Merge Ahead

Even the most efficient in-plant may be questioned after a corporate merger. Learn how to prepare.

You keep your in-plant well tuned, giving it regular maintenance, changing the machines' belts as needed and adding fluid regularly. But no matter how well your in-plant handles the curves and bumps of the day-to-day operations, you still can't be sure how it's going to fare when a corporate merger approaches. And with new mergers being announced almost daily, you don't have the luxury of just closing your eyes and hoping for the best.

Don't worry, though. You can take steps to protect and prepare yourself so that when it's time to merge, you'll have much better odds of avoiding every obstacle and staying in control.

Warning: Crossing Ahead

More likely than not, you won't even know that a merger is taking place until you hear about it on the news—and by then it'll be too late for you to get your shop in order. What this means is that you need to keep your books up to date, your prices in line and your presses working at top efficiency.

In other words, you have to treat your in-plant like a real business.

"We have always run this operation as if it were an outside business," says Bill Walker, senior manager of printing operations at Boeing, in Seattle. "We compare our prices against outside printers, and this helps to keep us very competitive."

Benchmarking yourself against other printers helps you determine which items to buy outside rather than print. This minimizes your print budget and keeps you out of businesses that you shouldn't get into.

"The mission I have isn't to print, the mission I have is to get printing done," says Walker. "I've spent $6 million on the outside out of a budget of over $50 million to optimize the printing operations."

If you're already comparing prices with outside printers and buying what you should buy, then outsourcing the in-plant after a merger should be less of a fear.

"You have the contracts and evidence that show you're cost competitive," says Walker. "You should be doing this anyway in any corporate environment, but it makes it easier to tell your story in the heat of a merger."

Monitoring prices on a regular basis also allows you to get into new businesses that emerge. Five years ago, Walker spent around $200,000 outside his shop for on-demand color printing; now that figure is almost a million dollars. Over time, though, his options have grown because the price point has gone down and the number of people in the on-demand color printing business has increased. Says Walker, "Now I've got a million dollars that I can reduce," by either switching to new printing companies or bringing the work inside and doing it there.

Don't just track the numbers for your own benefit, though; make sure to spread the news far and wide about how efficient you are.

"We are constantly telling our story through promotional efforts such as presentations and plant tours to various executives," says Tim Steenhoek, director of the US Printing & Fulfillment Center (USPFC) at the ING Group, in Des Moines, Iowa.

Whether your company is the one doing the buying or the one being bought, your in-plant will undoubtedly receive a top-to-bottom inspection. The executives will compare notes on the finance and manufacturing departments first, but eventually they'll make their way down to the in-plant. And if the new CEO has his heart set on outsourcing "non-core components," there might be little you can do to change his mind.

For example, a major Northeast insurance company's in-plant had been recovering 100 percent of its costs for years. It had prices 35 percent lower than outside printers. But when the company was purchased, the CEO who had supported the in-plant was gone and the in-plant was audited by the acquiring company's printer. Needless to say, the audit uncovered "inefficiencies" and the new parent decided to outsource.

That kind of scenario does happen, but your chance of surviving improves greatly when you can demonstrate that you're already outsourcing what you should and saving the company money on in-house work.

Tim Steenhoek's sales efforts paid off big when his former employer, Equitable of Iowa, was acquired in 1997 by the ING Group, a family of financial services companies.

"Showing documented results in terms of our volume, service quality budget and staffing levels provided us with the credibility needed to take a leading role in our shared services efforts," he says.

Steenhoek's in-plant became one of three in the U.S. that are sharing ideas and resources for ING, and thanks to his department's sales know-how, the USPFC is currently serving eight ING companies.

The situation was a bit more complicated at Boeing.

"McDonnell Douglas [which Boeing bought in August 1997] ran each of their different divisions in different services groups with different print shops," explains Walker. "Rockwell Aerospace [which was acquired eight months earlier] had five sites, and they were all different. It was more like an adjunct—an etcetera—than a business.

"We changed their paradigm of thinking and went from printing in eight places to printing in one," he continues. "You can imagine what happened: There's now less equipment, less management and fewer employees in fewer square feet, and one supply area for one shop, so you get a lot more out of your assets."

The lesson for in-plant managers: Consolidate what you can under your control now to give yourself a stronger position in the future.

Proceed With Caution

After regularly demonstrating your shop's efficiency and value, you may think you've done all you can to protect yourself, right? Wrong. A merger announcement means you have to take a fresh look at your in-plant and envision what it will look like in the future.

The first step in this process is to find out how much printing is being done at the other company, either in-house or at outside printers, and figure out how this volume will affect your cost calculations.

"You need to be prepared to show not only your rates but also your cost buildup," says Walker. "We had some pretty good contracts and the best price [at the time of the mergers], but when we took the volume from the other regions and put it together with ours, we got an even better price for equipment and supplies."

Those savings can be carried over into other areas as well. "The cost of our labor per unit was only about 18 percent of the total rate whereas the labor cost of the companies Boeing bought was significantly greater," says Walker. Understanding the breakdown of your rates—and the rates of everyone else involved—could help you argue that the in-plant will grow more efficient after the merger because of the cost savings uncovered due to shared best practices.

Another area for potential savings comes from jobs that were previously outsourced that you can do more efficiently in-house now that you're working at higher volumes. Since his in-plant was acquired in 1997, Steenhoek has moved a lot of previously outsourced work back in house, including forms printing, check printing, short-run digital color printing, CD and disk duplication, and automated mail presorting and processing.

Insourcing is just one of the changes that Steenhoek has undergone. He's also switched over to an Enterprise Resource Planning (ERP) system, added an Oracle purchasing and inventory system and assumed responsibility for the customized benefit packages sent to employees, retirees and agents.

All this change fits well with Steenhoek's advice to managers undergoing a merger.

"Develop relationships with the other in-plant managers involved in the merger, and keep in mind that you may not be spending your days exactly the way you did before the merger," he offers. "Remaining flexible and being willing to play a different role in the organization may prove vital to your future."

by W. ERIC MARTIN