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A Match for Grand Format

 

Evaluating an Investment

 

By Amber E. Watson

 

Part 1 of 2
 

Increased speed, lower cost of production, and opportunity for growth are benefits print service providers (PSPs) attain when adding a grand format device to their shop. The decision to purchase a grand format printer is not to be taken lightly.

 

There are many factors to consider when evaluating an investment. Analyzing productivity, cost per page, ink, current and proposed return on investment (ROI), as well as taking into consideration the opportunity for growth, help to determine if the purchase has the potential to pay off in the long run.

 

Questions to Consider

The cost of a grand format device may make PSPs weary. However, there are many price options on the market and financing is typically available for those who qualify. The question is more about having enough business to create a reasonable ROI on the purchase.

 

Michael Syverson, director of special projects, PrinterEvolution, LLC, recommends PSPs analyze if they have enough room in the facility for the equipment and any additional finishing devices; as well as whether or not the type of work currently produced is suitable for a grand format device.

 

According to Oriol Gasch, signage category manager, Americas, Hewlett-Packard, some of most important questions to ask before investing in a grand format printer include, “How much do we currently spend outsourcing, and how much might we save by bringing the work in house? What applications will we focus on? What is the current square footage per month needed to produce, and to what level can we increase this with new application offerings?”

 

Likewise, Geoff Stone, national sales manager, Paradigm Imaging Group, advises that a PSP consider if its customer base requires grand format output. He also suggests examining the details of the printer, such as warranty, service agreement, lease/buy terms, and the relationship with the seller/manufacturer.

 

Introducing a grand format device into a shop’s workflow is challenging. For this reason, PSPs may want to find out ahead of time about training, support, and guidance from the supplier. “From a commercial perspective, a PSP may want to first talk with customers to see if it is likely they will buy the end product at the intended price level. PSPs may also want to see if the equipment fits the facility in terms of workflow and learning curve. Getting a printer installed is only one factor; getting it to run smoothly and fit existing workflows is more involved,” advises Roland Biemans, sales and marketing manager, Hollanders Printing Systems.

 

Besides the task of ensuring the shop has room for a grand format device, Terry Mitchell, director of marketing, Fujifilm North America Corporation, recommends taking into consideration the quality of the device and all of its capabilities. The device should print to a wide range of substrates. Questions such as, “Does the software provide the versatility needed for the type of work that is currently or in the future be produced? Is there a trade off between high-speed production and print quality?” should be asked.

 

Greg Lamb, CEO, Global Imaging, Inc., asks prospective clients to take a snapshot of their most recent previous quarter of business and to break down how much was spent on outsourcing and how many square feet were produced in house. “A quarterly review of invoices for banner and adhesive-backed vinyl, as well as outsourced production, provides a sufficient snapshot,” he states.

 

He then asks what print technology the shop currently uses and what they pay for a cartridge or liter of ink. “If they use solvent, a reasonable yield to expect is 700 square feet per liter. If they pay $250 per liter of ink, then the per-square foot cost is roughly .35 cents. With that data we formulate an accurate ROI on what is spent and what may be spent if a move is made to a roll-to-roll grand format device.” What he cannot calculate is the opportunity value that may come from owning a grand format printer. “In many cases, the drive to separate from the masses is where some of the greatest, though incalculable, ROI comes into play,” he adds.

 

Analyze Productivity

A grand format printer gives PSPs the ability to print larger jobs with faster turnaround times. It also allows PSPs to take on larger, higher margin jobs, and provides faster production.

 

In general, grand format devices are ideal for shops with a high demand for large graphics. Most importantly, the shop needs to have enough of this work to support the cost of owning and running the device.

 

The best candidates for the acquisition of a grand format printer include PSPs that produce a high volume of billboards, banners, building wraps, and large posters, as well as point of purchase (POP). “The size of the print shop is not so much the issue, but rather the amount of work that needs to be produced and the expectation of turnaround time. Grand format UV presses have more productivity compared to solvent devices, so shops benefit from increased capacity and productivity,” explains Mitchell.

 

Larry D’Amico, VP, digital imaging, Agfa Graphics, notices a growing interest in grand format printers from all categories, ranging from commercial printers to traditional digital printers. “It depends on the customer demands and the shop’s overall capacity and volume. It is most about productivity goals and needs,” he adds.

