Making the Decision: Is Adding Services Right for You?
by: Dianna Brodine
Youve heard it all before either in this magazine, from another industry source, or on the financial newscasts. Money is tight, the value of the dollar is falling, and the economy is in a slowdown. As a wise business owner, youve evaluated your financial situation, taken a look at income v. expenses, reviewed new equipment that might bring efficiencies, cut a few customers whose business wasnt bringing in the expected return but a wise business owner doesnt stop there. A look to the future is the next step, and perhaps adding services is the right answer for growth. New services could bring new customers or, at the very least, add value to existing customers. And there are natural tie-ins with the bindery business that seem to make the decision a slam-dunk. But not all additions are wise, and not all change is good. How do you decide what is right for your business?
Industry Trends Tighten Profit Margin
Shorter runs, consolidation, and a reduction in the numbers of graphic arts firms all have an effect on the flow of business into binderies. Anna Massey, sales and marketing manager with Gateway Bookbinding Services, noted that, Todays trade bindery is very different than that of a decade ago. Printers have become far more efficient and the runs have become smaller so the days of doing 100,000+ books with 5 percent spoilage are long gone.
Jack Rickard, president of Rickard Bindery, has noted a trend toward one-stop shopping. People who do the purchasing really like to get the project off their back, so one-stop shopping is attractive. I happen to disagree with that mind-set because I think you want to go where core competencies are.
Agree or disagree, the reality exists that customers looking for one partner to fulfill all of a projects needs can apply pressure to printers, or in turn their bindery partners, to offer more services. This leads to another trend the inclination of printers to add bindery services to the printing shop but Rickard will point out that the trend is not a new one: I can remember my grandfather ranting about printers putting in their own equipment back in 1945. But here we are, going right along, and the reason is that were good at what we do. Were better at what we do than our printer customers, who dabble with what we do.
In fact, Rickard explained that knowing and understanding core competencies can provide opportunities to work with other bindery service providers when trying to meet the needs of a customer: There are things which we do that I know somebody else does better. When we get one of those jobs in, we will take it over to the guy who does it better. In Chicago, for years and years, we have dealt with each others core competencies. We work very hard with each other so that the printers dont get the feeling that theyve got to put the equipment in themselves.
Know Your Business Model
Business models define the parameters in which your company operates, including what you do, why you do it, and what you hope the results are once youve added your fair share of hard work. Part of that process is determining core competencies the things you and your staff do better than the competition. When evaluating the addition of services, one of the first questions you should ask is whether or not the new service can be done as well as your existing core competencies.
Rickard Bindery have explored a lot of avenues over its decades of existence and Jack Rickard is open about some of its mistakes. We stuck our nose into a lot of places and found out that 90 percent of the time, we got our fingers slapped. In 1980, I brilliantly got some labeling machines and we jumped in. I found out in a matter of two months that one, the mail houses hired cheaper people than we had; and two, they knew what they were doing. I managed to get back out of the business in four months, Rickard laughed.
That and other missteps have made Rickard a firm believer in knowing the business model in which your company operates. In the case of Rickard Bindery, the company could easily slip into mechanical binding, laminating, diecutting, or perfect binding. In order to succeed in the new ventures, the only thing Rickard employees would have to learn in those fields would be the technical expertise. The essential business model would not change.
In binding, we take paper and we mechanically cut it, chop it, fold it we physically alter the stock, said Rickard, explaining that adding services that alter the stock in similar ways makes good business sense, while some things fall outside of the companys core competencies. Fulfillment is a computer game with inventory. Youve got to have the computer horsepower and the inventory mind-set to manage inventories of various products in order to do fulfillment. And it, just like mailing, is a different mind-set business.
So, with the cautionary tales and words of advice, why add services? The answer, in some cases, is increasing responsiveness to customer needs. Todays trade bindery needs to be poised and ready to respond to their customers needs, said Massey. They need to go beyond just being a final step for their customers. They need to become a partner with the printers to bring added value to the relationship. Another answer is that the more services you provide, the more you control your customer accounts.
Once youve made the decision to expand your binderys services, there are many directions to go. Three are discussed here: string tying, mechanical binding, and mailing. Future issues of The Binding Edge will feature a series on fulfillment services.
– String Tying
Rickard Bindery added string tying to its services in 2006. According to Jack Rickard, it was a logical step for the trade bindery. String tying is the same business, the same customers, the same quoting process, and the same schedules, he said.
