Controlling costs is an essential element in every business. In the print industry, we look at the cost of labor, materials, capital expenses, and the costs of inefficiency to reduce friction points and optimize production, but there is more to growing a profitable inkjet-focused business. Getting to reliable profitability requires careful consideration of the current technology platforms and the products produced on those platforms. The third leg on that profitability stool is what the market you serve wants to buy.
What is Your Technology Platform?
Technology platform has many definitions, but for our purposes, it is the combination of software and hardware you use to run your printing business.
The software technology platform includes the operating systems on your servers and desktop devices, which may include Windows, UNIX variations, Apple variations, and mainframe environments like IBM MVS, VM, and VSE, as well as HP (Tandem) NonStop. The operating system (OS) determines what software applications you can install and how they will perform.
There are also database management systems (DBMS), web platforms, digital storefronts, and business intelligence infrastructures. This is also an array of graphic arts, prepress, information management, job management, and other production tools that make it possible to sell, prepare, produce, and deliver work. Hidden among the known software may be an array of freeware downloaded by well-meaning employees and scripts written to link pieces of software technology together to achieve specific outcomes.
The best practice in software technology platforms is to acquire and maintain software designed to integrate, share data, and participate in automation. Freeware and libraries of custom-written scripts are not a best practice and make it harder to build efficient, optimized workflows that enable the highest degree of profitability. If you have not walked your workflow and assessed your software technology platform recently, this is the time to do it. Every day you wait is a missed opportunity to right-size and optimize.
The hardware technology platforms are where the work is produced. It is every device on your production floor, from unwinds and presses to inline and near-line finishing. Cutters, perforators, folders, and tip-on machines are part of the platform. It also includes embellishment technology, binding, and inserting. It is every device, including those powered by hand, used to create the products you sell.
Creating a profit-enhancing production environment requires attention to the detail of what your equipment can produce. Have you codified the data you need to determine your profitability? What equipment do you have, and what capabilities are available? What format sizes are supported, and what paper can you run? How much saturation can you achieve at what cost? How fast can you print, and how fast can you complete the work through the finishing processes?
We are looking at the issue of profitability in the context of inkjet production, but the questions apply to the array of equipment you run.
- Do you have a clear picture of every device and what you are paying for it?
The relevance is that what you pay impacts your Cost of Goods Sold and your Total Cost of Printing. But there is more to it. Even if there are no lease or loan payments associated with a device, what about maintenance contracts or the average yearly maintenance cost? Are you tracking the actual operational costs of each device or hoping that it all balances itself?
The best practice is to gather the data and keep tracking it. You want the investment to carry its own weight, so you need to know the actual costs to inform your estimating and quoting algorithms and ensure you are hitting target profit margins.
- What is your true throughput and capacity?
You know your product mix. You know how many shifts you run and what you are selling. You may also know where your bottlenecks are. Take a step back and look at the stated and actual throughput of your current inkjet press technology. Did you base your costs on the expected throughput based on average rated speed, or have you tested your true speed for each substrate and type of job you run?
If you have upgraded your press, did you change your costs to account for different throughput? If you added additional press capabilities, new equipment, more drying, or other options, have you adjusted your tables to account for the changes? If you aren’t sure, check your data. Take a set of jobs you run regularly. Look at the actual time to run the jobs and how many operators or other people are involved. Compare the actual to how you estimate jobs with similar characteristics. If the numbers match, congratulations. If they vary, it is time to get to work to align your estimating.
Don’t forget to do the same exercise for finishing devices, embellishment devices, and any other process in production.
- Are you accounting for consumables?
We often hear printers complain about the cost of ink. It’s natural. It’s a visible cost. What your vendor charges you for ink is usually based on your expected volumes and coverage, which they use to assign you to a pricing band. If you use the same coverage assumptions and original pricing as your data points in estimation, you may be missing your anticipated profit margins. Begin by looking at the costs you use to estimate and what you last paid for consumables. That may be more than ink! Purging fluids, solvents, wipe cassettes, and anything else that goes into maintaining the press is a cost and should be part of the accounting.
How close are you? If you are spot on, congratulations! If not, this is the time to resolve the differences. There is also one more thing you can do – look at ink consumption by job and begin to understand if you are using too much ink.
Inkjet presses are not offset presses or toner presses. They operate differently. That means they should have their own color profiles, and files should be prepared with a conservative eye toward ink usage. If you have high-coverage work, look carefully at the files to see if the ink limits set in the files were intended for offset. If you see black set to a number higher than 100%, that is a hint that you may have too much black in your file.
Some DFEs and RIPS will flatten anything over 100% to 100%, which may not be the best option for getting vivid color. Others try to back all the percentages down proportionately, but that still may not be what you want. Take some time to understand how your inkjet device works because you may be able to save on ink costs and still produce stunning work.
Understanding your technology platform is essential to profitability.
What are You Selling?
What you offer to your customers is a gating factor for your profitability. It is easy to be lulled into a sense of security when your customer base remains stable and what they buy appears consistent. That doesn’t mean you are achieving the same profit levels you may have seen at the start of the relationship. In transaction and direct mail, it is common for clients to come back at the end of every contract term and ask for more discounting, and unless your costs have gone down, agreeing to the discounts takes a bite out of profits.
Start with the basics. Pull reports from your business systems to find all the products you sell. You want to know the volumes, cadence, and revenue associated with each product, who is buying it, and what you think the aggregated profit is. With your list in hand, carefully examine your actual cost to produce each product. What are the current profit margins? Look at the bottom five performers. Are they profitable? Do they disrupt production? Should you be selling them? Look at the top five and ask the same questions. Is there a difference between the top five volume performers and the top five profit makers?
There are no answers that are right for every business. You may be transitioning from older products to new offerings, impacting your numbers. You may have already done this exercise and begun to deprecate underperforming products. You may already be defining new products to offer. In all cases, the actual cost to produce the products and the calculatable profit should be your guide.
What is the Market Buying?
Test the market you serve regularly. For existing customers, do quarterly or biannual business reviews to get ahead of changes in their communication requirements. As you look for new customers, pay attention to the pitches that fail to produce work. Was it the wrong product? Was it work you couldn’t produce or didn’t know you needed to produce to compete?
Inkjet plays in so many markets that the substrate, print format, and finishing needs swing through many variations. Often, finishing is the differentiator for companies expanding the product catalog. Folding, cutting, coating, and enhancement are great add-ons. Inserting, mail services, bundled edelivery services, and document re-engineering can also be significant to add on.
Talk to your customers, listen to the results of sales calls, and watch the market to find the ever-changing print sweet spots to earn the most from your inkjet solutions.
The bottom line is that your path to profitability should not focus on raising prices without data. The best practice is to understand the technology you have today, the products you sell, the market you serve, and the costs associated with each element. Don’t stop there. Look at what you have and build the best offerings to achieve the best profit margins for today, but plan for your next acquisitions in print, workflow, and finishing based on your dive into the data. Focus on the data to lead you to profit.