Adding fulfillment services is a great way for an in-plant to expand, increase revenues and become more crucial to its parent organization.
By C. Clint Bolte
A number of surveys conducted in recent years by the National Association for Printing Leadership (NAPL) have accentuated the desire and plans among commercial printers to expand into a variety of value-added services complimentary and supplementary to their conventional print services.
The most recent "NAPL Creating Value Survey" conducted April/May 2005 had 317 participants and showed the following results:
Service
|
Percentage Providing
|
Mailing
|
74.7%
|
Fulfillment
|
73.5%
|
Digital Print: Variable
|
65.7%
|
Digital Print: Static
|
60.4%
|
Database Management
|
32.2%
|
Ink-jet Systems
|
28.2%
|
Web/Internet
|
24.5%
|
Digital Asset Management
|
18%
|
CD/Multimedia
|
7.3%
|
Flexography
|
3.7%
|
The fact that nearly two-thirds of respondents express plans to expand into the first four areas is a quite aggressive posture. The motivating factors for such expansion are: (1) improved share of client's business leading to (2) improved client loyalty and (3) overall enhanced printer profitability.
Those new business services that have been linked to digital workflows, such as digital printing, Internet print job ordering and wide-format digital printing, have also been aggressively endorsed by the leading in-plants. Ironically, though, in-plants rarely pursue fulfillment warehousing services, which is number two on the list. Two reasons are a lack of physical space and the desire of the corporate marketing department to control the relationship with this specialty vendor on this traditionally seasonal service.
Space Needed
There is no doubt that fulfillment services require extra warehousing space. The most recent fulfillment-specific survey conducted by NAPL indicated that the median amount of space dedicated to fulfillment by printers was 20,000 square feet.
This amount of space might be perceived as a major deterrent by in-plant printers until it is realized that the printers responding to this survey have a median of 23 fulfillment clients utilizing that space. The incremental revenues attributed to fulfillment from these few clients will typically be about 10 percent of the printer's total annual revenues.
The in-plant will normally have only a single client, though there might well be a number of product managers handling product literature for a dozen or more products. In the case of the in-plant for a college or university, their single client is inevitably the admissions department.
The advantage of having a smaller, limited number of clients is that, while the service is highly seasonal with peaks and valleys of storage demand, the speculation of how much space should be needed is much easier to predict. It is interesting that smaller general commercial printers that have successfully gotten into fulfillment services most frequently rent the necessary warehousing space from a nearby industrial park. Over 60 percent of these printers do not have their fulfillment operation on site with the printing plant.
The Multi-shift Advantage
The advantage many general commercial printers have over in-plants is multiple labor shifts versus the single shift of most in-plants. The third party fulfillment vendor—increasingly an expanded general commercial printer—sells its services by insisting that its clients' fulfillment needs are seasonal.
"If need be, we simply add more people from our well-trained part-time pool during seasonal peaks or move staff over from other operations," responds the private sector fulfillment sales representative. Whether or not this promise can become a reality is debatable.
In an in-plant, the manager quite often has more of an inkling of when seasonal peaks and valleys of demand are likely to occur than an outside vendor. In-plant managers have more contact with marketing coordinators and marketing secretaries while processing other work requests than most any outside vendor. While few reliable systems of predicting future fulfillment demand exist in practice, frequent communications with the client's staff have proven to be the most trustworthy predictors.
The Profit Potential
The primary reason that printers are moving aggressively to expand into these services is the incremental profit potential. The PIA/GATF Annual Financial Ratio studies show the printing industry overall to have about 2 percent before tax net profit. The Mailing and Fulfillment Service Association has a similar study that shows its members and their service specialty's net profit to exceed 6 percent. This 3x leverage factor is appealing to printers. And, in turn, saving money on premium-priced services should be most appealing to in-plant managers.
The largest in-plant in the country, Allstate Insurance (story on page 36), confirms that fulfillment is the fastest-growing segment of its in-plant revenues. While just a few years into the fulfillment business, it has quickly learned of the savings that can be generated by bringing these services in-house from a third-party fulfillment provider. This is a lesson you should also take to heart.
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C. Clint Bolte is the principal of C. Clint Bolte & Associates, a consultancy located in Chambersburg, Pa. To contact him, please call (717) 263-5768 or e-mail him at:
cbolte3@comcast.net
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