by Melissa DeDonder, The Binding Edge

When it comes to energy efficiency, suppliers and binderies often take different paths to arrive at the same conclusion. For suppliers, the newest technology provides a range of energy efficient features that can be a selling point for some industries. For an industry rooted in tradition, such as the binding and loose leaf industry, energy efficiency is not necessarily a top priority but is often the byproduct of adding or replacing equipment.

Shift to energy-efficient equipment inevitable

Wolfgang Ebinger, vice president of sales at bielomatik jagenberg, inc., said that energy efficiency is becoming an increasingly important topic when discussing new equipment or the modification of existing equipment in the binding and loose leaf industry. Steve Calov, postpress product manager at Heidelberg USA, Inc., echoed that sentiment and added, “In the postpress arena, customers haven’t pushed the energy button in total yet, but as utilities prices rise, we think that the demand for energy efficient equipment will increase.”

Matt Seidl, sales manager at Seidl’s Bindery, Inc., agrees that the move toward energy efficiency is inevitable, whether those changes are self-initiated or government regulated. “The movement isn’t going away, and you can’t stop what’s coming.” he said. “Our company is very interested in energy efficient equipment, as long as the speed or rate per hour of production does not suffer. It’s very similar to the gas vs. electric car argument,” Seidl said.

Another barrier for the binding and loose leaf industry in terms of energy efficiency is the initial cost of the equipment. “Cost is definitely a barrier for most of our customers,” Ebinger said. He encourages customers to look at the big picture and consider the cost of energy and maintenance for the older equipment vs. the higher availability of the new technology. “When considering all of these factors, it becomes clear that energy efficiency is an important component for staying competitive in today’s marketplace,” he said.

For the binding and loose leaf industry, the initial investment barrier often partners with a longer return on investment for energy efficient models. Calov shared the example of buying a conventional light bulb for $2 vs. an energy efficient light bulb for $20. “It boils down to one question: Do you save in the short term or invest for the long term? Customers who purchase energy efficient machines will gain energy efficiencies over time,” Calov said. Ebinger added, “Most companies would like to see an ROI of less than three years, which is a tough task for energy efficient investments.”

For Seidl’s Bindery, Inc., the investment is worth making. “We believe that you buy the best equipment to produce the work as quickly as possible, without sacrificing quality,” Seidl said. “By shortening production time, we also are saving energy and overhead costs because we are not dragging out the manufacturing process with substandard or outdated equipment.”

Modernization to meet customers’ needs

In addition to creating energy efficiency, another byproduct of adding or replacing equipment is being more able to meet customers’ needs. “Our progressive customers view print production as a manufacturing process, and they’re constantly looking to squeeze out the last bit of efficiencies in the machines. Energy efficiency is a byproduct because the machines set-up faster and produce less waste, so a higher percentage of the operating time is used for the actual job production. Additionally, since the machines have distributed servo-motors, as opposed to older machines with bigger line shaft drives, only the essential parts of the machine needed to produce a job are running at any given time. Others come to us because they want to do something really unique – trying to add value from a creative standpoint, using finishing to improve market response,” said Dan Maurer, vice president of product management – digital print and postpress at Heidelberg USA, Inc.

Maurer said it can be hard for some bindery owners to see what trends are occurring in the industry when they’re focused on providing for existing needs in the bindery every day. “The industry is changing so rapidly that some binderies may not clearly see the challenges that their printers are facing. Web to print providers have the latest software and automated equipment to significantly reduce the production costs of jobs, bringing pricing pressure to the market.” Bringing in new equipment can offer opportunities, expanding services without necessarily requiring new skill sets. He said the latest technology takes a lot of the artwork out of creating this type of finishing. The machines do the work now, which means that an extensive skill set is less of a factor in creating this work. The technology allows commercial printers to bring binding and finishing equipment on-site, and the printers are making this investment.

“Although this may feel like a threat to binderies, there’s an opportunity here for binderies to be proactive and to put their destiny into their own hands,” Maurer said. From a marketing standpoint, binderies could go to their printer customers to ask about their needs and talk about unique partnership opportunities. Maurer said an example is wide format printing. “A lot of printers currently outsource wide format, and it would not be considered a threat to the printers because the binderies would not be buying a press. Here’s an opportunity for binderies to secure both short-term and long-term business while adapting to the new technology that is not going away,” he said.

