Cornering the finishing market

Advice from successful printers as they examine the issues

In March 2018, Graphic Arts Magazine published an article entitled Print finishing: All that glitters can also be golden. At that time, finishing, and in particular, digital finishing, promised to boost profits, add value and differentiate a print shop from its competitors. It’s time for an update.

First, let’s set the record straight. A finish doesn’t stand alone. A finish is part of the overall look and feel of the product. It reflects the customer’s brand and must mesh with its integrated marketing strategy. Whether a printer chooses to invest in finishing equipment or farms out the finishing to a third-party provider on a transactional basis, the decision must be an integral part of the printer’s business strategy – a strategy where every dollar invested in equipment must be part and parcel of an efficient and effective production process, driven by the metrics of run quantity and print quality.

In a world of short runs, product customization, non-negotiable deadlines and predatory pricing (which results in razor thin margins), printers are pushed to look for ways to recoup shrinking revenue. Undercutting a job quote with the hope to recoup lost margin by adding a finish is folly: it’s akin to the tail wagging the dog.

Investing in finishing equipment is a strategic business decision. One that Christian Knapp, Managing Director of CMD Insights (distributor of Scodix in Canada), believes must pay for itself within 22-36 months, otherwise it becomes a sunk cost. Despite MacLean’s reporting that investment in plant and equipment by Canadian businesses has dropped 20 percent over the past five years, print shops with solid business cases have been investing and will continue to invest in finishing equipment, as well as offset and digital presses.

Let’s not forget that equipment manufacturers need to recover their research and development costs and turn a profit. The reality is that, when both printers and manufacturers work symbiotically to address equipment and technical issues, both parties strike mutually beneficial profitable agreements even in recessionary times.

Todd Cober, Vice President of Cober Solutions, one of Canada’s premier print manufacturers, believes that, while the equipment manufacturers have pulled finishing equipment from the emerging stages of industry development, its market growth rate has stalled probably due to the slow adoption rate by printers. Yet, the equipment that top manufactures are bringing to market is incredibly sophisticated. The lack of capitalization in equipment may be the result of printers doing digital finishing in a sort of semimanual, automated manner. A patchwork setup that isn’t cost-effective or efficient generally produces persistent headaches. Investing in equipment represents a significant cost, and printers need to feel confident that the return on investment will outweigh the business risks.

The economic predictions made in late 2019 for 2020 were optimistic. They revolved around the yin of uncertain trade tensions and the yang of increased household spending, contingent on a healthy employed labour force. Pierre Cléroux, Vice President and Chief Economist at BDC, projected that economic growth would continue to be tempered by the global uncertainty associated with trade tensions, the U.S. presidential elections and the Brexit transition period. The good news was that Canadians sat poised to open their wallets and spend. Coupled with the efforts of the Bank of Canada to keep interest rates low, the economic forecast was bright. But even in tough times, forward thinking printers made capital investments that pushed forward automation, offered market-leading solutions to their customers, hedged against margin compression and provided relief for industry labour shortages.

In March 2020 the unthinkable happened. A pandemic – COVID-19 – struck. Unessential services were shuttered, and employees were placed on emergency leave or directed to work remotely. Graphic Arts Magazine is proud of, and Canadians are thankful for, the graphic printers, flexographers and packagers who pivoted their operations to the production of personal protective equipment (PPE) and wayfaring signage. As Canada’s economy moves into its post-pandemic recovery period, printers must pay special attention to their clients’ recovery and how they can continue to take full advantage of post-pandemic business opportunities.

Finishing – a tactic

Upselling a finish is, at best, a tactic. Rebekah Fougere, Vice President, Client Services at Think2Grow, a Torontobased marketing company that assists Konica Minolta Canada clients with their implementation and business strategy, notes that graphic designers are the ones with the creative minds who will push and pull new design options through the system. When it comes to finishing, sales staff need to change their perspective from being an order taker to that of a client-centered, marketing salesperson. Client-centered salespeople form business relationships with their clients. They understand a client’s integrated marketing campaign and intuitively know when to suggest cost-effective finishing that can strengthen a client’s brand.

Jamie Barbieri, President and co-owner of the PDI Group, a one-stop-shop offering a vast range of services from document management to warehousing believes, “It’s better to understand how print moves through an organization’s value chain. Bundling a quote with a finish and other value-added services (warehousing, distribution, logistics) adds significant margin to the product. Plus, the printer becomes a strategic partner for that customer, as opposed to a commodity supplier who presses ink to paper.” Cober Solutions has heavily invested in finishing automated equipment. Cober predicts finishing will continue to be an important part of the printing process. Technological advances will allow printers to print faster than ever imagined, in many cases, on a roll. “However, if the product can’t be finished as fast as it is being printed, it really doesn't matter. All of the efficiencies gained in the printing are essentially lost in the finishing.”

Knapp neatly divides finishing into two categories:

- An additive manufacturing process that augments the paper, boards or plastics. For example, 3D printing, varnishes, laminations, spot UV varnishes and foil stamping are additive processes.

