Take Another Look

According to a new study, significant cost and performance improvements have qualified digital color presses for mainstream in-plant printing.

In-plant operations have always been pioneers in digital production printing. A decade ago, many in-plants began to add networked PostScript printers to produce books, manuals, directories, forms and other products. In fact, the in-plant market was the largest initial opportunity for the Xerox DocuTech, which essentially defined printing on demand (POD) and supplanted small-format, "short-run" offset production for many corporate applications.

On the color side, in-plants have been major customers for mid-speed digital printers such as the Xerox DocuColor 40. However, the digital color revolution—promoted so heavily since the introduction of the first high-speed digital color presses in 1994—has only recently touched the mainstream of high-volume commercial and in-plant printing. And no wonder: the initial technology was costly and not highly productive.

In 1994, direct printing costs were in the vicinity of 50¢ per A3-size page impression, which made digital color printing suitable only for ultrashort runs (250 units or less) of high-value products, such as proposals or proofs, or for variable-printing niches in direct-mail marketing, where digital color could add significant value.

Although the industry promoters forecast double-digit growth rates for direct-mail digital color printing, some industry observers have begun to question just how fast or far the technology can expand within this application alone, particularly when considering the cost, technological complexity and business workflow reengineering challenges. In any case, none of these "high-value" applications can be considered the sort of mainstream printing that the DocuTech took on earlier in this decade.

Fortunately, as the technology of digital color printing has matured, the performance has improved, and costs have decreased dramatically (Figure 1). Today the direct cost of printing an A3 impression on a Xeikon press is less than 10¢ in high-volume operations. This cost point is low enough for digital color printing to capture mainstream print volume, just as digital black-and-white printing has done over the past several years.

Moreover, digital printing is now more productive than direct-to-press offset in runs of 1,500 to more than 3,000 units, depending upon the product. At last, in-plant operations have the opportunity to extend the same sort of POD services into the color side of their businesses that they have offered in monochrome digital printing for the past decade.

More Than Short-run Printing

Print on demand has wide-ranging meanings and implications. Unfortunately, many suppliers and industry promoters use the term interchangeably with short-run printing. On the other hand, print providers usually view POD as a service: printing when and where the customer needs it.

In order to clarify the size, scope and implications of the POD opportunity and distinguish it from general short-run printing, Strategies on Demand, a consultant to digital print providers and customers, defines POD as "production and distribution of publication and commercial print products in quantities and cycle times based upon actual end-user demand." This definition is market-demand-focused rather than production-focused, emphasizing the differentiation of POD from simple, short-run printing.

Print providers may produce products in quantities that are only loosely related to actual end-user demand (Figure 2). Quantities falling below 5,000 units have been customarily called "short-run" printing. However, as the value of POD becomes better understood in the marketplace, run lengths more closely track end-user demand (Figure 3). The result is a decline in order size and an increase in order frequency.

Surveys of print providers have shown that more than half of "short-run" print volume produced on direct-to-press offset or digital printing presses comes from orders for less than 1,000 units. In fact, POD has grown at the cost of longer-run printing.

This shift is well underway in the monochrome segment, where digital printers like the DocuTech have taken 85 percent of the volume that was previously run on small-form offset presses and duplicators. The revolution is just beginning in color printing.

Cost And Productivity

The share of the POD opportunity that is captured by digital printing depends upon two factors:

• The cost and productivity break-even points between digital and offset printing, which determine how well digital printing competes with offset.

• The actual break-even cost levels, which determine the market demand for digital printing.

Last fall Xeikon commissioned Strategies on Demand, L.L.C., to compare the cost and productivity of Xeikon DCP/32D and DCP/50D presses with offset alternatives using consistent, documented methods. The offset presses selected for this study were the Heidelberg Quickmaster DI 46-4, a hybrid digital offset press with direct imaging on press, and the Speedmaster 52-4, a conventional offset press. This comprehensive analysis of the major presses in the color production printing segment was differentiated from previous comparisons in the following ways:

• Inclusion of all real costs and time factors in actual production environments, in contrast with the simpler "total cost of ownership" (TCO) models that ignore makeready, startup time and waste, among other issues.

