New Research Examines In-plant Trends and Services

There’s growing optimism in the in-plant market. Nearly half of the respondents to a recent IPG survey expect their revenue to increase this year over 2017 levels — even as print budgets decrease and customers continue to move documents from paper to digital formats. This follows a year of volume and revenue growth in 2017.

This was just one of the findings of our study, which drew 243 respondents from in-plants in a variety of industries. The research report paints a picture of an industry that has moved from a cost center model to a largely self-supported sector where print operations are run like businesses. They track expenses and charge back for the work they produce. They document their savings and benefits and report them to management. They benchmark with peers to ensure their capabilities and business practices are up to date.

In-plants come in a variety of sizes, from one-employee shops to operations with more than 200 employees. The average number of employees at the in-plants we surveyed is 14 and the median number of employees is six. Nearly half of respondents have between one and five employees and 7.5% have more than 40 employees.

These in-plants are generally supported by an annual operating budget from their parent organization, though in most cases this budget number reflects the annual revenue generated by the in-plant from charging back for its services. The budget figures reported by respondents range from below $50,000 at small operations with limited capabilities to $78 million at one of the largest in-plants. About 55% of respondents have budgets in excess of $1 million and 14% have budgets of more than $5 million. The average operating budget is $3,072,872 and the median budget is $1.2 million.

We asked in-plants to break down how they spend their budget money. Most of it goes toward labor expenses, with respondents estimating they spend an average of 32.9% of their budgets on labor. Paper is the next biggest expenditure, taking an average of 22.2% of budget dollars. Equipment, software and supplies rank third on the expense list, with 20% of budgets going here. About 8% of in-plants’ budgets go to procurement of printing, prepress and bindery services for the parent organization. Overall, our research found that 51.6% of all in-plants handle procurement for their organizations.

To show what this means in dollars, if we take the average budget figure of $3,072,872, using these percentages, in-plants spend an annual average of $614,574 on equipment, software and supplies.

Supporting the premise that today’s in-plants operate like businesses is the fact that the majority charge back for their services. Nearly 60% say they are fully or mostly self supported, with an additional 16.6% providing “some revenue generation” to offset their costs. This represents a change from IPG’s previous market survey in 2016 when just 57% said they were fully or mostly self-supported.

Revenue Generated

In-plants were in the vanguard of the printing industry’s transition from offset to digital printing and today, 96.3% of in-plants run digital printing equipment. It generates the largest percentage of their revenue, an average of 60.5%.

Offset printing is still a factor, though. Nearly half of in-plants still have offset presses in their shops, and offset generates the second largest percentage of revenue — an average of 14.6%. Coming in third in revenue generation is wide-format printing, a service that continues to grow as in-plants utilize new substrate options to produce ever more innovative applications. Currently, 69.3% of respondents have wide-format capabilities, and they use them to generate an average of 8.7% of their revenue — up from 7.2% of their revenue in 2016.

These three capabilities — digital, offset and wide-format printing — are responsible for 84% of in-plants’ revenue, on average. But note that nearly 3% of their revenue now comes from “value-added services” such as garment printing, scanning, etc.

Comparing our new data with IPG’s 2016 in-plant survey, we can see increases in a number of the services in-plants offer.

• Wide-format printing is now being provided by 69.3% of in-plants, up slightly from 65.3% in 2016
• The number of in-plants selling promotional products has soared from from 17.1% to 25.4%
• Contour cutting has also jumped from 7.4% of in-plants providing it to 15.8%
• More in-plants now handle print procurement (51.6%) than two years ago (43.1%)
• Scanning/digitizing documents is done by 50.8% compared to 39.8% in 2016
• 13% handle cross-media projects today, up from 6.5% in 2016
• And more in-plants are creating digital publications/e-books (13%) today than two years ago (6.5%)

Value-Added Services

Of the value-added services that in-plants provide, the most popular seems to be scanning for archival purposes. A lot more in-plants are offering this now than in 2016, when just 39.8% did this.

Nearly half say they have been given the responsibility to police all print files for proper use of the organization’s logo and branding. This is a crucial responsibility for an in-plant. As the last department to see files before they are printed, the in-plant ensures that pieces don’t go out to the public with inconsistent branding, an error that would require expensive reprinting if not detected.

When we look at the items printed by in-plants, we can see several changes over the past few years, most noticeably in wide-format products, which have climbed the charts in popularity. While manuals, tags/labels, business cards and envelopes show moderate increases in the percentage of in-plants that produce them, posters, flyers, banners, signs and especially window clings/floor graphics are being produced by considerably more in-plants than two years ago. Engineering drawings and window clings/floor graphics have shown particularly large increases.

Though brochures remain the top item printed by in-plants, newsletters have dropped from the second to the sixth position on the list compared with 2016. Some of the largest decreases in items printed by in-plants are directories, books and ID cards, with smaller decreases in direct mail pieces, stationery, annual reports and calendars.

Growing Optimism

One of the key findings of our research is that overall, in-plants are optimistic about their future growth. And no wonder, nearly half (48.8%) of respondents reported that their revenue in 2017 increased over 2016 revenue. Similarly, 49.5% said their print volumes increased last year. About 30% said volumes and revenue stayed flat in 2017.