- A subtractive manufacturing process shapes the product by cutting (laser), boring, drilling, and grinding, to cut away and shape the plastic, board or paper. In many instances, these functions are performed offline with specialized equipment manually or automated and driven by computer numerical control (CNC).

Barbieri makes a distinction between finishing and embellishment. For PDI, finishing is cutting, folding, plastic lamination and bindery. Embellishments such as embossing and speciality types of coating do not apply. Cober Solutions considers finishing as taking a printed sheet and turning it into a final product. For Paul Houde, Director ISM Manufacturing (In Store Marketing) at TC Transcontinental, Canada’s largest printer, finishing is part of its end-to-end (product conception to warehousing and distribution) customer service. The strategy leads to superior client service. The finishing, distribution and fulfillment are value-added tactics the printer offers to wrap around their clients’ needs.

In March 2020, Keypoint Intelligence identified bindery, personalization, mailing, and fulfillment as print shop table stakes. Table stakes are the basic offering required of a print shop to be considered a competitive player in a market. Print service providers who invest in differentiating themselves with value-added services such as finishing, web-to-print, CMYK, print management, and wideformat display installation services distinguish themselves from their competitors and win deals. Differentiation is a sustainable business strategy. Knapp puts it this way: “Where you add texture and foil to a process, even if it’s for one copy, it offers the highest returns because finishes differentiate the final product.” It creates a lasting impression and that’s priceless.

Printers who have developed revenue, retained and grew client bases from finishing must price competitively, meet deadlines and be able to complete the job in-house. Missing any one of this trinity of success factors results in lost profits. Keypoint Intelligence - InfoTrends’ research confirms that printers that compete solely on price turn their jobs into a commodity. That’s akin to placing a sign above the print shop door similar to Walmart’s former slogan, “Always low prices." Jamie Barbieri cautions that, if you are a commercial printer and all you do is put ink on paper, you won’t survive.

Knapp believes finishing continues to be an area that is under-utilized. However, finishing methods designed to meet the needs of long-run offset may not be suitable for digital printing. The expanding array of digital printing methods has changed the nature of finishing from large-scale devices focused on offset printing to automated methods that are often brought in-line with a digital printing device.

Automation

Many print titans believe the automation introduced in the print industry over the past five to seven years was an industry game changer; it revolutionized print and reduced set-up time. Nevertheless, transferring product from one feeder to another for finishing isn’t always a smooth process. The paper is not necessarily flat, it has toner on one side, there is static and there may be curl. By the time a job gets to finishing, its profits have been booked. Any rework in the finishing department cuts deep into revenues. It’s this realization that pushes printers to seek automated solutions for finishing the product. Still, making a dime from finishing depends on the sophistication of the equipment and its ability to complete the job on time. Booking revenues before finishing the product depends on printing the job on the most efficient printer: digital versus offset presses with the final selection of the printer dependent on the run length and print quality.

In 2018, Byron Loeppky, Senior VP of Books and VP of Operations at Friesens Corporation (Manitoba), Canada's largest printer of hardcover books, used the model of running roll to roll and finishing offline. This was a cumbersome process that made sense for long runs, but for its short-run yearbook business printing digital made sense especially if the digital press produces the book from roll to the finished book in one continuous production run.

In 2019, Friesens Corporation purchased two new industrial-scale HP Indigo 50000 Digital Presses: the oversized B1 (30-inch) duplex, roll-to-roll. In speaking to WhatTheyTh!nk, Loeppky comments that the quality and productivity of the HP Indigo 50000, combined with the format size and unique imposition capabilities, enable Friesens to transfer more of their offset production to digital production. But there is a downside. To get the higher quality in digital, speed is sacrificed. Every company has to determine the right balance and fit for them given their market.

Houde, agrees that the ideal situation is to automate the entire process all in one line with everything staying up to speed with no bottlenecks. While there are machines that have these features, they are limited by the speed of the slowest process. Automating finishing and adding digital finishing to a job makes sense if there is a possibility for sustainable profit. Houde is always on the lookout for places where applying automation reduces bottlenecks. For Barbieri, Cober, Houde, and Loeppky, contracting out finishing is not a viable option. When one builds a company on client-centered service, control over the entire job is a must.

PDI’s investment in finishing equipment over the past few years has been for its offset lithography (offset) and digital press businesses. Lithography for the longer, more traditional type printing, with and digital for quick turnaround short runs. Barbieri, too, recognizes the issues created by the differences between the print speed and quality between a digital and offset presses. One solution is a hybrid, inline finisher but problems of equipment and software connectivity will often appear. As well, many finishing machines that used to be extremely expensive (wrappers) are now mainstream, sold as integratable with today’s presses and capable of machine learning. Machine learning allows the operator to input all the docket instructors prior to starting the entire print job.

