The "In" Crowd

Insourcing can save your in-plant. Find out how from managers who have done it.

In the early '90s Liz Messner noticed an alarming trend: In-plants everywhere were being shut down. Her own in-plant at the Hospital and Health System Association of Pennsylvania Service Co. (HAPSCO) could well have been the next victim.

Fortunately, though, HAPSCO had decided a few years before to let her Harrisburg, Pa., in-plant start insourcing printing from outside organizations. That decision, says Messner, has kept the in-plant in business.

"Had we not gone outside and brought work in...we would not be here today," declares Messner, senior director of HAPSCO Printing and Graphics Services. Internal business volume has gone down, but thanks to insourcing, she says, "we are thriving today."

As in-plants struggle to prove their worth to their parent organizations, insourcing has become a great way for them to eliminate down time on equipment and bring in revenue to recoup costs. Additionally, working with external customers will improve in-plants' customer service and business skills.

IPG data shows that 40 percent of all in-plants take in work from customers outside their parent organizations. Still, not every in-plant thinks this is wise.

"I'm not a real advocate of an in-plant going commercial," says Robert Hulett, manager of central printing services at Beckman Coulter, in Fullerton, Calif. Commercial printers, he says, have a different overhead structure that can create an unfair advantage for in-plants.

"If I was a commercial shop and the in-plant down the street did [too high] a percentage of commercial work, I don't know if I would be too happy," he says.

Messner, though, feels she is competing on the same playing field as the commercial printers, with the same overhead costs, such as management fees, heat, electricity, rent and employee benefits.

Hulett admits he would love to insource from outside companies and increase revenue. But it's not a part of his firm's corporate philosophy.

"The new business philosophy is to outsource more and build alliances," he says. His shop insources work only from Beckman Coulter's original equipment manufacturers. He feels that when the insourcing clients aren't connected to the parent company, an in-plant loses its focus.

Messner disagrees.

"Our internal customers don't get less service," she says. "They're still our biggest customer. We have to worry about their needs."

Hulett believes in-plants that get more than half their business via insourcing should spin off from the parent and become a commercial printer.

Messner, whose in-plant insources 58 percent of its business, feels having an in-plant, regardless of the amount of insourcing work, still benefits the parent organization—especially in the area of customer service. That, Messner says, is where in-plants must focus.

"There are some in-plants that don't have a customer service attitude," she asserts. "Those are the ones that end up closing. You have to provide such good service that the company can't go outside." She feels her staff is much more focused on pleasing the customer due to the commercial nature of her operation.

"You have to please your customer 100 percent of the time," she says.

Messner sometimes ponders where her in-plant would be without insourcing. After all, four in-plants have closed in the Harrisburg area in the last two years.

"We wouldn't be here," she says with an air of certainty. "Not in this capacity. We'd be a copy center."

In-plants around the country are starting to insource. Read a few of their stories.

Look Within Your Niche

Hospital and Health System Association of Pennsylvania Service Co. (HAPSCO)

Harrisburg, Pa.

Senior Director, Printing and Graphics Services: Liz Messner

Insourcing revenue: $1.1 million.

Percent of total revenue: 58%

Types of jobs: Stationery, brochures, annual reports and newsletters.

HAPSCO's in-plant specializes in high-quality two-color work, and will only take on jobs that fit its niche.

"We can't just take on every job," Liz Messner says. "We're looking for middle-sized, professional organizations who are looking for a company that they can have a long-term relationship with and can help them manage their printing work."

Messner says most insourcing comes from other health care associations.

Marketing: Early on, all marketing was done via word of mouth. As the insourcing work grew, Messner singled out many health care organizations in the Harrisburg area and sent them letters. Many became clients that the in-plant still has. Today, two staff members handle sales.

The in-plant has so much work now Messner feels it either must cut back or expand. She opts for the latter and plans to add a five-color press, a color copier and a digital printer within two years. Messner says the in-plant may hire a full-time salesperson to handle outside clients. She feels the extra business generated by the upgrades will more than justify the cost.

Reciprocal Relationship

Houston Independent School District

Houston, Texas

Manager of Administrative Services: Stephen Blakely

Insourcing revenue: $40,000

Percent of total revenue: 1%

Types of jobs: Perfect binding, mailing, folding, tabbing, addressing, program materials, forms and brochures.

As busy as it is, Printing Services at the Houston Independent School District still has some slow periods. So the 50-employee in-plant started insourcing from non-profit organizations.

"We knew that we had additional capabilities that were not being used by our internal customers," says Steve Blakely.

