NOTEBOOK: Plan to Retool? Prepare For People, Planet and Profits

As word filters out about the remarkable new systems and applications available for printing, renewed excitement is certain to envelop our industry. Who would have thought the heart of innovation still beat so strongly in this mature business? Drupa, the driver for these candescent thrills, serves as catalyst and arbitrary deadline for engineers to present what's new and what's next. Whether you're traveling to drupa to see it first hand or channelling the information at graphicartsonline.com/drupa, dozens of developments foretell waves of efficiency set to wash over our sector's operations.

In this moment of transition, a recurring theme among technology developers is how to make workers more productive. As exhibitors bare their plans for the paths to reach this goal, emphasis seems to be shifting from making the operator adapt to a system, to developing systems that conform to how humans naturally behave. This sensitivity to the Human Machine Interface is a healthy sign—a proposition that embraces the value of the worker as a critical part of business profitability: a notion to which no one would object. But now industry suppliers seem to be considering more intentionally the consequences of how machinery is engineered and the welfare and safety of humans who use it.

The trend is allied with the move to sustainable business practices that honor and acknowledge the well being of the worker. These same practices make print firms leaner, more efficient and profitable. Yet just as solutions developers are presenting these opportunities for dramatic retooling, business reports indicate capital availability is less plentiful—an unfortunate aftermath to the credit meltdown.

What transpires in the private conversations between bankers and printers is anyone's guess. But publicly traded firms do pull back the veil, as they present their plans to lender groups and the SEC. From our read, we see pledges by publicly traded firms to damp down capital expenditures, in part swinging the investment emphasis to acquisitions—buying whole companies instead of machines.

During a year-end presentation to investment analysts, for example, RR Donnelley CFO Miles McHugh noted that 2007 capital expenditures were $48.2 million, or 4.2% of revenue. For 2008, that figure drops to 3.5% of revenue, a decline of $50 million, “in great part due to the new capacity we acquired with our 2007 acquisitions,” said McHugh.

Valassis, in a March 10 presentation to the ill-fated Bear Stearns, pledged to reduce capital expenditures: trimming from $38.3 million spent during 2007 by 10% for each of the next four years.

At Houston-based Consolidated Graphics, the firm's long-term acquisition/integration strategy is playing to advantage. CEO Joe Davis forecast for investors last year that its “pipeline of potential acquisitions represents annual revenues in excess of $500 million.” The Ott family, owners of Hennegan Co., one of Consolidated's signature acquisitions, expressed the pressure to fund systems: “As a family-owned enterprise, the need to make ongoing investments in equipment and technology to continue growing as a top-quality, state-of-the-art facility was an ever-increasing challenge.”

Still, Consolidated is investing in new technologies. “In 2007, we dedicated $8.7 million of net capital expenditures, which totaled $42.3 million, to expanding our digital fleet,” Davis noted, but he put the emphasis on human capital: “Our most important investment is in our people. Our impressive growth underscores the need to attract talented people and prepare them.”

Good managers may not need to be reminded, but it bears repeating: People are the key.

bill.esler@reedbusiness.com