Editor's Note An In-plant Casualty

The festive mood of the awards banquet at the recent International Publishing Management Association conference was disrupted by the slowly spreading news that USAA, a San Antonio-based insurance financial services association, has decided to close its substantial in-house offset operation and outsource all printing.

The news came as a blow to in-plants everywhere. USAA Publishing Services was one of the country's largest in-plants. With a $38 million budget, it ranked fifth on the most recent IPG Top 50 list and employed 305 people.

The company plans to lay off 175 of those people as of August 20, with another 75 to be shown the door in September. Among the casualties was Jack Mondin, the affable executive director of Publishing Output Services. Reached at his home, Mondin said he was unable to comment on the situation.

The company plans to restructure the rest of its print and mail operations, including digital printing and copying. By the end of September, USAA will decide whether any of these operations will also be outsourced.

In a news release, USAA President and CEO Bob Davis said: "We have a responsibility to our members to offer the highest quality financial products and services available at competitive prices. These changes will serve to accomplish that by keeping our operating costs at reasonable levels."

In an interview, USAA Public Communications Specialist Tom Honeycutt said that USAA already outsources 85 percent of its printing. Despite the substantial investment USAA has already made in printing and prepress technology to handle the other 15 percent, he said, the company decided it could get this printing done by outside vendors at a lower cost.

These percentages contradict data that Mondin submitted to IPG for our December Top 50 feature. He said the in-plant printed 61 percent of the company's printed material, a substantial difference.

Honeycutt went on to say the company did not want to continue spending money to upgrade the in-plant's equipment in the years ahead, especially when, he contended, 90 percent of financial services companies outsource their printing.

"We're in the financial services business, not the printing business," he said.

These arguments, no doubt familiar to the ears of most in-plants, rarely hold up against the data detailing the cost savings an in-plant provides. From my past discussions with Mondin and my visit to his in-plant last year, seems clear he had been running an efficient operation and reporting his savings to management. It would appear the company made a decision, then set about trying to justify it.

Though Honeycutt said only that the in-plant's profitability was studied by a team of "senior officers," one insider at USAA said the company hired a man specifically to conduct the study—a man who quit once he had made the decision to shut down the shop.

And although Honeycutt said Mondin helped conduct the analysis, our source said in-plant officials were largely kept out of the discussions.

Honeycutt couldn't say what had prompted USAA to undertake this study, only that the company has been looking into the idea of outsourcing "for a while." He said USAA had envisioned its business five years from now and didn't feel the in-plant would help it advance its relationship with its customers. The in-plant had been serving the company since 1957.

This isn't the first time a well-run Top 50 in-plant has been outsourced—Tenet Health System ranked number 40 on 1998's list, only to be taken over by a facilities management firm the next year.

The outcome at USAA underscores the reality that no in-plant, no matter how large or how well run, is immune to being shut down once upper management gets the notion to do so.