Penn State told how he created his own bidding system. Later I learned that others in the peer group went on to create similar systems.
The point here is not to talk about the advantages and disadvantages of different ways to monitor competitive pricing. The point is, if you want to be able to say such pricing is competitive, you need a system to prove it.
Responsiveness & Customer Satisfaction
Just as you can be blindsided by management, you can also be blindsided by your customers. They can complain to your boss about pricing or service, or start buying from someone else. To avoid being blindsided by your customers, you have to listen to the voice of your customer (VOC) and provide mechanisms to respond to their complaints quickly. Some great ways to do this are through the use of focus groups, one-on-one meetings and surveys. The goal is to quantify three things:
1. Customer satisfaction based on what's most important to them (e.g., price, on-time delivery, quality).
2. Their satisfaction with the range of services you offer, and how their needs may be changing (e.g., direct mail to e-mail marketing).
3. Who they consider to be your strongest competition, and how your products and services compare to that competition.
When we evaluate an in-plant at NAPL, we first benchmark financial and operational performance. Listening to the VOC with surveys and focus groups is the second step. Finally, we evaluate the strategy and vision.
We have a tool that we use called the NAPL Competitive Index Profile, which is specifically designed to measure how your in-plant compares to your strongest competition. We also use surveys designed to ask your customers how their needs are changing and quantify how much it's going to impact the volume of work they send you. We think that both are important to how your customers value the in-plant.
Taking the time and effort to hear the VOC is generally one of the best ways to understand your customers' changing needs, identify opportunities and know how to respond to those needs. Then you can add more value into your service offerings. If you're unsure of the value you offer, you should consider reading Fred Reinhold's book, The Ultimate Question.
Pigeonholing & Planning
Companies that are responsive to their customers' changing needs avoid the problem called pigeonholing, in which customers may start to think about you based on your products and not on the value of your services. In other words, your customers may think of you based on their business card orders, course packs or large-format posters.
The result of such pigeonholing is that the in-plant may gain the reputation of being "old-school" or old-fashioned. Unfortunately, many in-plants have no idea how much they have been pigeonholed by their customers; that is where surveys and focus groups help.
Keeping Customers Updated
This problem can be exacerbated because many in-plants are discouraged from using salespeople. One of the roles of sales is to update clients on new services or to counter the claims from competitive providers. Without sales staff, the responsibility of keeping your customers updated falls on either management or customer service.
Regardless of who speaks to your customers or how you listen to the VOC, it is important to use that info in your planning process. NAPL is currently analyzing and writing our next digital services study, which will talk about common denominators of digital leaders. When we identify the leaders, we see differences in what they are doing; planning is one of those differences.
Often, smaller companies are fearful of the planning process because it conjures up visions of weeks and months of never-ending meetings. While planning does take time, for smaller in-plants it can start with simply a two-day (offsite) meeting to initiate the process, followed by half-day meetings throughout the year. And you may not be surprised to learn that good planning is something we see more from the leaders than the laggards.
Process and Tools
Increasing operational productivity and reducing manufacturing costs run hand in hand. Driving down the cost of manufacturing results in both shorter turnaround times and more competitive prices. These can be achieved through process improvements or automation technologies. One strategy for increasing productivity is continuous process improvement—critically evaluating how you do things and always looking for a better way to do them.
In one of our recent NewsTalk live webinars, one of our panelists was John Berthlsen, president and CEO of Suttle-Straus. Much of the success of Suttle-Straus comes from John's passion for continuous process improvement. He has been a regular presenter at the Continuous Improvement conference and is famous for saying, "It isn't doing five things 100 percent better, it is doing 100 things 5 percent better."
Of course, not all organizations have the culture for continuous process improvement, which, put another way, is to increase productivity through automation.
There are three categories of software automation: Web-to-print solutions, Print MIS systems and prepress PDF workflow software. The functionality of all three are starting to merge. Today, estimates and job ordering may start with a Web-to-print solution. The files are then transferred to a prepress PDF workflow where the jobs are preflighted, corrected and imposed. At the same time, the Print MIS is creating the job tickets, monitoring the scheduling and invoicing.
I wish I could say, like I did a year ago, that there appears to be less scrutiny of in-plants; however what I am finding is that those in charge are getting better at hiding the fact that they are considering closing the doors.
One way to counter the argument that printing is not your core competency is to follow the Boy Scout motto: "Be prepared." Consider planning your defense before you actually need it. Those who do will be able to make the argument that "Printing is my department's core competency, and I can prove it with evidence of our pricing, customer responsiveness and satisfaction and productivity."
Related story: Improving Your In-plant
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