Looking ahead, almost 46% predicted their revenue will increase in 2018. The optimism of in-plant managers stems from a variety of changes they are making to compensate for declines in their traditional sources of business. These include the addition of wide-format printing capabilities, insourcing and actively seeking out new customers and new types of work.

In-plants are getting much better at marketing their services internally. They spend time getting to know customers to better understand what they want to achieve. In-plants also try to re-educate customers about the impact a printed piece can have that an email or a social media post can’t match. The in-plants that anticipate revenue increases in 2018 spend their time looking for new sources of work by marketing to new groups of internal customers and also by insourcing work from outside of their organizations.

Currently, 57.5% of in-plants are insourcing. They are getting this work from a variety of sources. University and school district in-plants are accepting jobs from other educational institutions. State government in-plants are doing work for local municipalities. Nonprofits are a rich source of insourcing work for many in-plants. All told, in-plants that insource say they get an average of 11.3% of their total revenue from this work.

This has understandably helped these in-plants in many ways; 64% say insourcing has strengthened their in-plants’ ability to serve their parent organizations. Insourcing revenue has allowed 31% to add new equipment and 10% to add new employees. Nearly 56% are returning a portion of this new revenue to their parent organizations, showing that they are not just bringing cost savings, but are also generating new revenue.

Though some in-plants that have not yet done any insourcing worry that doing so will create friction between their parent organizations and local printers, just 8.5% of respondents say that this has actually happened.

Best Practices

In-plants strive to operate as businesses, marketing their services, comparing their costs with competitors and ensuring their service offerings stay in line with customers’ needs. More than 80% have upgraded equipment in the past two years to make sure they are serving their customers with the most up-to-date capabilities.

Because of their close relationships with their internal customers, in-plants routinely hear about new services that their customers need. They are then able to add capabilities so they can offer these services in-house. In the past two years, 66% have added new services.

Comparing their prices with outside printers and sending periodic reports to upper management are two ways in-plants highlight their cost-saving benefits, and more than 60% of in-plants do these things.

Despite these cost-saving benefits, though, it’s rare for parent organizations to mandate that all departments send their printing to the in-plant. Less than a third enjoy the right of first refusal for all printing, and must compete with outside printers.

With all these efforts to prove their value, it’s no wonder that 68% of in-plants feel they are “well respected” or “highly valued” by their upper management, with most internal customers choosing to send their print work to the in-plant. Nearly a quarter say there is only a “good awareness” of the in-plant’s services, with departments going to outside printers because they don’t know if the in-plant is capable of doing what they need. In these cases, better marketing, perhaps some open houses and direct customer contact would help convince departments that the in-plant can handle their work. The same applies to the 3% that feel they are often overlooked and the 5% that fear being closed.

In-plant Challenges

In-plants face challenges, to be sure. Their competitors — commercial printers and facilities management (FM) firms — are relentless in their attempts to pry printing business away and close their in-plants. Still, according to our research, those outsourcing companies may be gaining less of a foothold due to successful efforts by in-plants to promote their value. Just 29% of in-plants reported being approached by outsourcing firms in the past two years, down from 35% in 2016 and 39% in 2014.

Of those that were approached by outsourcing firms, 65% said that company could not provide all the services the organization required and could not save them any money. On the other hand, about 17% of respondents said being challenged by the FM inspired the in-plant to improve its services. In some cases, the challenge shook things up and left the manager with new responsibilities. By and large, however, in-plants are successfully proving their value and documenting their successes. Less than a third list “defending the in-plant against challenges from outsourcing companies” as one of their top three business concerns.

Beyond external challenges, in-plants face a whole set of internal struggles. Chief among them, according to our research, is getting approval to add the equipment they need. Working, as they do, for companies and organizations that are not in the graphic arts business, in-plants can have difficulty convincing their upper management of the benefits that equipment upgrades can bring to the organization. As a result, 46% list this as their top challenge.

In-plants are also constantly challenged to prove their value to the parent organization and, similarly, to convince other departments to stop sending print jobs to outside printers instead of the in-plant. Turnover among their customer base and unexamined assumptions about the superior service of outside printers contribute to a lack of awareness of many in-plants’ capabilities. For this reason, in-plants must continually market themselves, something that more than 70% already do.

Other in-plant challenges noted by respondents include:

• The retirement of supportive executives and uncertainty about whether their replacements will be as supportive
• Working in a facility that’s too small, which inhibits the addition of new equipment and needed services
• Finding the most appropriate online job ordering tool
• Establishing a closer relationship with the marketing department

Conclusions

Though largely hidden from public view, the in-plant industry is flourishing. Its directors and managers run their operations like businesses, tracking revenue and productivity while seeking ways to add value and save their parent organizations money.

Overall, in-plants are fairly optimistic about their future growth. Most predict their revenue will increase in 2018, consistent with a growth trend that brought revenue and volume increases to nearly half of respondents in 2017.

Though in-plants continue to have internal and external challenges, they remain dedicated to their parent organizations’ success and are committed to seeking new services they can provide to help their internal clients.