In-plant Purchasing Decisions in a Recession

IN FEBRUARY, InfoTrends, a market research and consulting firm, partnered with North American Publishing Co., In-Plant Graphics' parent company, to conduct a survey entitled Purchasing Decisions and the Current Economic Climate. Readers of both Printing Impressions and IPG were asked to answer 18 questions pertaining to actions their organizations have made to weather these tough economic times.

Of the 601 respondents, 408 were from commercial printing companies and 193 were from in-plants. In-plant respondents were mainly management-level employees, with over 75 percent qualifying themselves as key decision makers. The organizations poled had a median in-plant operational size near 20 employees. The top three industries represented were educational institutions (37 percent), government and public sector employers (14 percent) and general manufacturers (13 percent). Overall, the median budget for in-plant printing related services was $300,000.

To begin the survey, we wanted to gauge where print revenues were prior to the economic crisis, and gain insight into where things were headed in the future. The year 2008 started out as a relatively healthy one for much of the printing industry. Nevertheless, the economic events that occurred in the latter half of the year inevitably took a toll on the industry. With that time frame in mind, we asked respondents to compare their facility's 2008 revenue from printing services with their 2007 year-end revenue results. In-plants reported a mean decline of approximately 0.4 percent for 2008.

The Full Story

While at first glance 0.4 percent does not seem like a large decline, the data tells a slightly different story. Cumulatively, 61.6 percent of respondents stated that their revenues remained flat or declined, with nearly 25 percent showing a significant decline of more than 5 percent. This means that only 38 percent of respondents showed any growth in 2008. Of those that did grow, 15.5 percent showed growth equal to or greater than 5 percent.

We also asked respondents to estimate print revenues for the remainder of 2009. The results show that they believe their 2009 print revenues will continue to fall moderately by a 0.2 percent decline. Of this group, nearly 68 percent of respondents believe that 2009 revenues will remain flat or decline, with 15.4 percent stating significant declines of 5 percent or more in print revenue.

Assuming that respondents were going to report declines in revenue for 2008 and 2009, the survey went on to ask participants what their organizations were planning to do to offset these declines. When asked about their plans for staffing in 2009, in-plant respondents stated that they planned to reduce staffing by a mean of 1 percent. Another 70 percent stated that they had no current plans to add or remove staff, while 9 percent planned some level of increase and 21 percent stated some level of decrease. Of the 21 percent that stated they were considering staff reductions, 19 percent said they were expecting to trim fewer than 10 percent of their in-plant print-related positions.

Overall, a majority of respondents chose to cut back on spending, putting hardware and software purchases on hold. About 61.1 percent of in-plant participants stated that they are currently not planning to purchase any hardware in 2009. The remaining 38.9 percent of respondents, who are looking to acquire hardware, had fairly diverse purchase plans with a nearly 50/50 split between black-and-white and color solutions. When asked how they planned to acquire these devices, 45 percent said they would lease, while 55 percent said they would purchase—and 60 percent of the latter plan to use cash. (See chart.)

Similarly, a majority (59.6 percent) of respondents are not planning to purchase any software in 2009. Of the 40.4 percent planning to buy software, most anticipated acquiring layout tools, workflow management software and prepress point solutions. Around 60 percent of respondents who are purchasing software in 2009 plan on using cash to make these software purchases.

Key Findings

While the current economic climate has impacted the printing industry as a whole, in-plants are actually weathering the storm far better than their commercial counterparts. When factoring all survey respondents from print-for-pay and print-for-cost, overall revenue in 2008 was down 1 percent over 2007. Print-for-pay respondents bared a larger decrease in revenues, with declines reaching 1.2 percent, compared to that of in-plants achieving a 0.2 percent decline.

Looking ahead to 2009, total respondents predicted a continued downward turn, with revenue projections declining another 0.6 percent over the year. Again, in-plant facilities showed less of a decline than print-for-pay. Print-for-pay respondents stated a mean revenue decline of 0.7 percent from 2008 to 2009, while in-plants estimated a continued decline of 0.02 percent. Additionally, print-for-pay participants stated that they would have to reduce their workforce by nearly 2 percent, versus the in-plant staffing reduction of 1 percent.

While it is important to note that the printing industry as a whole has suffered from the current state of the economy, it is also important to note that in-plant organizations were well positioned overall to handle such economic instability. Whether sheltered by the umbrella of a much larger parent organization, or by making sustainable purchasing decisions, in-plant print facilities have managed to hold their own in this tough economic climate. IPG