Written by Howard Fenton, Senior Technology Consultant at NAPL

For most printing businesses, pricing is highly competitive because the manufacturing costs are similar for different companies. Generally speaking, different companies use the similar equipment, paper, and consumables and are in the same area with similar utility and building costs. Successful companies may have newer/faster equipment, better-trained staff, and more efficient procedures, but in general, the manufacturing costs and resulting pricing are typically within a defined range.

According to the latest NAPL/NAQP Financial Benchmarking Study (2010) of small printers, the cost of goods, payroll and overhead make up 90% of all costs. According to the PIA Ratios 2009-2010 for all printers, the total factory cost of the product was 78%.

One of the keys to ensuring lower printing costs is matching equipment capacity to production demand. If customer demand exceeds machine capacity, overtime or outsourcing may occur, which is more expensive. If capacity exceeds demand, then you may be paying too high a price for a piece of equipment that is sitting idle.

When a machine’s capacity matches the production demand it remains in use or has a high utilization rate. The utilization rate is a critical factor in determining which equipment is most appropriate because it determines the costs of manufacturing.

How do you determine how well a machine’s capacity matches customer demand? We feel that demand has to fit within a range to be considered appropriate. If the machine is only used 2 hours a day, it may be cheaper to buy that product. If the machine is busy 6 hours a day, then the costs should be very competitive. It does not matter if the printing technology is offset or digital – you never get 100% utilization.

With offset you have to change plates, refill ink / paper, and wash blankets while with digital you have to refill toner, replace belts, and vacuum.  And both require scheduled and unscheduled maintenance. But leading companies can achieve 65-75% utilization rates across multiple shifts, with different types of jobs and using different printing equipment.

What is your utilization rate?

Howard Fenton is a Senior Technology Consultant at NAPL. Howie advises commercial printers, in-plants, and manufacturers on workflow management, operations, digital services, and customer research.