In-plant Survival Lessons

At a trade show last year, Andy Paparozzi, the chief economist at Idealliance, discussed how print sales today are far below the 2007 high of $98.3 billion but continue to grow from the low of $77 billion in 2011. In fact, sales have grown slowly but consistently for five years.

Some analysts look at this growth and other factors and predict that outsourcing efforts will increase. We believe however, that a continued focus on three critical success factors will increase the value of in-plants and reduce outsourcing efforts.

Market research firm InfoTrends, now a division of Keypoint Intelligence, believes that this slow growth and competitive pricing, as well as regulatory and compliance concerns, will motivate greater outsourcing efforts. In its study U.S. Document Outsourcing Market Forecast: 2013-2018, InfoTrends states, “U.S. document outsourcing revenues totaled $25.7 billion in 2013 and are expected to grow to $28.8 billion by 2018 at a 2.3% CAGR.”

InfoTrends identifies the two driving factors. “While cost reduction is often considered the primary driver for outsourcing, regulatory and compliance concerns can be an even more important factor for organizations seeking external support.”

This may be true for transactional in-plants printing mostly bills and statements, but they make up only about 25% of the total number of in-plants. In the 2016 NPES/PRIMIR study titled Digital Printing Technology’s Influence on the U.S. In-plant Printing Market, which we worked on with IDC, we forecast a total of 17,389 in-plants in 2020 comprised of 4,148 transactional and 13,691 graphic arts in-plants.

In addition, much of this is based on the speed at which customers migrate from paper to paperless delivery of bills and statements. Matt Swain, a group director at InfoTrends, has shown that year after year the expectation of this transfer far exceeds the reality. For example, every year for four years an average of 36% of transactional printers have predicted a transfer to paperless, while less than 25% made the move.

Slower Outsourcing Growth

In our work we are not seeing the growth in outsourcing that we have in the past. We believe that the decline in volumes from 2007 and the hyper-competitive pricing have made outsourcing less attractive to outside companies. The reason is simple; many outsourcing models are based on a sharing of the savings achieved when equipment is more fully utilized and staff levels decline as tasks are automated. As volumes decline, the savings from higher equipment utilization declines. In addition, as in-plants implement their own automation (Web to print, Print MIS, PDF workflow, color management), savings from automation declines.

Our conclusion and prediction is that outsourcing efforts will not increase beyond levels we have seen in the last few years. In fact, we believe if in-plants continue to focus on what’s important, outsourcing efforts will continue to decline.

Critical Success Factors

The prediction of declining efforts is based on the assumption that in-plants continue to pursue three critical success factors:

1. Measuring and proving increased productivity and cost savings.
2. Increasing productivity and cost saving efforts.
3. Building value-added non-print products and services to increase revenue.

In an October IPG article titled “How Leading In-plants Prepare a Battle Plan,” we talked about how leading in-plants keep their metrics up to date and report it in a way to make it easy for upper management to understand.

Reducing manufacturing costs and remaining competitive with outside pricing are the most important objectives for in-plants. The InfoTrends study found that 40% of customers reported cost reductions as their top priority. That is why outsourcing companies typically start by talking about cost reductions.

Independent studies are also important to demonstrate increased productivity and cost savings, but until recently there was no research documenting in-plant cost savings. Last year however, we wrote a white paper for the In-plant Printing and Mailing Association titled Case Studies of In-plants that Save Money. The study identified the savings generated by seven in-plants.

In the NPES/PRIMIR research, we learned that creative services, Web-to-print and mailing/postage optimization were the most important non-print, value-added services that in-plants are offering today. We are already starting to see a shift to new value-added services such as managing the MFD fleet, insourcing, scanning and fulfillment. Ultimately the most important value-added services will include multi-channel, digital asset management, external print procurement and record management.