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The Third Wave: An Iron Tail about the Business of Print, Vol. 2

This column is the second in a year-long series of columns about challenges facing the converting industry. Through our series of web articles in 2002, we hope to provide critical insights, specific industry examples, and thought-provoking ideas about how technology is impacting converters today. Raine’s white paper The Third Wave: An Iron Tail about the Business of Print is the third in a series of in-depth analyses of the relationship among technology, business growth, and the printing industry. The print industry is an important benchmark to examine trends in the converting industry.

This month, we will examine an idea from the Third Wave called "pain points" –- key business metrics that owners and CEOs monitor. The points we’ll cover are not unique to printing -- they rear their heads in converting as well. Once these pain points become too severe, businesses will resort to drastic steps –- organizational change, or product or service re-vamping.

Barbaric Pricing
Printers and converters have worked diligently over the last 10 years to design and implement reliable costing procedures. If a converter is in a fairly visible market segment, he is likely assaulted every day on price. One interesting metric is to examine is the spread on bids for a particular job. If the customer will release this information, it can be a telling signal about the degree of pressure on converters to "get the work." In a recent study of similar commercial print jobs, the spread between high and low bidder was over 38%. Variances of this magnitude mandate customers shop around for their printer or converter. And then when you layer on top a tightening economy; well, pricing just gets plain brutal.

Cash-Flow Pressures
Everyone is keeping a closer eye on the accounts receivables, DSO (days sales outstanding), and any potential bad debt write-downs. Boardrooms today find these topics front and center on their agendas indicative of soon-to-be expected cash flow pressures.

Likewise, any future expenditures are on the back burner. Investments in IT initiatives, ISO certifications, equipment upgrades, and anything that has five-digit price tags are frozen right now.

Insane Turn Times
Many segments of the converting industry have been ripe for a speed war. Overcapacity, combined with intense customer pressure, have been dropping lead times on repeat orders for years. Print oriented segments of converting, like folding carton, are faced with multiple step converting processes that are not changed easily. Folding carton, for example, like the broader print industry, has looked to compress its prepress production process by the integration of digital technology. Converters that made this investment before capital got tight have been well-positioned to respond the customer demands for "ship it fast or I’ll find someone else."

What’s fascinating to note is the growing success of the tag and label converter, with his narrow web widths and notoriously fast turnaround, in entering into select segments and customers of the folding carton and flexible packaging industry.

Sales Forecast Visibility Is Shrinking
Anyone trying to predict their customer behavior as it relates to his or her print needs is out on a limb. Customer commitments that match perfectly with the converter’s capacity openings are few and far between.

Supplier-qualification programs and increased budget quotation activities has made the estimating department busier with little to show for it. The best forecast most companies can expect, with any degree of confidence, is a 3-month window, no matter whether it’s transactional spot work or even a contract.

Excess Capacity
The release liner business, an important segment of the converting industry, has been buffeted by overcapacity in recent years. While the print industry is susceptible to overcapacity concerns, the release business is highly susceptible because of customer’s ability to produce in house. Release liner suppliers, particularly those supplying commodity grades, are more likely now than ever to see their business taken "in house" by key customers. This is creating a ripple effect, increasing non-captive capacity, and further driving down prices.

Interesting to note that "Internet competitors" do not make the list of the typical converter’s or printer’s top "pain points"; the e-commerce providers sparked immense confusion and non-value-added activity with printers and converters of all sizes and specialties. Just over a year ago, they would have ranked number one. But they, too became casualties of the " demise." Many printers regard that period from late 1998 to early 2001 as reminiscent of the dark ages of print, now only to be bombarded by a tightening and unpredictable economy.

In next month’s column we will take a closer look at the true, and lasting impact of the Internet and dot.coms on the converting industry.

This article is excerpted from the Raine whitepaper The Third Wave: An Iron Tale about the Business of Print, downloadable free of charge from

Susan Kelly is a managing partner with Raine Consulting, specializing in strategy development, customer clarity, and business optimization services for the graphic media and digital technology industries. She can be contacted at This email address is being protected from spambots. You need JavaScript enabled to view it..

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