Feb 8, 2005
By George Linkletter
According to the Chinese calendar, 2005 is the year of the Rooster. The
Chinese people believe individuals associated with the sign of the
Rooster are hard working and definite about their decisions. They are
not afraid to speak their minds. Those are wonderful traits.
But for managers in the HVTO industry, I believe 2005 will be the Year
of O.W.L. ? and O.W.L. is short for Outsourcing, Workflow and 'Lectronic.
Here's why.
The biggest factor on the horizon for all customer messaging operations
? both the internal units and the service bureaus ? is the prospect of
much higher postage costs in 2006. Some observers believe the
percentage increase in postage costs will be in the low double digits.
The Allure of Outsourcing
Since postage is the biggest single expense associated with customer
messaging operations, and may account for as much as 50 percent of total
operating costs, it is easy to see how the increase will impact the
overall costs of customer messaging. No doubt some managers will view
the increase as inescapable. But I think the vast majority of the
financially-oriented executives who oversee internal operations will try
to evade the increase by considering a switch to outsourcing.
Those shops most in jeopardy will be the ones that have delayed ? for
the past year or two or three ? investments in new equipment and
software that can boost productivity. Now that investments to improve
efficiency will have to compete with the added cost of postage, they are
likely to fall even further behind, and will have the most to gain by
outsourcing their operations to the service bureaus that continued to
re-investing to improve performance.
Customer messaging is a fast-moving and dynamic industry. So if you are 'standing pat' for any length of time, you are really
'falling behind'
competitors are regularly investing to improve performance.
Make no mistake. The service bureaus ? and those internal units that
view customer messaging as strategic to the success of the business ?
have been making ongoing investments in technology to stay competitive.
Just one recent example illustrates the immense benefits of investing in
new processing technology. One service bureau in North America that I
am familiar with enjoyed a strong and enviable reputation for processing
large-volume mailings quickly and efficiently, thanks primarily to its
fleet of more than 30 inserters. These non- or limited-intelligence
inserters can each accommodate a portion of a mailing simultaneously, so
even mega-sized mailings can be processed smoothly.
However, the senior managers were not satisfied with the status quo.
They wanted to grow more rapidly and to shift its mix of applications
from primarily direct mail to an eventual 80/20 ratio that favored
higher-value and more profitable transaction-based mailings. An
internal study indicated that a substantial expansion of the physical
plant, along with the addition of more processing equipment, would be as
required to accommodate the growth plan.
But instead of continuing with its aging yet functional fleet of
inserters, each with limited capabilities, the managers looked to new
technology. And they discovered that the entire existing work load
could be handled by just two state-of-the-art intelligent inserting
systems.
As might be expected, the R.O.I. on the new inserting systems ? from savings in
labor costs, reduced service requirements, lowered maintenance expenses, and
vastly reduced errors and the associated costs of rework ? is tremendous. Plus,
the firm now has a streamlined operation and a platform and space for more
growth.
Workflow Improvements
Still, even the most productive service bureaus
and internal shops must continuously improve to stay competitive. And this year,
with the threat of higher postage costs on the horizon, many will look to
improve their Workflow procedures.
Streamlined data flows will be a continuing
priority this year. And so will improvements in the actual physical movement of
material across the entire production floor. Both can help bolster productivity.
Most shops are well versed in the traditional method of boosting print/mail
finishing productivity, which centers on speeding up existing work via the use
of faster processing equipment. But even greater improvements in productivity
can be achieved by examining how work is performed, and especially how various
work units interact with each other.
The goal here is to cut out inefficiencies
that may have slowly taken root over time and to implement a range of
improvements that can result in better uptime, enhanced quality, higher
productivity, lower costs and a less fatiguing work environment for all
employees.
'Lectronic Alternatives
The third key focus in 2005 will be 'Lectronic.
I believe managers will try to lower costs by accelerating the migration of new
and existing customers to an electronic or digital form of messaging.
There are
substantial cost advantages to digital messaging, such as delivering an e-mail
alert and then posting account data on a secure Web site. Indeed, electronic
messaging can cost as little as one-sixth of the cost of traditional print/mail
finishing and delivery via the U.S. Postal Service.
So, a shop that can migrate
about 10 percent of its paper-based customer messaging volume to a digital
format could largely eliminate the impact of the potential postal rate increase.
And if those customers also choose to engage in a form of electronic bill
payment, the savings will be even greater.
I also expect the focus on 'Lectronic to extend to enterprise
integration strategies. There may be some overlap here with the efforts
mentioned above to improve digital workflow procedures. Still, the
goals are just as
worthwhile: improve the effectiveness of the mailpiece (to boost revenues and
strengthen customer relations) and bolster the efficiency of the processing
operation (to lower costs).
These enterprise 'Lectronic efforts will likely involve: including more
pertinent content within each mailpiece to boost effectiveness; linking
the content of the mailpiece to call centers, for example, so customer
representatives can handle inquiries more quickly and at lower cost; and
utilizing mail stream tracking technologies for inbound messaging to
help predict the arrival of payments and suppress the need to send
follow-up collection letters.
Do you have a prediction for 2005? Send it to:
gl@outputlinks.com.
George Linkletter
PO Box 186
Sherman, CT 06784-0186
(860)350-4043