Currently, the in-plant has a reciprocal arrangement with the in-plants at the Harris County (Texas) Department of Education and the University of Texas-Health Science Center. They help each other by offering lower prices than commercial printers and farming work out to one another when necessary.

Marketing: Now that the in-plant has launched its insourcing operation, it wants to expand.

"Next year will be a benchmark year for us as far as insourcing is concerned," Blakely comments.

The in-plant hopes to enter into reciprocal relationships with other non-profits. Blakely says that expanding the insourcing base for his in-plant will also help the reciprocal partners.

"To a certain degree we're also recruiting for each other," he says. "If we recruit more business than we can handle, we can pass that to the other printers."

Important Part Of The Package

McCormick & Co.

Hunt Valley, Md.

In-plant Manager: Dan Reed

Percent of total revenue: Under 15%

Types of jobs: Packaging, folding cartons, paper labels, converting.

"Our thing is packaging," says Dan Reed. For that reason, his shop only insources that kind of work. The in-plant started insourcing about eight years ago to fill lulls in its schedule.

"Our inside work follows the sales of McCormick products," Reed says. He reports that business for the seasoning and flavoring company is usually slowest in the spring. This affords the time to bring in work.

"We wanted to keep our equipment and people busy," Reed says.

Marketing: When they first decided to insource, Reed and his staff made a few cold calls to potential clients from various industries. Beyond that, they don't market the in-plant at all, except by word of mouth.

Eight Years And Growing

Meldisco, Division of Footstar

Mahwah, N.J.

Printing Operations Manager: Mike Kaplan

Insourcing revenue: Over $100,000

Percent of total revenue: 7%

Types of jobs: Flyers, forms, brochures and signage.

Forget last year's $100,000 in insourcing revenue. Mike Kaplan estimates the figure for this year is already approaching $250,000. The number has grown steadily for eight years.

Meldisco Printing Services is the 19-employee in-plant for Footstar, a retail shoe corporation that includes Footaction, Just For Feet, and Meldisco (owner/operator of K-Mart's shoe departments).

Meldisco started as a division of the now-defunct Melville Corp. Eight years ago it started taking in work from other Melville divisions. For Kaplan, this made a great deal of sense.

"Why not leverage what we had and print for those divisions?" he asks. Kaplan reports that by insourcing he was able to save money for everyone.

"Anything you can do to leverage what you have and bring down the operating costs of what you do every day is worth it," he says.

Word spread, and the in-plant began printing for area colleges and companies—a practice continued after Melville disbanded and Meldisco became a division of Footstar in 1996.

Kaplan believes that proper management allows for successful insourcing.

"I insource work that is geared to my equipment," he reports. He won't bring in a job unless his in-plant has the time, and charges the client for any overtime accrued. Kaplan will even take jobs his in-plant can't complete on its own.

"A lot of in-plants say if they can't do it all, they don't do it," Kaplan says. But, he will take insourcing work, even if he has to outsource part of the job to a commercial printer.

"I'm not rejecting the jobs," he says. Kaplan will take a job as long as his in-plant can do at least 50 to 75 percent of the work. He reports that by accepting this work, he still makes money. Ultimately, he says, the customer doesn't care who does it, as long as it gets done.

Marketing: Kaplan says the in-plant doesn't market itself at all. Any business it generates comes from word of mouth and its reputation for quality.

"We do so well that one tells the other," he reports.

Mike Kaplan, printing operations manager at Meldisco printing services.

All Part Of The Plan

Briggs & Stratton

Milwaukee, Wis.

Graphic Services Manager: Debbie Pavletich

Percent of overall revenue: 18%

Types of jobs: Technical manuals, marketing materials and forms.

Debbie Pavletich was concerned.

"I saw what was going on in the industry with in-plants being put out of business," she recalls.

So she developed a business plan that included a strategy to sell to the outside.

"If we can do it for Briggs & Stratton, why can't we do it for somebody else?" she asks. "If you want to stay alive, you have to keep moving."

Her superiors at the manufacturing company gave her permission to insource. Now, three years later, the in-plant is thriving.

"It justifies our existence," she says. "It shows that we're cost-effective and professional. We're a profit center for Briggs & Stratton."

According to Pavletich, developing a thorough plan is essential. Part of hers involved starting a second shift at the 30-person in-plant. The move increased the amount of insourcing work she could do and made the in-plant more flexible for the parent company's needs.

The in-plant insources work from other manufacturing companies and ad agencies in the area, along with distributors throughout the U.S. Pavletich is loath to turn down a job, but admits she won't take a job that doesn't fit the shop's equipment.