 

Given the investment level of this type of equipment, production capacity plays an important role. The margin on the end product is also key. “Capacity and margin are the most important factors in ROI, which effectively dictates whether an investment is feasible,” explains Biemans. “Niche applications with added value may offer better margin, but lower production numbers. General applications provided by most PSPs may have lower prices and lower margins, but create the volume necessary to keep running production,” he adds.

 

It is useful to analyze current grand format production demands, as well as the strong potential opportunity for growth following the purchase. “A simple ROI calculation based on current in-house production and outsourcing costs is recommended. It is important to have a strong partner to assist in navigating the costs and benefits to your business,” advises Lamb.

 

“Four key verticals drive purchases of grand format printers, consisting of screen, commercial, packaging, and signage PSPs,” explains Gasch. Screen, commercial, and packaging printers typically have large-format screen or offset printers in house. “They see an opportunity to expand business by adding digital technologies to address shorter runs at economical price points, as well as versioned output without the need for screens or plates and with reduced waste. The typical screen, commercial, and packaging printer business achieves over five million dollars in revenue and jobs range from 500 to 2,500 pieces depending on the print size,” he adds.

 

Many manufacturers target shops that generate millions in annual sales revenue, but Kevin M. Sykes, president/CEO, Novus Imaging, Inc., shares that the bottom line is if the shop is able to print enough output to keep the printer busy for an hour a day, and they qualify for financing, the printer’s ROI pays for itself and breaks even in about 18 months.

 

Analyze Costs

The decision to invest in a grand format printer often comes down to cost per square foot. It is important to know if the equipment delivers the quality and speed or capacity needed to sell goods to customers at the right values.

 

In general, the biggest savings as it relates to cost per square foot between grand format and wide format printing is in the ink cost. “Ink cost associated with grand format printing is up to one half or one third the cost of ink for wide format printing,” explains Sykes. “What that translates to in terms of cost per square foot depends on the PSPs other costs such as material, printer, labor, and overhead.”

 

Smaller solvent printers have higher finishing costs, mounting, laminating, and labor. Capital costs figure in, but assuming that selling the output is not a problem, larger printers generating more revenue per hour cost less to run than lower priced printers delivering less revenue per hour,” explains Bill Grambsch, Midwest sales manager, Polytype America Corp. “However if you cannot consistently sell the high-volume output of a high-capital cost machine, it becomes expensive to keep in operation.”

 

Agfa produces UV flatbed grand format printers, which have an average ink cost of 12 cents per square foot or less depending on the technology, with speeds ranging from 100 square feet an hour (sf/h) to over 5,000 sf/h.

 

According to Gasch, the average cost per square foot for grand format devices is approximately $0.03, which is significantly lower than smaller, wide format printers—typically averaging $0.12 to $0.27 per square foot depending on the media selection and coverage.

 

A number of factors are used to determine the real cost per square foot. “If someone were to buy a used ten-foot solvent printer for $80,000, that equates to roughly $1,520 a month on a lease schedule, assuming 22 working days in a month and six hours of true production per day, the machine costs $11.50 an hour to run,” calculates Lamb. “On average, it produces 500 sf/h or .023 cents per square foot for actual costs. Ink cost is $22 per liter or .0315 cents per square foot for a total of .0545 cents per square foot.”

 

“If that were compared to a new UV printer, the calculations would be the same,” continues Lamb. “The lease cost goes up, therefore the hourly costs rise. Ink costs increase but the yield per liter increases as well. If we compare the costs of a grand format versus a wide format then savings would be roughly .29 cents per square foot. If a shop produces 10,000 square feet per month on adhesive-backed vinyl and banner at average sale prices, they are up by $1,380 per month as outlined in the above scenario.”

 

Measuring cost per square foot is a starting point to establish margin. “Most people take marketing figures for granted and only look at the cost per liter of ink, the cost of media per square meter/foot, and the cost of the investment based on the economic lifespan of a machine, but the media and ink used are also important factors,” shares Biemans.

 

Risk and Reward
A grand format printer adds to the capabilities and services offered and helps differentiate a shop from the competition.

 

If it seems there is strong potential to generate new business though the investment, it is a risk worth considering, but not before analyzing productivity, costs, and asking the correct questions.

 

Part two of this series looks at trends in the grand format space, and how advancements—particularly to newer model printers—influence the decision to invest in or upgrade to a grand format device.

 


Click on the link above to get more information on the vendors mentioned in this article.

Apr2012, Digital Output  DOGF1205

 
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