Posts Tagged ‘Tharsten’

  • The case for more capacity-based pricing in the printing industry – James Cryer

    The story of how Anthony Thirlby’s UK-based printing company, ESP Colour, is revolutionising the workflow, pricing and productivity of the industry – in the April issue of Print21 magazine – prompted James Cryer, industry gadfly and iconoclast, to write an affirmative and positive response.

    Greetings Anthony,

    I was fascinated to read the article on your company in Patrick Howard’s Print21. Being 4th generation in print, I toss the occasional thought bubble into his magazine and online publications on issues that annoy or fascinate me about the printing industry.

    And being self-employed I can afford to be as idiotic, controversial or merely thought provoking as I wish. No one can fire me! I’ve tried everything to fire up a vicious attack –even a mild rebuke, or being told I’m an idiot would be nice ­but so far nothing.

    I can just imagine if I’d written about a hypothetical company that proposed to do what you’re doing and wrote: Now what you’ve got to do to make a buck is to tell your clients they CAN’T have their favourite stock, nor can they have exactly the trim-size their chairman nominated 40 years ago and they may have to WAIT a few extra days  – the fact that the newly-minted purchasing officer who said they needed the job tomorrow when they didn’t really need it for two weeks is irrelevant! – And (I haven’t finished yet!) your client CANNOT see a proof, no, not even if they offer to pay, it’ll bugger-up the entire workflow and cost millions!

    And finally, if they’d even persisted in reading this far without tipping their morning coffee over my words as if to obliterate them forever, I would, tongue in cheek, of course, tell them that if any client even HINTED at wanting to come and do a press-check they’d be fired! And yes, firing clients is actually part of the process of running a profitable print shop.

    As said, if I’d written that as a serious article I’d have to check my letterbox and look under my car even more frequently than I do now. And yet, here it is, in brutal reality, reminding us that truth really IS stranger than fiction – a printing company making money by breaking all the rules!

    Just backtracking slightly, I must say I am a bit of an iconoclast myself when it comes to trying to break down some of the long-held conventions, which have plagued our industry. So, when I first started reading the article I was mildly intrigued and began underlining a few bits that caught my fancy.

    By the time I got to the end, the whole double-page spread was awash with double and triple underlinings, furious exclamation-marks and vigorous marginal scribblings, making it vaguely like one of our grandkids’ works of art.

    Anthems to success

    But seriously, this article, or more correctly, your business model, should be compulsory reading for all intending entrants into the wonderful world of commercial print. You are to be worshipped as the anti-Christ – the messiah, the Great Profit (sorry!) the one who can lead us out of the wilderness and back onto the sunlit uplands – from whence we came(th).

    The bits I thought were the most radical were –

    • “98% of what we print goes on one size”
    • “We … employ the best people [and] pay them 20% above average” (I must say this is music to a recruiter’s ears)
    • “We never schedule by delivery date” (love it!)
    • “There was initial reluctance from clients but we won them over” – and – “clients formed the biggest obstacle”.

    They’re all anthems to success, but arguably the last one is the most telling. Traditionally we’ve all been a bunch of lemmings, reluctant to stand out from the crowd or take a stand. We’re an industry cowed by convention and struggling to climb out from under the yoke of craft, which philosophically is built around perpetuating the status quo.

    If I had written that mythic article proposing we should do what you have done, I’d have been assailed by an avalanche of why it wouldn’t work.  We’re unwitting subscribers to the maxim: The perfect is the enemy of the good – in that we’re quick to see possible faults with ANY new system and so we cling to the proven or the familiar and don’t do anything!

    Plus, we’ve been too quick to seek the ‘magic bullet’ in rushing out to buy the latest Speedmaster (for example).  But if you don’t upgrade the workflow software you may as well just go and buy a second-hand press. Us blokes and we are mainly a masculine industry, are too bedazzled by big iron. We don’t see the bigger picture, which is the point Frank Romano made when he said: ‘Workflow is king’ (or words to that effect).

    Another dimension to this is, I was pleased to read that nowhere are you bleating about ‘quality’. That’s yesterday’s fish-wrapper – ALL print quality is good these days!

    What you’re doing is not unlike what Subway do; offer limited choices  – a few bread choices, a few fillings, a few sauces, etc. The customer thinks he’s getting unlimited choices, but in fact Subway have worked out what – I paraphrase you – 98% of people want to eat! If you want Trader Joe’s South African Smoke Seasoning or some such, forget it! Go somewhere else. And we’re not stopping to ask the chef if he’s heard of it. Go away, you’re holding up the queue of paying customers!