"I'm not going to say I can do something, then stumble on it," she says. However, she will take a job that she can partially complete, and then outsource the rest.

"If you can't do it, but you can get it done, that's a valuable thing," she says.

Pavletich also feels insourcing has a positive affect on her staff.

"It gives our employees access to a variety of projects to work on," she reports. "It gives them experience and knowledge. Through that, it gives them pride in what they do."

Marketing: Pavletich started out with mailings. Since then, she and her two salespeople have discovered that the most effective method is to set up an appointment with a potential client and present a live demonstration with samples of the in-plant's work.

Debbie Pavletich, graphic services manager for Briggs & Stratton.

New Shop, New Mission

University of Louisville

Louisville, Ky.

Assistant VP of Information Technology: Ray Chambers

Percent of overall revenue: 10%

Types of jobs: Specialized prescription pads, forms, medical materials, invitations.

The University of Louisville recently combined its printing, graphic design and copier departments to form U of L Print and moved the operation to a new facility about a mile from campus. Now the in-plant plans to market itself to its internal customers and aggressively expand its insourcing operation.

Currently, the 25-employee in-plant prints mainly for the medical community—specifically doctors on staff at the university hospital who have private practices, as well.

According to Chambers, Kentucky passed a law two years ago requiring all prescriptions to be written on a specialized kind of paper. U of L Print produces this kind of prescription pad.

Chambers hopes to purchase a digital printing device in the near future. He hopes the machine will attract outside business and create a new service for the university.

"I can use insourcing to reduce pricing for the university and give them a product they would not otherwise have," he says.

Chambers also hopes to print specialized college-related items, like invitations, for nearby smaller schools that don't have the budget to produce them.

Chambers is quick to point out that insourcing brings one particular headache—taxes. He says that any income generated by business that is not directly related to the parent company's needs is declared unrelated business income and is taxable.

Marketing: Marketing coordinator Eve Bohakel says U of L Print will begin sending samples and packets to other colleges, then NPOs and finally government organizations. It will use the printing awards it has won, along with its digital capabilities, to impress potential clients.

Slow, Steady Growth

Louisiana State University (LSU)

Baton Rouge, La.

Director of Procurement and Auxiliary Services: Mike Loyd

Insourcing revenue: $1.8 million

Percent of total revenue: 19%

Types of jobs: Various printing and copying jobs, from business cards to annual reports to wide-format work.

Graphic services, the 111-person, 32-student in-plant at LSU, is classified as a state printer, so it has always catered to the needs of state universities and agencies. Mike Loyd, IPG's 1999 Manager of the Year, says state organizations often prefer to come to LSU to avoid the bidding process with commercial printers.

Loyd also believes that state operations, with their fixed incomes, would rather not have to deal with the fluctuation rates most commercial printers use. LSU charges one fixed rate at all times. This benefits the client because Loyd says LSU saves them between 20 and 30 percent over commercial rates.

"We have a philosophy," Loyd says. "We give them a fair price and deliver quality product when they want it. We're happy and they're happy."

Insourcing is important to LSU because the revenue generated helps to keep the in-plant up to date.

"It allows us to have state-of-the-art equipment to do the type of work our parent university expects," Loyd says.

Although LSU hopes to expand its insourcing business, Loyd says the best way to do it is slow and steady. He warns that trying to add too much work too quickly can be disastrous.

"You have to have the infrastructure in place to serve those people," he advises. "We want to grow at the same rate our work increases."

Marketing: "You have to stay in tune with your customers," Loyd stresses. "Stay on top of trends and what the customer wants."

To that end, LSU regularly surveys its clients. It also holds quarterly meetings with an advisory board made up of its largest customers.

Word-of-mouth plays a huge part in marketing, Loyd says. And a good reputation, he adds, can go a very long way.

Graphic Services has a marketing person who markets first to the campus, then to other LSU branches throughout the state, then to other state universities, and finally to other state agencies.

Insourcing Tips

• Before insourcing, have a plan: Know exactly who you will target, how much you can do and how much you'll charge.

• When setting your price, capture all your costs. Don't lose money.

• Stay in your niche. Insource to your in-plant's capabilities.

• Don't take on too much work. Establish your limits.

• Don't be afraid to outsource part of a job. The customer won't care.

• Stress customer service. Listen to your clients' requests and comments.

• Satisfied customers are your best marketing tools.

• Partner with other in-plants.

• Other marketing strategies: Cold calls and mailings to similar organizations, open houses, Internet and intranet listings.

• Never forget that your parent organization always comes first.

• Insourcing may require you to collect sales tax.

• Insourcing revenue will help you pay for the latest equipment.