Other efficiencies to consider

There are other options to consider that can create energy efficiency in the bindery. Heidelberg mentioned customers who are embracing new technologies such as solar power to generate electricity and reduce the cost of energy, and Seidl’s Bindery has made major facility upgrades in an effort to improve energy efficiency. “When it comes to making big purchases and structural improvements to the building, energy efficiency is our number one priority. Many times, it is the driving factor for upgrades,” said Seidl.

The following items were installed or upgraded to increase energy efficiency at Seidl’s Bindery: a white roof to help keep the building cool; a harmonic ballast system to prevent electrical spikes and power surges; the building was completely reinsulated; a new heating and cooling system complete with smart thermostats was installed throughout the building; low flow toilets were installed, as were air blower hand dryers; energy-efficient lighting was added throughout the building; improvements were made to the air-tight dock doors; and a new trash bailer and dust filtration system were installed.

Seidl said that all of these upgrades have helped the company achieve significant savings. “Once we committed to energy efficiency it opened our eyes to other possibilities that were unique to our facility. So, my advice is to find that first step to open the door for energy efficiency, and then other opportunities will become more feasible,” Seidl said.

Another key to Seidl’s Bindery’s energy-efficient success is employee empowerment. “We have created a culture where our greatest ability to save energy costs on a daily basis starts with our employees. We have empowered them to shut down lighting and equipment when not in use,” Seidl said.

Maintaining your investments

Regardless of whether energy efficiency comes in the form or equipment or facility upgrades, investments need to be maintained through regular and systematic care. For equipment investments, Heidelberg recommends a proactive maintenance approach – at least one maintenance visit per year, per piece of equipment. “By minimizing equipment failure and enabling the early detection of potential problems, preventive maintenance programs reduce waste, energy consumption and the use of consumables,” Calov said.

Seidl agrees that equipment maintenance is vital. After overhauling its heating and cooling systems throughout the building, Seidl’s Bindery discovered that it wasn’t achieving its energy saving goals due to poor air quality. Excessive dust in the air was clogging up the air filters and, as a result, the company was changing the filters every week. The company decided to completely change its bailer and dust filtration system in an effort to bring down the parts per million, which would allow the new system to work at high capacity. “In the end, we have vastly improved the air quality in the building while capturing a great energy cost savings as a direct result of these energy-efficient upgrades,” Seidl said.

While it may be a daunting task, Seidl also encourages companies to assess and evaluate their efficiencies on a regular basis. “One of our greatest challenges has been the evaluation component – figuring out how to monitor the changes, how to calculate the cost savings and how to improve upon efficiencies down the road.”

The Binding Edge would like to thank the following companies for contributing to this article:

bielomatik jagenberg, inc. in Windsor, CT, is a subsidiary of bielomatik Leuze GmbH + Co. KG, Neuffen, Germany. bielomatik jagenberg specializes in paper finishing, stationery manufacturing, print-finishing-on-demand and RFID. The company offers a variety of energy efficient solutions, including brake generators, water-cooled drive systems and upgrades to existing systems. For more information, call 860.640.0500 or visit www.bielomatik.com/en.

Heidelberg USA, Inc. in Kennesaw, GA, is a subsidiary of Germany’s Heidelberger Druckmaschinen AG. Heidelberg provides solutions and services for commercial and packaging printing worldwide. The company offers a variety of energy-efficient solutions for prepress and postpress, including automatic presetting options on postpress machines, automation devices and individual feeders driven by their own servomotors. For more information, call 888.472.9655 or visit www.us.heidelberg.com.

Seidl’s Bindery in Houston, TX, provides precision and expertise in a complete range of binding and finishing services, from PUR adhesive and mechanical binding to foil stamping and embossing. The company is committed to energy efficiency and continuously strives to operate at higher efficiencies while lowering operating costs. For more information, call 713.681.3815 or visit www.seidlsbindery.com.

by Jen Clark, The Binding Edge

A solar-powered renewable energy management solution at Spiral James Burn is expected to help lower building operating costs and reduce the company’s carbon footprint at its corporate headquarters in Totowa, NJ.

The project – an installation of about 3,500 solar panels – is the largest roof-mounted installation in northern New Jersey and will produce approximately one million kilowatt hours of electricity each year, according an article on the company’s website. “The new 825 – kW DC solar power system will offset a total of 15,375 tons of carbon dioxide over its lifetime,” the story said. “The environmental benefits of such a large installation are equivalent to planting more than four million trees and eliminating over 40 million automobile driving miles.”