Loeppky does like how more and more technology is being integrated. Its first digital sewing machine was very basic. The second version was much more advanced and faster. The next generation should put the entire process inline where it goes from a roll directly to a sewn book. “Instead of having four different workstations, make it inline. That’s where I think digital has an advantage because it is pretty simple, especially on these short runs for digital to literally take it from a roll to a finished book out the other end. At small quantities, it certainly is very difficult to do that on the offset press.” Todd Cober offers a cautionary note.

Connecting too many devices into one line can actually create inefficiencies when the speeds of the equipment are not compatible: that's another deterrent. If printing and finishing are automated, technical, mechanical or connectivity problems may result in the entire line going down. “Too much automation can be a limiting factor. Uptime is reduced. One has to know what the slowest process is and how that impacts the entire line.”

Keypoint Intelligence’s research into finishing (March 2020) reported that 80% of survey respondents who had digital print and offset presses generally preferred to use the same finishing equipment for both. Only 11% preferred to keep offset and digital production separate, while another 9% reported that combining digital and offset was not possible due to format and other requirements. The shorter digital press runs, along with requirements for quick turnaround do not synchronize with equipment that takes a long time to set up. The faster the press runs the more requirements there is for faster, higher volume finishing tools. It’s a cat and mouse game.

Workflow, ink, and technology and labour

Barbieri, Cober, Houde and Loeppky, printers who started their careers as iron pressmen, agree that scheduling a job to a press depends on run length and quality. Moreover, while digital presses have advantages, there are drawbacks. One sore point with digital presses are the click cost and proprietary nature of ink. Offset ink can be purchased from numerous third-party vendors that compete solely on price. Equipment service contracts can be arranged with other than the manufacturer’s exclusive technicians. But, a business that is driven by technological advances and software application is ripe for copycat innovation and hacks.

One has been the growth of third-party software that minimizes the ink coverage or consumption without impacting the colour of the print-ready file. And when it comes to digital print quality, scrutiny must be used to assess the colour and quality differences between multiple colour digital presses. One may find that, for the markets served, a four-colour press offers excellent print quality and cost savings that can be passed on to the customer. Nevertheless, while technological advances have impacted workflow processes, what has been revolutionary is how technology has transformed an organization’s labour requirements.

Mechanization and technology gains have drastically shifted the requirement for brawn and replaced them with brains. Print shops now scramble to find talent with analytical and problem-solving skills that understand information and communication technologies (ICT) and can work with computerized workflow applications. Paraphrasing the words of the experts interviewed, talent can be hired with no knowledge of the print industry and trained to be excellent printers. Still, it is difficult to get iron out of one’s blood especially when it comes to the craft of printing. Offset operators who diagnosed press equipment problems based on the clicks, clanks and thumps of the iron gears as the paper passed through is equal to the digital press operator who diagnoses problems based on the lines, arrows and polygons of workflow diagrams and the whoosh of paper as it is pneumatically pulled through a digital press. Perhaps this isn’t the loss of a craft but a transformation. Technology has opened up employment opportunities in the print industry for women, persons with disabilities and persons from diverse backgrounds.

Technology as a disruptor has revolutionized the business of pressing ink to paper. While in the short-run jobs may disappear, in the long run technology can address labour shortages. Moreover, technology has shifted the view of the print industry as a closed shop, male-dominated environment with career limiting job opportunities to one of offering a promising career with advancement.

Full circle – back to the future

Jamie Barbieri believes that a printer cannot do everything for everybody. Sound business practice suggests that no shop should invest 100 percent of purchases to one vendor. Portfolio and investment diversification are key to business success. At a vendor’s booth it’s easy to get caught up in the glitz of finishing equipment. Don’t let the gloss of an embellishment and the sheen of varnishes cloud one’s vision. Before one enters into serious conversations with a vendor ask these questions:

Are the current and future markets understood?

Understand the economic factors that drive one’s business and those of one’s clients. Read widely. Gain an understanding of how the supply and demand curve of diverse businesses impact the demand and supply of one’s services. Understand the importance of one’s value proposition and how it is impacted by provincial, national and international economic forecasts.

Are all costs and revenues accounted for?

Verify that one’s production management system captures all the cost associated with finishing the job. Analyze the data and understand where money is made and lost. Look for trends and project them to potential future business and equipment needs.

Does the strategy need adjusting?

Be prepared to adjust one’s strategy and hone the tactics to achieve maximum growth. Planning is the key to building, sustaining and growing a business.

Is the thinking integrated?

No business decision should address a singular problem. Keep one’s peripheral vision as wide as possible. This allows one to predict downstream problems that can arise from a decision.

While a finish doesn’t stand alone, finishes provide the opportunity for enhancing profits but meeting customer’s objectives to create a true brand image is the top priority.

Caterina Valentino

Caterina Valentino, PhD, is an Instructor at the Ted Rogers School of Management at Ryerson University and the Faculty of Health Disciplines at Athabasca University. She can be reached at caterina.l.valentino@gmail.com.