Managing Inflation in the Wide-Format Segment
In a recent interview for Printing Impressions, Andy Paparozzi, chief economist for PRINTING United Alliance, said that the rising prices facing printing businesses, including wide-format graphics producers, have become embedded into the economy. What started as transitory price increases – such as price increases based on supply chain disruptions – have grown into other areas, such as labor costs, and may prove to become permanent.
For business owners, and those on their teams tasked with controlling production costs and protecting margins, these recent price increases have left them with a difficult choice. Do they absorb the higher costs, pass them on to their customers, or do a balance of the two? Are there ways already-lean printing businesses can manage rising prices by controlling costs internally? To understand how inflation is affecting wide-format producers, this article features the experiences of three cost-conscious companies.
Chicago Print Group Inc.
Paul Denst, president of Chicago Print Group, located in Calumet Park, Illinois, says his company is currently experiencing inflation “across the board: in materials, labor, and finishing products.” He says it seems like every week he’s getting “an email from somebody about cost increases that are coming our way.” He’s seeing surcharges from some suppliers, and will be facing re-evaluation for new pricing structures in the year ahead. Regarding the higher cost of the banners, posters, signs, and other applications produced by the company, Denst says, “We try to absorb it, but can only do that so long. We push an increase to the customer, and then are told of another price increase.” Freight costs, he says, are a significant factor in the increase he is experiencing.
Denst says that, depending on the program they’re serving, Chicago Print Group is either absorbing higher costs, or passing them on to the customer. Most buyers, he says, know that current pricing is “good” only for a short term, and realize what’s happening regarding prices. “At first, they didn’t listen,” he says, “but now they are.” Denst sees the end of the year as an opportunity to reevaluate programs.
In passing costs along to customers, says Denst, he has had to rework prices for some jobs a few times. He says his company buys materials by the project – instead of holding an active inventory of materials. Because of this, he says, he doesn’t purchase materials until the job is contracted. One challenge amid rising costs is the difference experienced between estimating a job and actually purchasing the materials. Asked if this could drive customers to other wide-format producers, Denst says, “it’s not just our company, and we’re all using the same distributors.”
To address pricing challenges internally, Denst says the company is “working to increase efficiencies by adding capacity, which makes for more product, quicker.” Other areas of automation opportunity are found in finishing and software solutions. Further, he says buying multiple machines across the same manufacturer has given Chicago Print Group a buying advantage, due to lower ink costs.
Denst believes that the current price increases will generally become permanent. For him, a bigger concern than prices is the unreliability of the supply chain. “The bigger headache,” he says, “is not being able to source what you need.”
Regarding labor, Denst says those costs are going up as well. He says that while his company is not actually in Chicago (it’s a block away, he says), the expectation is for “Chicago pay rates.” The staffing company he uses for unskilled labor, such as kitting, is urging a higher rate. “For full-time employees, we’re having to offer a higher salary rate,” he says. “We have to keep existing staff happy through raises.”
For Elaine Scrima, vice-president of operations at GSP Companies, which is headquartered in Clearwater, Florida, and has additional production in Lenexa, Kansas; Provo, Utah; and Madison, Wisconsin, the largest pricing increases have been in materials and transportation. To control some shipping costs, GSP, which serves national accounts on a large scale, has to shift some jobs between facilities, thus minimizing the costs of transportation. Scrima says the materials the company is most challenged to find today are styrene and card stock.
One strategy for keeping supply of those materials, she says, is to seek staggered delivery instead of large lots of materials. Other cost saving strategies related to materials, she says, are to become more careful with forecasting, and to investigate viable alternative materials. Scrima says exploring alternative materials is common at GSP, noting it’s always been the company’s philosophy to look for vendors with comparable products. But, “cheap is not always good,” she adds, “and I want products that meet customer requirements.”
Scrima says, “With our customers, we engage in long-term arrangements, so there is a hold on that pricing.” She says it is in new work that the company can institute its own price increases. That said, Scrima adds the company, “looks for ways internally to make the job profitable without having to pass costs on to customers.” One creative solution devised by the GSP team was to take advantage of changes in shipping requirements. By shipping certain types of jobs in a slightly smaller box, the company was able to avoid higher shipping charges that would be either absorbed or passed on to the customer.
Like Chicago Print Group, GSP is seeking the advantages of automation to help control costs. She says the company’s biggest gains have been in finishing and fulfillment. With the goal of reducing “touches” in production, using less labor, and working more efficiently, she says, “we are still limited to the specification of equipment.”
Asked whether she believes current higher prices will become permanent, Scrima says she doesn’t know, referring to current conditions as “uncharted territory.” She, like Denst, is most concerned with the availability of materials. She says some materials have gone from 3-4-day availability to 4-6-week availability. “All the guarantees are out the window,” she says, “and we’re at the mercy of the supplier.”
Addressing labor costs, which Scrima refers to as “the million-dollar question,” she says GSP conducted market research and “implemented raising hiring rates in every area.” Further, she says the company is looking at different types of automation to reduce the number of open positions.
SpeedPro of Fort Collins
According to Matt Kettler, co-owner of SpeedPro of Fort Collins, a franchise operation serving Northern Colorado and parts of Southern Wyoming, prices for his company started rising in mid-2021. Today, he says, he sees new price increases every 30 to 45 days. The company – affiliated with the national company SpeedPro – focuses on vehicle wraps and vehicle graphics, wall murals, corporate signage, and office rebrands.
Regarding supply prices for his company, Kettler says “everything has gone up,” and he has had difficulty sourcing the vehicle wrapping vinyl the company prefers to use. This has led the company to explore vinyl from other manufacturers. For the company’s wide-format printer, he says, maintenance parts have become harder to find. When asked whether the company has experienced higher prices for the equipment it purchases, he replied that the company hasn’t added equipment since the beginning of COVID, and is instead focusing on preventative maintenance to keep existing machines running as expected.
Regarding the price increases experienced by his company, Kettler says they have absorbed some costs and passed on some to customers, noting he “doesn’t want to keep increasing prices.” That said, he is not sure how that approach will ultimately affect margins. Of his customers, he says, “everybody has been understanding so far, both on price and material shortages. We communicate what’s going on. It helps that every industry is going through it.”
To mitigate some internal costs, SpeedPro of Fort Collins has been exploring alternative products, and is considering switching vendors, particularly for media, overlaminates, and trade-show hardware, such as banner stands. The company is also exploring internal efficiencies. “In this industry,” Kettler says, “there can be misprints and flaws, and I’ve been harping on being careful so we’re not making mistakes and wasting material.” For local work, he says it is not uncommon for he or his wife, company co-owner Kelly Kettler, to make deliveries. To find and keep a good labor force, Kettler says the company has increased its hourly pay rate internally and has raised its rate for new hires.
Overall, Kettler believes the higher prices will be permanent, but hopes the pace of increases will slow. “The increases affect us,” he says, “and I’m hoping that will stabilize.”