Technology Report: Don't get caught in the ink storm
By Jon Severs Friday, 04 February 2011
While ink price rises may make many see red, suppliers are aiding printers with a whole gamut of ways of converting their blues into green, writes Jon Severs
Do I think things will improve in 2011?" ponders Tudor Morgan, Fujifilm Europe group marketing manager, graphics and wide format, when asked if the upwardly mobile ink prices of 2010 will continue their ascent this year. He pauses. It is a pause full of the uncertainty in which the industry is currently immersed when it comes to the cost of inks. And then: "I’m not really the man to ask, but I bloody hope so."
With the marketplace unwilling to pay any more for its print than it is already, those rises are potentially catastrophic for print companies. Finding a way to offset them is therefore essential for most to stay in business. Fortunately, shelter from the storm comes in a number of guises. Some digital printers are opting for a switch from the OEM to cheaper third-party suppliers, while others are taking advantage of a helping hand from manufacturers in the form of fixed-price deals and innovative service package solutions. Picking the right option for your business is essential as the wrong option can be more detrimental than the ink rise itself.
Absorbing the rises
In the litho world, the options available for offsetting ink costs derive chiefly from the ink manufacturers themselves. Far from upping the prices and hiding away in fear of retribution, most are working on ways to help printers find a way of avoiding passing on these increases to the customer. This help usually centres on finding savings elsewhere in the pressroom to, in effect, pay for the cost of the ink price rise.
Manufacturers such as Sun Chemical have done this by helping to initiate the use of process improvement practice ‘Six Sigma’ in pressrooms, while Fujifilm will audit a company’s kit so that output quality is standardised and work can be printed on the most economical kit, rather than the kit with the quality the client likes best. Perhaps the most innovative example of manufacturer assistance, though, comes from ink and consumables manufacturer and supplier Stehlin Hostag.
It has developed a system called i-Check whereby printers can implement a proven efficiency project that best fits their business and monitor the impact that project has via a website that can be accessed remotely from any computer. The website carries details of the project, its aims and its reasoning, along with ongoing data on how it is progressing.
Managing director David Ward explains that the project began with the company looking back over its history of helping clients with efficiency drives and picking out the most successful for a portfolio of the projects, reducing blanket usage for example or moving to alcohol-free processes. Clients could then look through this portfolio and select which measures best suited them.
"We looked at the situation of rising costs and decided that there were lots of opportunities within the pressroom where we could save," he says. "And the fact the i-Check is transparent proves it is not just words: we have quantifiable and measured results to prove that the savings are genuine."
One business using the system is ESP Colour in Swindon. This year, it has rolled out two projects: a blanket usage report and a conversion to alcohol-free print. Both have been a massive success, says managing director Anthony Thirlby.
"We have actually spent 30% more per unit on our blankets, but the net saving has been 50% as we are changing the blankets less and so achieving more uptime on the presses," he reveals. "Together with the switch to alcohol-free, the savings have been really impressive. This year we have saved 8% off our total consumables spend, even with the ink price increases. So we haven’t just offset the rises, we have actually managed to save money."
Impressive as the savings are, some may argue efficiency has its limits and has too haphazard an impact to be able to price for the long-term effectively. For those after that sort of stability, hedging would have to come into play where printers could agree fixed-price contracts for a year or more. Sun Chemical chief marketing officer Felipe Malledo believes this is just not possible for litho inks as the raw materials situation is too volatile to allow a manufacturer to commit to a price for that length of time. Fujifilm’s Morgan says that for inkjet, this is not the case.
"We will agree a fixed price over the period of a sole supplier agreement, generally for 12 months, depending on the volume used," he says. "This stabilises the cost of the consumables for the printer so that throughout that year there are no surprises. We will absorb any additional costs through the course of that year."
He adds that Fujifilm has also introduced a pay as you go system whereby the company will deliver dispensing kit and 200-litre barrels of ink in whichever colour the printer requires to the print site. The delivery of this ink along with the kit is free, the printer only pays for the amount of ink it uses, the price of which is fixed for 12 months.
The trouble with fixed price deals is that you are essentially just skipping a few steps of the staircase. While you sit happily at the bottom, over the course of a year competitors are taking small steps in price hikes and adjusting their business accordingly. At the end of the year, these competitors have a business geared for the end-of-year price high, whereas those who fixed have to make the giant leap from the bottom to the top straight away. This is not easy.
That’s why some in the digital market have opted to take the option of switching to cheaper inks and starting on a whole new staircase altogether – one that starts at a much lower price point so is arguably a more long-term option. Some claim the OEM inks come at a high price because that is where the kit manufacturer makes its money – cheap kit to lock the client in, expensive consumables to bring in the cash. A third-party supplier does not have the same business model and so can undercut the OEM price.
Book printer Butler, Tanner & Dennis (BT&D) certainly found this to be the case for its Epson 7880 and 9880 proofers. Mike Barnsley, BT&D reprographic and pre-press manager, explains that the OEM inks were going up in price on a regular basis, so when its proofing products supplier Image2output offered a cheaper option in the form of its own range of remanufactured Epson inks called ISOchrome, priced at up to 30% cheaper than the OEM, BT&D gave them a try. After testing extensively on one proofer, and with excellent results, they rolled out the inks on all of the proofing kit.
Lance Britnell, director at Image2Output, says the savings come from not being to greedy with the margin and not having as many people in the supply chain – they take empty cartridges to their ink manufacturer, which refills them, and then they are sold back to the client. In quality and service, he says, the client should see no difference for their lower spend.
The OEM will counter that using these cheaper third-party inks will be detrimental to quality and damaging to kit – and in switching you obviously relinquish service or warranty deals you have with the OEM. However, Britnell says the OEM’s are just scaremongering and that if you are careful in your choice of supplier, then the risk is minimal, if not non-existent. The same could apply for the litho inks market.
Worryingly, though, however printers choose to deal with the rising cost of inks, it’s probable 2011 is going to force them to work even harder to offset the rising costs. While 2010 seemed a year of unprecedented ink price rises, it is likely efficiency drives meant manufacturers were able to absorb some of the raw materials costs and that printers were spared some of the pain. This year, with efficiency drives complete, manufacturers will likely have no way of cushioning the blow and so the full brunt of raw materials cost rises will be passed on.
So, while there are a number of credible ways to try to offset the ever-growing cost of buying ink – efficiency and fixed prices in the short term, while switching to cheaper inks is possibly a slightly longer-term option as long as you do your homework –they shouldn’t be seen as a cure. Rising costs are a reality the industry is going to have to face and while these solutions can act as a buffer, printers will at some point have to pass the cost of the inks on to their own customers, as the manufacturers have had to do, in order to survive.
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