In-plant and Commercial Utilization Rates and why they are important?

By | October 22, 2010

The In-Plant Printing and Mailing Association (IPMA) recently published a manual called “The In-plant Printer and Mailers Guide to Survival 2010.” This is a great publication that I would recommend to any in-plant manager. In it Debbie Pavletich, the immediate past president of the IPMA, writes “In-plants that maintain high productivity levels … will provide a 15%-30% savings to the parent organization.”

I would not dare disagree with Debbie. She is an in-plant leader and could back up any claims with reams of data. But I do think we need to define “high productivity levels” and talk about why they are important. And I would go a step further. This conversation about high productivity levels is just as important for commercial printers as in in-plant print production.

Let’s start with the basics. Generally speaking, the same equipment, paper, labor and overhead costs exist for both in-plant printing sites and commercial service providers. One main difference between the two is the business model. A commercial printer tries to make a profit and most in-plants work under cost recovery or using a break even business model.

The problem for both is when you are slow or when your machines are not printing much. Commercial printers using the budgeted hourly rate analysis will have their manufacturing costs increase per piece as they shift from a two shift to a one shift operation. The same is true in an in-plant where the costs are spread across the number of jobs created. In other words, the cost of pages printed from an in-plant where the machines run 2 hours a day will be more expensive than from an in-plant with machines that are running 6 hours a day.

For both organizations, one of the keys to ensuring lower manufacturing costs is matching equipment capacity to production demand. If customer demand exceeds machines capacity, overtime or outsourcing may occur, which is more expensive. If capacity exceeds demand, the company may be paying too high a price for a piece of equipment that is sitting idle, resulting in a higher cost per page when the costs are spread across the total number of pages. How busy your equipment stays is the utilization rate. When a machine’s capacity matches the demand it is running often or has a high utilization rate.

But utilization rate is not everything. In both cases, utilization rates are less important for certain fast turnaround jobs. For example, a financial printer or a state printer who requires 500 reports of a 200 page document overnight may need over-capacity to meet those deadlines. But let’s assume that over-capacity is not required.

So the question becomes, “How busy do your machines need to be to justify the investment?” Does your equipment need to run 75% of the time? Could a digital or an offset press run for 6 hours a day? What about the time to change press plates or wash blankets, refill toner, replace paper, clear jams and the time required for scheduled and unscheduled maintenance?

Howard Fenton is a Senior Consultant at NAPL. Howie advises commercial printers, in-plants, and manufacturers on workflow management, operations, digital services, and customer research.

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