    I’m not suggesting that printing companies should employ Serco-style armed guards with machetes and axes to ward off time-waster clients, but … hmmm!

    You want it when?

    One of the causes of this pressure to schedule jobs according to their perceived ‘wanted dates,’ which you have refused to kow-tow to, is the sense that every print job is URGENT! We’ve probably contributed to the problem, collectively over the years by over-promising and under-delivering – or to put it in more technical jargon: we frequently run late.

    So clients hedge their bets by insisting on a delivery date that is sooner than they really need it. And why wouldn’t they? We don’t give them any reason to do otherwise. The pressure this creates leads to a lumpy workflow, where we DON’T group like jobs or adjust the press progressively as you do. The workflow becomes a battleground where ‘special pleading’ trumps efficiency.

    This disruptiveness gets embedded in our collective cost structure and creates a massive arbitrage opportunity for someone to come along, who is not under-cutting but who simply has a smoother workflow.

    How to get the smoother sequencing? If only there was a sorting mechanism to group all the GENUINELY urgent jobs, then the reasonably urgent ones – and finally the non time-critical ones. One idea I’ve had (Anthony, I’d be interested in your thoughts) is to price them differently according to urgency. I’m not suggesting you change your system but there may be scope to introduce a time-sensitive pricing mechanism, if not in your operation, then other printers could explore it, as another way of using price signals to modify customers’ behaviour.

    My proposal is as follows;

    What better or easier way to do that, than to simply quote EVERY job by routinely offering (say) three price options:

    $10/k for urgent delivery (i.e. that falls outside our normal flow);

    $9/k for normal delivery;

    $8/k if you’re in no hurry and allow us to blend it into our workflow at a time that suits us.

    The numbers are arbitrary, of course. But the point is that for 100 years we’ve priced everything on a normal delivery basis, but we cave in and deliver many jobs ahead of schedule, which has a disruptive and largely un-recovered cost impact. Economists love this three-tiered approach as it places a cost on disruption, but it ALSO offers a reward/incentive to those clients who genuinely aren’t in any hurry. Why should they pay as much as the queue-jumper? But that’s what our traditional one size-fits-all pricing philosophy has encouraged over the years: it’s actually ENCOURAGED everyone to seek a rushed delivery benefit for free!

    This idea is not new! Airlines use it, as do hotels, just about every service provider in a competitive market where excess capacity can come and go like the wind, uses it – except the printing industry!

    There is no LOGICAL reason why we shouldn’t adopt a capacity-based pricing model. We can now monitor and predict our workflow pretty well. I think the answer is that our estimators probably went to the same school that estimators in the building game went to where you simply take the cost of a tonne of bricks, add the cement (metaphorically), add the labour component, add the lot together and bingo! there’s the cost of your building.

    I know it’s going to cause aggravation among some quarters, who will struggle to understand why the very same book or brochure could cost $6 one day and $5 another. I’m dying to tell someone, somewhere, someday, the reason is that the latter client didn’t lie about wanting it overnight; he actually gave the printer a few days extra to produce it!

    But getting back to your new approach. The economist would view it as simply stopping one client gaining an unfair advantage –i.e. getting his job earlier than another client, but not paying anything for that benefit. It’s a bit like a crowd at a football match; if one person stands up to gain an unfair advantage everyone else then has to. But nobody is better off. In fact they’re all worse off, because now they’re all standing!

    Your pricing approach, is virtually like saying, if EVERYBODY sits down, we’re ALL going to be better off!

    Everyone in our industry is complaining about margins. Everyone’s complaining about not wanting to lower prices, because in theory it squeezes margins. Everyone talks about trying to get a better i.e. higher, price.  But the paradox is, that the higher the price of ANYTHING, the LESS people will buy. With the advent of the internet and other media, it was never so important that print should be price competitive, not with the bloke down the road, but with other communication options.

    Your approach addresses the margin issue without obsessing about the price issue and where you’re having the best of both worlds; one – by asking everyone to ‘sit down’ your margins go up, and two – by effectively offering a generally more competitive price, more people will buy from you.

    Sometimes the simplest solutions seem to elude us.

    I’d be interested to know what you think of the above – a lot of it is simply stating the bleeding obvious – but sometimes even that has to be spelled out.

    Yours is arguably the single most dramatic break-through in memory, in our march towards greater efficiency.

    Regards,

    James Cryer, BA, MBA

    JDA Print Recruitment

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