Richard Christmas, director of operations for Spiral James Burn, further explained the company’s decision to invest in solar energy:

Why did you add solar panels to your building?
Two reasons: Environmental responsibility and lower operational cost.

What company completed the installation, and how long did it take?
Amberjack Solar Energy, Oakland, NJ, (www.amberjacksolar.com) installed the panels. The installation, start to finish, took five to six months.

Have you realized any energy savings in the nine months since the solar panels were installed?
The installation is new, but it looks like we will be realizing the expected cost savings by producing the maximum allowed solar energy production of around 80 percent.

You were expecting to lower building operating costs. Have you been able to do that?
We don’t have empirical data to support this yet, but since nearly our entire roof surface area is covered with the solar energy panels there seems to be less heat energy travelling into the building structure. This has been a relatively hot summer, but the non-insulated warehouse area of the building has been noticeably cooler temperature-wise. If this is true, then the A/C units for our office space are likely using less energy as well.

Was this part of an overall effort to be more aware of the company’s impact on the environment?
Yes. We had been reviewing this, along with many other energy reduction options, and we just found the right scenario to move forward. We also have realized significant savings and help for the environment by implementing nine different recycling programs at the present time.

Have you undertaken any other environmentally-friendly efforts? Did this spur any other projects?
At the same time, we have been working on other smaller “energy reduction” initiatives throughout the facility, including energy efficient bulbs, proximity motion sensors for select fixtures and even rewiring some fixtures to utilize less bulbs.

What advice do you have for other companies who might be considering a project like this?
Do your homework. Research everything: vendors; power authorities; incentives from local, state and federal governments and tax benefits. Conduct feasibility studies and, of course, consult your accounting staff!

by: Gerry A. Michael, CPA, CMA, MBA

It’s pretty clear that this is not a “happy time” in the graphic arts industry. We’ve seen the economic climate this bad before, but knowing that things have been worse before is little consolation to a company in the midst of the battle now. The simple fact is that in the next few years, a lot of companies in the industry are likely to be gone. And as my company sees it, the bindery and finishing sectors of the industry will be hit even harder than the rest of the industry. That’s not being alarmist or pessimistic. It’s simply a fact.

Surviving in a Difficult Economy

The difficult economy, combined with the changes in the marketplace that the industry has been struggling to respond to for decades, means that the number of firms in the industry is likely to contract. Some firms are probably not going to make it. But in previous downturns, once the economic storm clouds clear, the firms that have weathered the storm enter a period of robust growth and strong profits. Difficult business times seem to produce stronger companies. But is it really that simple? Probably not.

What’s the difference between those that survive, and those that don’t? Obviously, the answer to that is complex. Success or failure can’t be attributed to just one thing, and in my experience, sometimes it comes down to simple luck. But one thing I have observed over the years is this: Successful firms know a great deal about themselves, they understand the keys to their own success, and they are able to react quickly to change.

Basically, they know what’s important, and they measure it, monitor it, and react to it with speed and confidence. What is it that gives these firms an apparent advantage over others? They tend to use relevant, timely, and accurate information about themselves and the environment in which they operate to improve the quality of decision making, to provide early warning of impending difficulties, and to find and take advantage of opportunities for improvement. Put another way, they know what “metrics” are important, and they use them in their business.

The Problem with Financial Statements

So which metrics are most important to owners and managers? That’s a trickier question to answer. One of the biggest reasons is that my own profession, public accounting, has hijacked the entire accounting world! Simply put, CPAs don’t try to produce information for the use of management. The approach of all Certified Public Accountants is the maintenance of an accounting system and reporting philosophy designed to meet the needs of the public, not management. And practically every accounting system in existence today has been developed based on these principles. Where did we go wrong?

The answer requires a long and detailed review of how accounting evolved in the business world, from its origins over 5,000 years ago in ancient Sumeria. In fact, some scholars actually believe that the oldest known writing was developed to help ancient bookkeepers communicate commercial matters! Accounting has evolved to meet the needs of the time, focusing first on simple merchant (“retail”) accounting systems, often using barter, then adapting over time as the economies of the world changed and became more sophisticated. But then, about 200 years ago, something quite dramatic happened. Business entities began to seek investors and lenders to supplement the capital of the owners, as businesses became both larger and more complex. These investors and lenders began to impose reporting requirements on the businesses, requirements that would enable them to compare one investment opportunity to another. Enter the profession of Public” Accounting.

