The Economics Of Ink-jet Addressing

ACROSS THE street from my office, I noticed one of our neighbors preparing his race car for the local speedway track. Admiring his sleek speedster, and always interested in going fast, I asked, "How much does a car like that cost?" His smile nearly grew to the width of this face before he replied: "How fast do you want to go?"

I realized then that, for the most part, price is proportional to speed; the more you pay, the faster you can go. His wisdom meant more to me than just a race car. The racer's comment lingers when I see my ink-jet printer addressing mail and sorting at speeds in excess of 50,000 pieces per hour (pph).

Of course, the cost of mailing equipment is a serious consideration. But when considering ink-jet addressing equipment, speed is more important than the price tag. Consider the economics of the matter: With greater throughput per hour, one can turn jobs around faster. That will allow more help to be hired, which increases capacity. With greater throughput on an ink-jet printer, one can meet a deadline, frustrate a competitor, gain more market share, build the brand, reduce expenses and improve profit margin. The economics of ink-jet addressing show that when making the commitment to addressing mail, performance and flexibility can outweigh price.

Ink-jet Fundamentals

For the purposes of this article, ink-jet equipment consists, in progressive order, of:

• The feeder
• The base that handles the mail piece
• A print head or print heads
• A dryer (optional)
• A conveyor

When considering any piece of equipment that handles paper, it's important to consider the wide array of possible mail pieces. Ink-jet addressing equipment is primarily designed to print the address on a mail piece; yet most ink-jet print heads provide the ability to print other text or graphics as well. A mail piece, then, could be an envelope or a self-mailer, such as a newsletter, postcard or folded brochure.

Costs and Profit

There are five core costs when it comes to addressing a piece of mail:

• The ink-jet addressing equipment
• Labor
• Electricity
• Ink
• Maintenance

Making a profit with an ink-jet printer should not be overshadowed by the lowest price alternative. A calculation will look something like this

Selling price per piece
x Average pieces per hour
= Total revenue per hour
- Total costs per hour
= Hourly profit
x Productive hours per week
x 52 weeks per year

The cost of consumables—the ink itself—is often overestimated when comparing ink-jet printer options. One ink-jet printer manufacturer says its cost for ink is 45 cents per thousand pieces, while another says its ink is half that price, or 25 cents per thousand. If charging $25 per 1,000 mail pieces to address and sort, the difference between the two ink costs is less than 1 percent of the selling price.

While controlling costs is crucial in a highly commoditized service market such as ink-jet addressing, improving the overall profit margin is the better calculation to utilize. While cost is a portion of the calculation, the most important factor determining ink choices is dry time and types of substrate (i.e., paper) that will be addressed. The faster the drying time, the faster the run times. Coated stocks can be challenging for water-based ink if one desires optimum speeds. This includes papers with a gloss finish, such as aqueous or UV-coated.

When evaluating ink-jet printers in today's competitive environment, flexibility is of utmost importance. Ideally, an ink-jet solution will be flexible enough to print on all paper finishes without sacrificing speed.

How Fast Do You Want To Print?

I mentioned to some fellow mailers at a recent Mailing and Fulfillment Services Association conference that my production crew can easily achieve output speeds of 34,000 pph on my Videojet BX binary array printer using three people and sorting a 5-1⁄2 x 8-1⁄2? postcard for U.S. Postal Service Standard Mail. We've occasionally seen speeds greater than 50,000 pph.

Knowing I would be met with some skepticism, I filmed our crew and loaded the video on my Apple iPhone. I did this to show those investigating ink-jet choices, but also because it's simply fun to watch a blur of postcards speeding by that are individually addressed and sorted at the rate of 567 per minute (or nine every second). At a price of $20 per thousand, the gross revenue is more than $675 per hour.

One of the attendees cornered me and boasted that their arrangement was better at 28,000 pieces per hour with only two people. But a common mistake is to calculate output per person only. When looking at labor, one will obtain a better return on investment when the faster machine exceeds the slower machine by the cost of the additional labor for each hour.

For example, assume the same for two new ink-jet printers from competing suppliers, one slightly faster than the other. Labor cost is $15 per hour per person (though using actual numbers will show the same benefit). If charging $20 per 1,000, once the slower machine is exceeded by 1,000 pph, revenue has increased by $20 (or, 1,000 pieces more per hour at $20 per 1,000). Additional labor cost only went up $15; therefore, the gain is $5 per hour. If speed has increased by 6,000 (34,000 pph vs. 28,000 pph) using three people, then revenue has increased $120 and labor has one increased $15. Therefore, $105 each hour has been gained.

If the ink-jet printer is productive 80 percent of the week, or 32 hours, then the printer that provides the faster line speed will have generated $3,360 more in one week. Since there are 4.3 weeks per month, an additional $14,428 per month has been generated, which can easily justify the higher price for the faster and more flexible choice.

Furthermore, if choosing the printer that yields 34,000 pph, then the slower machine has been outperformed by 38,400 at the end of an eight-hour shift, assuming both machines perform at 80 percent. The greater throughput generates significantly more profit at the end of one month, as demonstrated in Table 1.

Making the Choice

The keys to ink-jet printer choices are throughput and flexibility. Flexibility can be determined by the ink and the printer's ability to handle a variety of sizes, thicknesses and substrates. Additional revenue from better productivity should exceed all costs to obtain faster line speeds, which will generate more profit. That additional profit can easily exceed the difference in the costs not thoroughly covered in this article, such as maintenance or cost of equipment. Added throughput will also allow one to turn jobs around faster and achieve more productivity per shift. This in turn provides greater capacity and more than likely a competitive advantage.

More information can be found by studying the benefits of incremental pricing. The figures are based on assumptions, but if the assumptions are reasonable, then the desired outcome and governing economics can be reasonably achieved. IPG

John Wolf has 25 years of experience in the mailing industry and is president/CEO of Wolf Mailing and Marketing Services, in Oklahoma City. Wolf Mailing's total revenue has grown more than a cumulative 50 percent in the past four years. John Wolf can be reached at: ilovemyjob@wolfmailing.com