"The Benefits of Outsourcing"
[Column #75, 3/01]
The graphic arts industry is unique in so many ways—it’s almost as if we exist on another plane and few of the normal rules apply to our business. This isn’t always a bad thing, but it can be frustrating at times. One lesson I’ve learned over the years is the necessity of staying focused—of understanding our place in the food chain and capitalizing on what we do best—binding and finishing. Finding a niche in this highly competitive environment allows us to provide quality products and quality service at competitive prices. Many printers have mistakenly tried to handle everything (from design to finishing to shipping) in house, regardless of the end result. The purpose of this article is to discuss the importance of outsourcing and why the industry has been slow to adapt with the rest of the business community.
The Benefits of Outsourcing
Outsourcing has become commonplace in many industries because those businesses have discovered that sticking to their core competencies allows them to add resources, talent, power and, ultimately, a competitive advantage to their products. The auto industry, for example, outsources huge chunks of their business to remain competitive in a harsh environment. General Motors outsources an average of 47 percent of the value of its vehicles; Ford outsources 62 percent; Chrysler 67 percent; and Honda, a whopping 90 percent of its component parts! Even with such influential role models, the printing industry has been resistant to outsource.
One of the biggest battles the post-press world has had to deal with over the years is a warped perception of the role we play in the graphic arts industry. Many printers believe they cannot get the quality or service they need from an outside trade bindery. (This is often the case when the choice of bindery is completely price driven—simply put, “You get what you pay for…”) And often printers are so focused on price (because they have already invested exorbitant amounts of money in the design and printing end of the job), they convince themselves that they can just as easily keep the job in house and save both time and money. Ironically, this belief couldn’t be more off base. If you’ve printed a beautiful piece, doesn’t it make sense to use equally impressive binding and finishing? The post-press industry, after all, has become increasingly specialized and requires specific equipment and technical skill, none of which is typically within the scope of a printers’ capabilities. Moreover, the lack of such capabilities can cost the printer dearly when it comes to both landing jobs and providing quality products.
Many printers still insist their salespeople use value-added selling. The problem with this tactic is that it severely limits the sales force to a narrow range of binding and finishing options—or those that can be produced in house. Many jobs are unnecessarily lost based on this practice and, worse yet, many shoddy jobs have been delivered to the customer as a result. Because salespeople are not compensated for any portion of the job that is outsourced, there is little motivation for them to do so. Ironically, this notion is completely unfounded when you consider the volume of jobs that could be landed by offering a complete line of binding and finishing options to the customer.
Another misconception that seems to fuel a negative attitude toward outsourcing is the belief that trade binderies reap high profit margins. Boy, do I wish this was the case! The truth is (according to ratio studies done by the Printing Industries of America), the profits typically generated in a trade bindery are lower than the profits generated in a commercial printing company. It’s puzzling to me that any printer would want to invest in equipment that produces lower profit margins than their core competencies such as printing presses. If we’re over here running this stuff around the clock using duplicity of equipment and maximizing machine capacity, how on earth can printers ever justify bringing this technology in house? It makes no sense since it would be virtually impossible for them to turn a higher profit margin than we can on the same job, leaving them with an even less profitable venture on their hands.
The good news is I have seen a slow change in attitude toward outsourcing over the past few years. I realize the post-press industry has contributed to the problem because so many binding and finishing operations are outdated in a wide range of areas—from selling to capabilities to technology all the way down to dismal plant environments that do little to generate trust in printers.
My best advice to any printer that recognizes the huge benefits of outsourcing is to shop around. Find a few allies that can truly be your partners—companies you can count on to provide the best service, the widest range of capabilities, the most advanced technology, and the greatest expertise. Even with all the computer technology we have today, I believe there will always be a strong need for printing and binding. Nonprinting corporations are not planning to bring their printing in house and we’ll never be a paperless society. We just need to join the rest of the business world and come up with more progressive ways to meet our customers’ needs.
In next month’s column, I’ll offer tips on speeding up outsourcing and maximizing the number of jobs that can be successfully delivered to your customers on time.