Outsourcing--Friend or Foe?

Strategic outsourcing lets you concentrate on your areas of expertise. Here's how to analyze your in-plant and maximize your potential.

Some words strike fear into the hearts of in-plant managers: Privatization. Downsizing. Rightsizing. Facilities management. Outsourcing.

We've all faced—or know someone who has faced—privatization or facilities management threats, so some of our nervousness is justified—but not all of it. Unlike the other challenges, outsourcing, when done strategically, can be our ally.

Traditionally, in-plants have attempted to perform all types of printing and reproduction internally. Managers promoted their in-plants with slogans like "one-stop shopping" or "no job too large or small."

To fulfill customers' requests for every possible type of printed piece, in-plants stretched their human and equipment resources to the limit. Pressmen on one-color duplicator presses were asked to print four-color brochures. Bindery staff using tabletop folders and small stitchers produced large quantities of booklets and brochures.

Up until several years ago I was a follower of this do-all-work-internally philosophy. Today, I am absolutely convinced that no in-plant, regardless of its staff or equipment resources, can succeed with this mindset. Furthermore, I believe that those in-plants trying to physically produce all of their organization's printing internally are prime targets for privatization and/or facilities management challenges.

First, Segment Your Market

Let me try to explain what I mean by strategic outsourcing and the process it involves. Prior to outsourcing any service, an analysis of strengths and weaknesses is essential. You must determine systematically what your in-plant is good at and what it is not good at.

Your in-plant's business or market must be segmented into the major products and services you are producing. This list needs to be of a workable length. Do not segment it so far that every product is a separate category. For instance, you should have a category for stationery. There is no need for separate listings for letterhead, envelopes or business cards.

Combine catalogs, magazines and other stitched booklets into one category. Another category could be books, particularly if they are perfect bound. In our in-plant we segment forms as a separate category due to the unique nature of forms, particularly carbonless ones. Certainly high-speed copying work is a category and, possibly, you may have enough print-on-demand applications to include it as a separate category.

Multi-color or process color printing or even color copying may be major parts of your market and deserve individual category status. Items such as brochures, self-mailers and flyers may justify a category. There may also be several service areas outside of the traditional printing environment such as courier service, bulk mail handling, stock only sales and others that may deserve a separate category. Most in-plants can segment their product offerings into a list of eight to 12 general categories.

Next, Start Your Research

Once this categorization process is complete, each category must be researched. Volume of income, as well as impressions or pages, needs to be calculated for each group. Direct costs related to each segment must be determined.

It is also important to remember that your department has a considerable amount of indirect expenses that must be prorated to these categories. Certain product types may require a larger percentage of indirect costs than others. As an example, books and journals are often in production for several weeks and require numerous proofs. A customer service person may spend many hours or days on this one project.

On the other hand, most quick copy jobs require a minimal amount of indirect expense due to their more simple nature. So, I advise you to try your best at prorating indirect costs realistically rather than simply across the board.

Average order size and average turnaround time are important factors for analysis. Competitive prices from commercial vendors for one or more of the categories will be very helpful to you. Certainly quality performance is a factor to investigate. Review customer surveys if you use them to see which product types customers are most pleased with or complain about more often. Many of these factors can be accessed through a computerized printing management system. Others will require old-fashioned manual research.

Now Analyze And Maximize

After you have completed this fact-gathering phase, you will have a much better appreciation of what your strengths and weaknesses really are. In fact, you may be surprised.

Analyze the data you have accumulated. Your goal should be to identify the niche(s) where your in-plant is very strong or even excellent. You will find categories where your personnel and equipment resources are well matched to the specific publication. You will also find those areas where performance is obviously poor due to lack of appropriate resources.

Look for product and service categories where quality and customer satisfaction is consistently good, where production efficiency is high, and where costs are well below the commercial market. Those categories clearly define your strengths. Maximize these niches to the fullest extent possible. Resources should be dedicated to these strengths. Conversely, those categories where product or service performance is lacking are prime candidates for strategic outsourcing.

Identify Outsourcing Vendors

The next phase in this process involves external research. Identify commercial vendors in your area and try to determine their strengths and weaknesses. The commercial printing industry has moved very strongly over the past several years into more specialized service areas. Only a few commercial printers today advertise that they can do all types of publications well. Most have found the niche(s) they want to serve, and they stick with those.

Interview the vendors and find out what resources and capacities they possess. Solicit quotes from various vendors.

To operate a strong, successful in-plant, managers must grow their business in what they do well and manage the outsourcing of what they don't. Every in-plant can benefit from strategic outsourcing, so explore this option. Outsourcing may be one of our best allies in this increasingly challenging printing environment.

Joe L. Goss is the director of University Printing Services at Indiana University, in Bloomington, Ind. He's also an IPG Editorial Advisory Board member. Contact him at jgoss@indiana.edu or phone him at (812) 855-6075.