Key Ways for Printers to Excel in 2022
The following article was originally published by Printing Impressions. To read more of their content, subscribe to their newsletter, Today on PIWorld.
COVID-19 and its aftermath continue to obstruct our view of what’s ahead. What we can see, however, suggests growth will continue for printers in 2022, but so will the materials and labor shortages that created problems in 2021. Key to excelling, according to the printers we surveyed: Capital investment that promotes productivity, automation, product diversification, and preparing for the post-pandemic world.
Every quarter, PRINTING United Alliance and NAPCO Research survey the state of the printing industry. Nearly 150 companies that define commercial printing as their primary business participated in our most recent survey. They include both general commercial printers and product specialists (direct mail, books, point-of-purchase, etc.), that have annual sales ranging from less than $500,000 to more than $400 million, and are located across the United States and Canada.
Addressing Supply and Labor Shortages
Throughout 2021, our research group has reported disruptive supply shortages, delivery delays, and labor shortages that extend “from the front office to the back dock and everyone in between.” The shortages are restricting production, and dramatically increasing practically all operating costs. Comments such as these capture conditions on the ground:
“Truck lines are worse now than any time I can remember. You can get no commitment on a delivery time at all!”
“The cost of doing business — the cost of goods sold and of people — is going through the roof.”
“If I can’t find people to work, I can’t take on more jobs.”
There are no quick fixes for any of this. We closed the American economy to limit the spread of COVID-19 and enacted exceptionally expansionary monetary and fiscal policies to prevent recession from becoming depression. Now, we are learning that it is easier to close the economy than it is to reopen it, and we are re-learning that the economy has a supply side as well as a demand side.
When supply can’t keep up with demand because of supply chain disruptions, labor shortages, regulatory policy, tax policy, or anything else that suppresses production, inflation is the result. If the imbalance is temporary, the inflation is transitory; if it is sustained, the inflation is persistent. Our concern is that inflation has already gained a foothold in the economy by raising energy prices, which touch every business and household, and “sticky” prices, such as rents and wages, that will continue even as supply chains heal.
Strategies for Growth
Persistent, embedded inflation eventually slows the economy by eroding real purchasing power, consumer spending, and consumer confidence. The exact timing of the slowdown is impossible to predict, but we expect it to be noticeable by the second half of 2022.
As the economy slows, so will commercial printing. Our preliminary forecast is for total printing industry sales (all sources) to grow 8.0% to 9.0% during the first half of 2022, 2.5% to 3.5% during the second half, and 5.2% to 6.2% for the full year. We expect comparable results for commercial printing.
Our state of the industry research also investigated where commercial printers would most like to invest in the next year, diversification trends, and where they see growth potential.
We asked about desired investments because, with so much uncertainty, many we surveyed still have not finalized their 2022 investment plans. More than 20 investments, ranging from direct-to-garment inkjet to 3D printing, made the most-desired list. The most frequently cited are in Figure 1. Ensuring efficiency and speed gained in the pressroom is not lost to bottlenecks in bindery/finishing, and expanding commercial inkjet capabilities, are the top priorities.
Click to enlarge.
Other approaches include e-commerce to strengthen virtual sales, mailing to deepen relationships with clients, workflow software and digital infrastructure to minimize steps and touches, and print enhancement (digital enhancement, coating, varnishing, foiling, etc.) to create the wow factor clients value.
Increasing productivity, cited by 79.9%, is by far the top investment objective. That will be particularly important in 2022 because, where clients have generally accepted price increases this year, resistance will stiffen next year as persistent inflation threatens their margins. Cost inflation that isn’t offset by productivity gains will have to be absorbed. Expansion into new markets, cited by 48.5%, and automation, cited by 44.8%, follow. Less than one of five would invest to compete more effectively on price. (See Figure 2.)
Click to enlarge.
Nearly 79.0% of our research group has diversified beyond commercial printing. Sixty percent have added graphic and sign production, 26.1% package printing/converting, 14.4% apparel decoration, and 9.6% functional printing. As Figure 3 shows, they see growth potential in products as diverse as folding cartons, wall/building graphics, direct mail, and banners/flags.
Click to enlarge.
Throughout our research, commercial printers asked how best to prepare for the post-COVID-19 world. Experts agree three steps will be essential.
The Future of Sales
Commercial printers will build remote/virtual sales capabilities. Steven Bookbinder, author of “3 Ways COVID-19 is Accelerating the Future of Sales,” and “How to Craft A Compelling Social Selling Persona: 5 Key Considerations,” writes that COVID-19 pushed B2B sales forces into virtual/remote selling with “unprecedented speed and scale.” He cites statistics such as these to prove there will be no turning back: “Two-thirds of B2B decision-makers surveyed believe that their new [remote] model is as effective, if not more so, than the previous model,” and “B2B companies expect digital interactions to be two to three times more important to their customers than traditional sales interactions.”
Bookbinder then shows step-by-step how to build virtual/remote sales capabilities. The key steps include teaching the sales team to master the complete digital sales process, helping each sales rep develop an effective social-selling persona, basing sales decisions on data, and creating a rigorous operating model for virtual sales.
They are also preparing for the data age. In “6 Ways Small Businesses Can Become More Data Driven,” Larry Alton quotes Tom O’Neil, chief cloud officer of Sisense, who describes data-driven companies as maximizing “the potential benefits of their data” by developing “efficient processes to turn data into action, and actions back into data.” They reduce risk, he says, by “developing rigorous decision processes and fostering evidence-based cultures.” They treat data as a business asset, recognizing its value in uncovering intelligence, such as how client preferences are changing, which marketing campaigns show the most promise, and whether a capital investment is meeting expectations.
Data and Digitization
Alston and Toni Sekinah, author of “11 Tips to Become a Truly Data-Driven Company,” detail essential steps that include aligning data strategy with business objectives, teaching staff the importance of basing decisions on data, and encouraging prompt, honest reporting of results, even when they are disappointing.
The last strategy is Digital transformation of businesses. Agnes Teh Stubbs, author of “5 Keys to a Successful Digital Transformation Process,” defines digital transformation as “finding ways to integrate digital technologies into your processes in order to help your business provide products and services more efficiently.” Examples include creating a chat capability on your website and introducing software to assess the efficiency of a key production process.
Stubbs emphasizes that there is much more to successful digitization than purchasing technology. Other steps include a “360-degree” assessment of current processes and technologies; determining which parts of the business would benefit the most from digitization, and how digitizing one part will affect other parts; connecting digitization to business objectives; and precisely defining desired outcomes. Because digitization will change how employees work, it is essential to explain in plain language “why digitization” and “the pain points and challenges the technology is aiming to solve.
Legendary business educator Peter Drucker said, “In business, one does not begin with the answers. One begins by asking, ‘What are the questions?’” Among the questions every commercial printing company should ask heading into 2022: How will we protect margins from persistent, embedded cost inflation, especially as resistance to price increases grows? And, what are we doing to understand how the preferences and behavior of clients, employees, and other stakeholders will be changing in the aftermath of COVID-19? The right answers can make all the difference next year and far beyond.
Andrew D. Paparozzi joined PRINTING United Alliance as Chief Economist in 2018. He analyzes and reports on economic, technological, social and demographic trends that will define the printing industry’s future. His most important responsibility, however, is being an observer of the industry by listening to the issues and concerns of company owners, executives and managers. Previously, he worked 31 years at the National Association for Printing Leadership. He has also taught mathematics, statistics and economics at various colleges. Andrew holds a Bachelor’s degree in economics from Boston College and a Master’s degree in economics — with concentrations in econometrics and public finance — from Columbia University.