• Employment of a market basket of products simulating the actual work mix confronting the typical print provider.

• Incorporation of data from actual production tests and print provider experiences with the equipment.

• Analysis under generally recognized operational and management accounting standards.

The results, summarized in Table I, are surprising. While many in the industry have believed, on the basis of earlier cost comparisons, that the cost break-even points between digital and offset printing are as low as 250 units, the benchmark study showed that Xeikon printing is cost-competitive with the offset alternatives at a market-basket average of 950 units. Moreover, for single-sheet products such as A4 data sheets and postcards, the cost break-even point ranges from 1,850 to more than 3,000 units, respectively.

Although the cost of digital color printing has declined markedly, productivity issues are every bit as important in tight-deadline situations. Here digital color production printing really shines. For productivity measured as the ratio of saleable impressions to the total job time on the press, the break-even point for the Xeikon DCP/50D vs. the Heidelberg Quickmaster DI ranges from 1,450 units for catalogs to more than 3,000 units for postcards, averaging 1,550 units for the market basket as a whole.

Higher Break-even Points

The results of the Strategies on Demand benchmark study clearly show that the break-even points of digital presses are much higher than most people have thought—largely due to performance improvements and cost reductions driven by Xeikon over the past three years. However, break-even points are only part of the story. What is equally important is the cost level at which the break-even occurs. The question is: Has digital printing reached the "sweet spot" where it can be used for mainstream applications?

To answer this question, it is useful to once more consider the DocuTech. Using the same market basket and operating assumptions that were incorporated into the benchmark study, the direct cost of printing on the DocuTech is about 2¢ per A3 impression in monochrome only, which would be roughly equivalent to a cost of just over 8¢ per A3 impression in color. Moreover, the DocuTech break-even point with offset is less than 1,000 units—in fact, it is about 800 units against a small web press.

In short, at a cost of 2¢ per A3 impression per color and a break-even less than 1,000 units, the DocuTech defined the POD field of competition and largely took over the monochrome segment from small-format offset presses. Remarkably, the Xeikon DCP/50D has a higher break-even point than the DocuTech, and it operates in the same cost range, adjusted for color.

Strategies on Demand forecasts that the volume (page impressions) of digital color POD will grow at a 54 percent compound annual rate through 2000, while the domestic value of the print shipments will grow at a 21 percent rate to $3.9 billion.

For the first time, digital color presses are confronting offset presses in the mainstream of short-run color printing. Although many promoters continue to emphasize "segment-of-one" marketing as the driver of digital color printing, the real volume growth is coming from the dramatic cost and productivity improvements in the technology, which are enabling print providers to realize greater sales and profits from digital color printing.

The time is right to make the investment in digital color. IPG

Dr. Mark W. Fleming is President of Strategies on Demand, L.L.C., Naperville, Illinois, providing marketing, financial, and operations consulting to digital print providers and customers, as well as to vendors of equipment, supplies and software. An 18-year veteran of digital printing and document management, Dr. Fleming has managed digital printer product development, as well as several digital printing businesses. He can be reached at (630) 983-7746 or stratondmd@aol.com.

Quick Look

• As digital color printing has matured, the performance has improved, and costs have decreased.

• The direct cost of printing an A3 impression on a Xeikon press is less than 10¢ in high-volume operations.

• Digital printing is now more productive than direct-to-press offset in runs of 1,500 to more than 3,000 units.

• More than half of "short-run" print volume produced on direct-to-press offset or digital printing presses comes from orders for less than 1,000 units.

• The break-even points of digital presses are higher than most people have thought due to performance improvements and cost reductions.

• The volume of digital color POD is forecasted to grow at a 54 percent compound annual rate through 2000.