Crucial In-plant Metrics

When pricing their wide-format digital printing services, more than half of in-plants surveyed say their number one challenge is "determining real costs and overhead." This detail was discovered in a recent research study conducted by InfoTrends and In-plant Graphics. The study was designed to produce benchmarks and gather insights on how in-plants are operating along with the challenges they face in pricing wide-format services.

Understanding real costs and overhead is a complex matter because of all of the factors that could go into calculating them at an in-plant. In fact, many of the other challenges that respondents cited are also related to the financial aspects of print, such as determining appropriate mark-up, developing accurate estimates and selecting a pricing model.

Here, benchmarking can be very helpful when looking to add wide-format printing services because it provides a set of metrics that in-plants can use as a guideline for performance management. The collection of the data can also help in-plants understand costs, which, in turn, can be used to develop estimates, since true costs should comprise at least part of any pricing strategy.

Operational Metrics

In-plants reported a number of operational metrics that InfoTrends believes are important and can be used as measuring sticks. For example, the survey asked for materials costs for 2012 and 2013 and specified that materials costs should include paper, substrates, ink, toner and finishing supplies.

The average in-plant reported that materials costs were about 24.7 percent of the value of printed materials in 2012 and 25.1 percent in 2013, a slight 1.6 percent increase year-over-year.

At the same time, the average respondent reported labor costs were 35.1 percent of the value of production in 2012 and 35.8 percent of the value of production in 2013, which is a 2 percent increase year-over-year.

Therefore, the value of labor and materials grew by a total of 3.6 percent while the value of shipments grew 7.3 percent.

It should be noted that in 2013, the average material costs for wide-format were 26 percent, slightly higher than those for the overall print operation material costs; however, it is important to remember that wide-format services open up new revenue opportunities for providers who offer it.

While we do not like to compare in-plants to print-for-pay operations, there are some very important differences that can be determined by this data set. For example, whereas one in three print-for-pay shops indicated they are raising their prices to make up for the rising cost of materials, labor and transportation, only one out of every 10 in-plants reported they are raising their prices.

At the same time, in-plants reported a much higher level of anticipated capital expenditure than print-for-pay shops. InfoTrends interprets this to mean that in-plants are under even greater pressure to produce wide-format services at lower costs and recognize the need to invest in new equipment that operates more efficiently to meet that demand.

Services Beyond Printing

The gap between cost increase and the value of production across all print processes represents an additional value metric that in-plants should strive to grow. The best way to do that is to focus more on the services that in-plants provide to their organization beyond printing. In-plants should be working with IT and internal marketing departments to develop ways to integrate new communication services that the in-plant can support. These types of services might include better brand management or better inventory and supply chain management, which can improve marketing effectiveness, provide better compliance and save the organization money.

The other value in benchmarking is that it provides a basis for continuous improvement, which is especially important today as many in-plants have to constantly prove the value of their contribution. InfoTrends believes the best positioning for in-plants is to benchmark their current operations, then develop more ways to serve the organization, as well as a measurable plan to steadily improve on their contributions.

Arianna Valentini is senior media analyst for InfoTrends' Production Group.