Article prepared by C. Clint Bolte, C. Clint Bolte & Associates, Chambersburg, Pennsylvania. For additional information please call 717-263-5768, fax 717-263-8945, or e-mail to clint@clintbolte.com.

NAPL Top Management Conference 2008:

Recession Proofing Your Print-based Offerings

Ninety-four printing companies and 264 attendees gathered in Orlando for the National Association for Printing Leadership’s 2008 Top Management Conference. Representatives from two Canadian provinces and the Republic of South Africa were part of the group. “How to” sessions preceded the successful case studies presented by printer panels. Select experts spoke on current national and global issues as well.

“Recessions are sneaky and unpredictable,” offered NAPL’s Chief Economist, Andrew Paparozzi, during his State of the Industry address. Industry sales growth has been slowly deteriorating since mid-2006 and yet over 40% of the NAPL Printer Business Panel reported faster growth in ’07 than ’06. However, pre-tax profitability for 37% of this panel has not been as low since February 2004 – the end of the last recession. All of these national economic woes “were created by the excesses of the late 1990s and earlier this decade,” according to Paparozzi and do not rest solely on the shoulders of Mr. Bernanke or the Federal Reserve Bank. He concludes, “No one knows how long the correction will take or how deep it will go.”

A number of suggestions were offered of how to weather the storm and prepare your company to be even stronger during the come back times. Top of the action list was to communicate with your employees, customers, and suppliers about the economic realities and how you want to move proactively to work with each of these stakeholders. “Don’t let others tell your story,” encouraged Paparozzi. The next three days added other possible action items.

If there was ever a time that your management team should be monitoring your own benchmarking metrics, this is it. The thirteen metrics comprising the proven NAPL Performance Indicators are

-Value added/sales -Value add/factry hr -EBITDA/sales -Sales/employee -Value add/salesman

-Gross profit/value add -EBITDA/net tot assets -Days of A/R aging -Value add/employee

-Value add/factory payroll $ -EBITDA/value added -Rework % of sales -Sales/sales person

Monitoring some of these on a daily and others on a weekly and monthly basis requires a reliable data collection system and discipline. Using monthly, biennial and annual moving averages is also essential in highlighting critical changes, trends, and nullifying seasonality. “This NAPL Performance Indicators Program will be entirely web-based, beginning next month,” announced Paparozzi. Each firm’s specific results can be compared against the industry norm for the same metric.

To put specific meat on these bones Paparozzi moderated a two printer panel that described the analysis of their vital few metrics. Chuck Kinzer, President of Omaha (NE) Print, shared selections of the metrics and actions their management team took. For example, the firm’s days receivable were running less than 42 versus the industry norm of about 52. They decided that their credit policies were too tight. Loosing these polices to allow A/R collection period to approach the industry mark resulted in substantially increasing sales. With Omaha Print’s value added/factory payroll hour being in line with the industry norm, management concluded that employees were being fairly compensated versus the industry. Many of these metrics (though not all) were shared with employees during their company wide quarterly meetings.

President and CEO of South Bend, Indiana’s Mossberg, Inc., James Hillman, shared the illustrations of how his firm tracks the profitability of the company’s ten most and ten least profitable customers whose annual sales exceeded $100,000. From this analysis the firm decides who to invest additional resources in and who to consider firing. Another operational metric in the pressroom coupled with a concerted LEAN manufacturing initiative showed how the company has been making strides at realizing a corporate target of a 30% gain in manufacturing throughput.

Omaha Print utilizes EFI’s Logic system while Mossberg has a PSI management information system. Both firms have invested in the most current version of this software available.

A Fulfillment Free-For-All breakout session involved thirty printers who wanted to raise particular issues with which they are grappling. They hoped to hear discussion from other printers who had resolved or were addressing similar concerns. From Internet order taking to dedicated Fulfillment software the frustration with “islands of independent software applications” was expressed and reconfirmed from numerous parties. This lack of integration is poignantly true between virtually all print MIS and fulfillment MIS systems. This strategic product IT weakness has been identified by only a few early printers expanding into fulfillment services. Virtually all pertinent software vendors quietly acknowledge this rub with few immediate revenue streams evident to pay for the problem resolutions due to the multitude of potential systems.

How to develop fulfillment specific marketing strategies and knowledgeable pricing discipline were other immediate pain points. Identifying needed staffing and supervisory skills and the advisability of finding partners who had demonstrated specialty capabilities were brought up. While no simple answer(s) emerged, the consensus was expressed that all printers offering information fulfillment services would benefit from joining the Mailing and Fulfillment Association (mfsanet.org) and attending the upcoming fourth joint MFSA-NAPL Annual Fulfillment Conference April 14-18 in Napa, California.

It seems that the principles of Lean Manufacturing have been discussed at every major print manufacturing and executive conference held this decade. And yet the number of successful practitioners is still few and the lessons these leaders share is invaluable. Again Lean defines waste as “anything the customer is not willing to pay for.” And all successful Lean programs ultimately concentrate on the customer’s perspective. Jon Cummings, CEO of Paramount Printing, became part of a 52 manufacturing company consortium in Jacksonville, Florida. The intention – and reality - was for the group to encourage and learn from one another. He is one of the few printers in the consortium.

Michael Murphy, Japs-Olson President, described his firm’s Lean incentive as being the experience of losing 25% of their total volume in 2002 following a decade long period of consecutive growth. Now an integral part of Japs-Olson’s changed culture, Lean has five elements in its toolset; value stream mapping (identifying all non-valued added steps), Kaizen events (25 last year alone), 5S, standardizing work, high performance supervision (HPS – 12 hours of training average per employee last year), and cellular manufacturing.

This later element is the most complicated but potentially most rewarding according to Murphy. In essence it focuses on product rather than process flow analysis and layouts. Jim Clark, the panel’s moderator, described his firm’s (McNaughton & Gunn in Saline, Michigan) cellular success example. They have a team of cross-trained people performing the CSR, planning, pre-flighting, and estimating tasks for their book publisher clients.

Murphy highlighted Japs-Olson’s culture-of-performance as being attributed to Executive commitment (he spends 50% of his time on Lean issues!), a quarterly newsletter to all employees on Kaizen initiatives including performance results, and a year end performance bonus. This is 50% of the productivity gain for operators and amounts to 10% of payroll.

NAPL Senior Consultant Ray Prince presented a series of cost effective uses for digital presses that are consistent with this Lean approach. When multiple prepress proofs are needed, digital presses are cost effective versus wide format or press proofing. Using a color digital press is a cost effective way of preparing advance copies of a magazine or an initial trial run on a book. Either a monochrome or process color digital press is a good choice for making up count on short signatures of a multi-signature book. Similarly digital printing is a good alternative to prevent going back to press on commercial work that is short of count.

Another printer panel described their experiences of becoming FSC certified. Howard Swerdloff, Sandy Alexander’s Vice President of Production, suggested negotiating a five-year contract with a consultant to get the best value on the annual re-certification process, particularly if your firm has multiple plants. He is paying $6,000 a year for this service. This may be increasingly difficult as the consultants, who offer this service are currently over booked. The current March issue Graphic Arts Monthly listed over 550 FSC-certified printers. The formula to calculate the savings in trees, gallons of wastewater, etc. is available from the paper merchants that are selling the FSC and SFI certified stocks.

Presentations on the generational diversity in the workplace have been made at previous TMCs. But this was the first time by a printer. Tom Carroll, RR Donnelley’s Chief HR Officer, gave a tutorial on the motivating factors needed to “sell employment” to the four generations;