String tying is one of many ways to promote products at point of purchase. There are a variety of shelved products that have a physical shape that lends itself to having a string-tied piece attached. Well-conceived string-tied promotional pieces attract attention and provide useful information right at the point of purchase. If your customers product is a bottle, or has a button or a hook, then string-tied tags might be exactly whats needed to boost unit sales. Products could include grocery items like liquor, hair care products, condiments, spices and flavorings (i.e., soy sauces or olive oils), or cosmetics.
String tying applications have size limitations and stock weight requirements. A hole must be punched in one corner. And the pieces must be stitched, glued, and folded in such a way to be attractive and functional. Further enhancements through foil stamping and diecutting are possible. Strings can range from plastic options to cotton in a variety of thicknesses and colors.
The work came about for Rickard Bindery because of an existing customer relationship. We were doing a lot of string tying work and we really didnt want to mess with their turf, but we were operating three shifts and they were operating one shift. We could bring something to the table that they couldnt, said Rickard. Despite the very real possibility of offending their string tying customers, the company is still doing work for the string tying companies, providing material and occasionally sending very difficult jobs to them. Weve drawn our market from areas our string tying customers werent drawing from.
– Mechanical Binding
Mechanical binding is another service that makes sense as a vertical move in a binderys business plan. According to Massey, mechanical binding offers ease of use, quick start-up with minimal training time needed for operators, and affordability of implementation. Most binderies will already have some sort of punching equipment so often all they require is a punch tool with the correct hole pattern for coil, explained Massey. Once they have their punching requirements figured out, they then need some type of coil inserting equipment. Massey explained that there are a number of options, depending upon the volume of work the bindery foresees and the complexity of the projects. Possibilities include belt drive coil inserters, dual roller coil inserters, and automated coil inserters. Equipments investments can range from as little as $795 up to $20,000 for an automated machine.
The plastic spiral itself is readily available, but according to Massey, a lot of binderies take it one step further with in-house coil manufacturing. By producing their own coil from spooled filament, the bindery not only positions itself to be able to respond much more quickly to its customers needs, but it also sees a 50 percent savings in material costs. Interline the coil forming process with automated coil insertion (with production speeds anywhere from 700 to 1,400 books per hour), and that bindery becomes not only fast but highly efficient.
Adding to the appeal is the fact that plastic spiral binding is suitable for a variety of projects. With a variety of color options and lay flat capabilities, mechanical binding could provide flexibility not only to your bindery business but to the customers you serve.
– Mailing Services
According to John Gracey, co-owner of Mail Right, Inc., 65 percent of printed material ends up in the mail but only 10 percent of printers have an in-house mailing system. Gracey points out that the mailing business is a natural move for binders, since theyre already involved at the end of the process right before mailing occurs.
Mail Right specializes in setting new companies up in the mailing business, offering the equipment, software, and resources needed to be successful. We focus on the how-to, said Gracey. Weve done it, so we can teach exactly how to do it. We can walk new mailing organizations through pricing mailing jobs, getting your salespeople to sell mailing jobs, teaching the production people how to produce jobs, all the way to taking them to the post office to teach them how to introduce jobs into the system.
Continued compliance and changes in the mailing standards and prices are a concern. Mail Right holds advertised phone seminars and schedules phone calls to discuss compliance issues. One change coming up in November is NCOA (National Change of Address). At this time, when an automated mailing is done, mailers have to verify that the address and zip code are valid. NCOA goes a step further to require that mailers verify that the person the mailing is directed to actually lives at that address. Mailers are going to have to access the USPS change of address database to verify that the person actually lives there, said Gracey. Its always been required for first class mail, but now its going to transfer to standard mail, which is the majority of the stuff in the system. All of the lists are going to have to be run through a list verification service. Another change in the works is a new barcode system that allows more information to be imprinted, offering increased ability to track your mail through the system.
Getting into the mailing business from bindery is less of a vertical move and more of a horizontal change in business strategy. No longer are you physically altering the state of the paper stock. It can be, however, another way of securing your customer relationships.
Jack Rickard has a simple standard for evaluating expansion possibilities: Its looking at whats going through your shop and saying What else is being done with this, and how can I help out with whats being done? If its really outside of your competency, Id recommend you take a long, hard look before committing any resources.
Special thanks to Jack Rickard of Rickard Bindery for his insights and experience. String tying information reprinted with permission from Rickard Bindery. Additional recognition to Anna Massey, Gateway Bookbinding Services, and John Gracey, Mail Right, Inc.