Try Insourcing

It's nice to have a captive customer base, isn't it? You just keep your rates low, turn work around quickly and watch your customers keep coming back—provided your service is good.

But this same "guaranteed" base of customers can also limit your growth opportunities: How can you continually increase your business and justify equipment upgrades when your customer base never grows?

In response to this dilemma, several in-plants have found a way to bolster their clientele lists by taking in work from external customers. By insourcing, they can use up extra equipment capacity and generate income.

Insourcing does have its difficulties, though: Your organization may draw the ire of local commercial printers when you go after their work; Your in-plant will have to start collecting sales tax; You'll have to hire salespeople.

But those who are already doing it report nothing but success.

Louisiana State University Graphic Services has accepted work from state government agencies and state colleges for years—work that does not get a sales tax. Director Mike Loyd says this work makes up about 30 percent of the in-plant's business—and he intends to increase that percentage.

"That's going to be our growth area," he says. "It increases our revenue, which allows us to purchase better equipment to support the university."

Eastman Chemical of Kingsport, Tenn., came up with the idea to sell printing after the company began looking for ways to cut costs. The in-plant offered to use up its extra capacity by insourcing. Upper management gave the shop a tentative green light, and the in-plant went on to sell $280,000 worth of printing, photography and video production last year. Its goal this year is to sell $700,000.

"This was our way of saying 'We can help offset our costs,' " remarks Larry Sutherland, manager of creative services.

The Allstate Print Communications Center is also focusing on insourcing, which Jerry Grouzard, print operations manager, says represents about 5 percent of the in-plant's work. An internal sales team calls on prospects, and Grouzard hopes to soon add a commercial print sales rep. Allstate's long-term goal, he adds, is to create a separate facility to do commercial work.

Another Chicago-area in-plant that is having success at insourcing is Ace Hardware Graphic Services, which has been doing it for a decade. Manager Mark Krammer says that almost 50 percent of all in-plant expenses are covered at cost by revenue generated from sales. An in-plant salesperson drums up business, but much of the work comes from Ace Hardware's vendors.

Krammer encourages in-plants to give insourcing a try. Have a strong business plan in place first, he advises, and make sure you can generate a profit.

One danger is that, by taking in outside work, in-plants are creating a potential conflict of interest situation. But those who practice insourcing say they lay down the law right away with their outside clients. When there's a crunch, the parent organization's work always takes priority.

"We understand that we're the university's printer first and foremost," declares LSU's Loyd.