Now, understand that I’m proud of my profession and I have great respect for the work that we do. The profession imposes very challenging and demanding requirements on its practitioners. It’s just that I also realize that there is nothing about being a CPA that qualifies a person to advise management. Actually, that’s the arena of Management Accounting, and it is best done by a Certified Management Accountant, or CMA. Even the accounting profession acknowledges that there is a difference!

What this means for an owner or manager is that financial statements are inadequate tools for managing any business by themselves. While it’s important to have statements that are both accurate and timely, they don’t provide what is needed for managers. What traditional statements (income statement, balance sheet, and statement of cash flows) do help to determine is how the organization performed as a whole over a certain period of time. What they don’t do is help management understand why the performance was what it was and how it can be changed. The entire focus of financial statements in public accounting is the “fair presentation” of the results of operation for the company in total. Little analytical or diagnostic information is presented, nor is it intended.

Choosing the Right Metrics

So what type of metrics should be used? Forgive the classic consultant’s answer, but “It depends.” However, there are criteria for management information that can definitely be stated as relevant in all cases.

• Timeliness – is the information current? This should mean a matter of days, not weeks. What data is reviewed each week?
• Relevance – does it measure things that count? Labor dollars are hard to manage, but not labor hours. Which is being looking at?
• Usefulness – does it serve a purpose going forward? For instance, what good is looking at gross profit margin when it includes both fixed costs (rent) and allocated costs?
• Action-focused – does it support a plan of action? In other words, can the results be changed through management action?
• Repeatable – often overlooked – can the metric be measured at different times with the same qualitative values? Only then can the effects of change be monitored.
• Reliability – sometimes thought of as “accuracy” – does it really measure what it purports to measure?

Based on those criteria, what are some of the things I think every manager should look at on a regular, consistent basis? Examples might include the following:

Planned Capacity Utilization – What percentage of bought (i.e., paid for) direct labor hours are actually charged to a job, not including time on reruns or above estimates? This is critical in any manufacturing company, and especially for firms in all phases of graphic arts. A company has to sell the capacity it is paying for to succeed. When it doesn’t, the company has excess capacity and needs to react to it, either by reducing capacity (layoffs) or by pricing more aggressively.

Price Realization – This is calculated as actual job prices divided by “target” price for the same jobs. Management has to price to the market, but also should track the cumulative effect of market pricing, to be able to predict the financial results.

Estimate Turnaround Time – How much time elapses between a customer’s request for an estimate or quote and the company providing one? This should be in hours, not days, and it can be tracked more easily than management might think.

Job Turnaround Time – Perhaps more obvious, but how much time elapses between the order and job shipment?

On Time Rate – This may be the most important metric for managers. What percentage of jobs are shipped on or before the original promised date (rather than the date the client accepted after the first deadline was missed)?

The above can be powerful tools in the hands of managers who are willing to use them. They address some of the most critical issues in the industry today:

• How well does the company serve its customers?
• How well does the company use its resources?
• How well is the company pricing its product or service?

Notice that not a single one of these metrics can be found in traditional financial statements. But the data should all be available with minimal extra work, and it should be generated internally.

One final note: Sometimes when I present this to clients, their response is disappointment. They seem to want a longer list of things to watch, as if the more information a manager looks at, the better the company will do. I disagree. Looking at a large number of reports is not only a waste of time in my experience, but can provide conflicting information, thereby eroding the value of the whole process. Focus on a small number of metrics, make sure they are understandable, and stay with them.

These are just examples and should only be used in conjunction with more traditional reports, since understanding the effects on the company as a whole remains important. But a change in those reports only occurs when management metrics such as these are employed, and that should be everyone’s goal.

Gerry Michael, CPA, CMA, MBA, is president and co-founder of GA Michael & Company, PS, a Seattle-based CPA and consulting firm specializing in the graphic arts industry for over 25 years. Michael has been a frequent speaker at industry meetings, including the recent BIA Mid Management Conference in Las Vegas, and is author of numerous articles on industry financial issues. In addition to public accounting services, his practice provides merger/acquisition, valuation, and strategic planning services to its clients in Washington, Oregon, and California. His firm’s website, www.gamichael.com, includes many of his past articles, and he can be reached at gerrym@gamichael.com.