Wide-format Graphics: Factors affecting print profitability

by all | 10 February 2015 11:42 am

By G. Scott Wood
The large-format sign and display graphics sector continues to grow and represents a significant portion of today’s marketing mix. According to InfoTrends, a strategy and consulting firm for the digital printing and document technology industries, the retail value of large-format graphics increased by a compound annual growth rate (CAGR) of 7.9 per cent from 2010 to 2015. From the world’s largest brands to small businesses, non-profit organizations, schools and even individual consumers, the demand for short-run, wide-format graphics for promotions, special events, point-of-purchase (POP) displays and other applications has never been greater.

With this sustained year-over-year growth in the sign and display graphics business, wide-format digital inkjet printing continues to represent a strong and attractive profit opportunity for printing companies. As a result, many print service providers (PSPs) are now bolstering their product offerings with wide-format inkjet-based output.

In some cases, they are helping their existing customers expand into signage and further large-format graphic applications. In other cases, they are seeking to attract new customers with the in-house ability to produce high-quality, high-margin graphics on demand.

Buying a new wide-format digital inkjet printer, however, is a significant investment that must be carefully considered beforehand. It is important to analyze the true costs of running the machine, among other factors that can affect its return on investment (ROI).

The first step in determining the ‘bottom line’ involves evaluating the current state of the business and its existing graphic production platforms. Many PSPs and sign shops already have some type of digital inkjet printer and may even already be fully digital facilities, but not all of these output devices are created equal. They can differ in terms of both ‘hard’ and ‘soft’ costs, inks, printing capacity and volume and environmental sustainability, among other factors.

Productivity
For many shops considering a major investment in a new printer, the natural inclination may be to look for the best deal, but this does not necessarily mean choosing the lowest price. ROI and ongoing profitability are based on more than the initial cost; they will also depend on what types of jobs the printer will handle, how many square feet of graphics it will output each hour (i.e. throughput), the quality of that output, the colour gamut and the types of inks.

All of these factors must be considered together to make the right decision. More important than how many square feet of graphics can be printed in an hour, after all, is how much profit the shop can make from selling each of those square feet.

Further, production capacity that goes unused or output that will have to be heavily discounted will erode the value of the printer. So, it is important to calculate how many hours of production per day or week, based on a level of work the shop can reasonably expect to sell at the right price, will be required to achieve a reasonable ROI. The equipment should pay for itself as quickly as possible within this context.

Substrates
The mix of substrates for the new printer is another important consideration. A sign shop may plan to print directly onto flexible media and/or onto rigid materials; its choice in this regard will help narrow the search for the best printing platform.

It is also important to factor in both the ‘buy’ and ‘sell’ prices of substrates that will be run through the printer, with an eye on leveraging higher profit margins by minimizing material costs. With ultraviolet-curing (UV-curing) printers, for example, a sign shop can use non-coated substrates, which generally cost less than coated materials, thus allowing it to widen its opportunity for profit. And waste should be taken into account, with consideration given to the amount of ‘extra’ material a sign shop may normally expect to need and the relative costs of the substrates that shop can source for its printer.

Substrate weight might also be an issue, particularly if wide-format graphics will be shipped to clients who are seeking to reduce their freight costs. Light-emitting diode-based (LED-based) UV-curing printers can use thinner, lighter, heat-sensitive materials, for example, which can save on shipping costs. (The LEDs also require less energy than traditional UV lamps, yielding further savings in terms of operational costs.) In addition to financial advantages, there is also the environmental advantage of reducing the carbon footprint associated with shipping.

For that matter, the ability with UV-LEDs to print on heat-sensitive materials opens 
the door to working with a broader variety 
of inexpensive films and boards that would otherwise warp or buckle during printing. So, there can be savings above and beyond those associated with uncoated substrates for UV-curing printers.

Inks
Ink prices should be considered in terms of square feet, rather than litres, because coverage levels on the substrate can significantly affect ongoing costs. The price per bottle will not tell the whole story in terms of profitability per print.

The type of ink used—durable aqueous ‘latex,’ solvent-based or UV-curable—will have an impact in terms of consumption, print production time, graphic durability, application range and environmental sustainability.

UV-curable inks, for example, are not only compatible with a wide range of flexible and rigid substrates, but have also become popular in the sign industry because they cure or ‘set’ quickly, yielding dry graphics that are immediately ready to move onto the next step in the production process; turnaround times are a major issue for many customers. UV inks offer environmental advantages over the solvent-based inks of the past, which contained noxious volatile organic compounds (VOCs) and required ventilation systems.

Many other inks require heating or greater drying time to achieve a proper cure, which entails special equipment and, thus, extra power consumption. And some inks are not water-resistant, so they will require an overcoat or lamination if the finished graphics are intended for outdoor installation.

That said, UV inks are not the best answer for every application, so it is important for signmakers to do their homework first, learning about how the type of ink selected will affect their scope of applications.

Another consideration that has become significant in wide-format printing in recent years is white ink. When a sign shop can print layers of white, it can output graphics on a broader array of substrates, including dark and transparent materials, which increases the variety of applications it can offer to customers. White ink is often required for window clings, backlit graphics, architectural features, packaging and prototypes, many of which can entail higher profit margins for the shop than other applications.

Printheads
The choice of inkjet printhead technology will also have an impact on ink consumption and quality of output.

Today’s piezoelectric drop-on-demand (DoD) inkjet technologies comprise three primary types of printheads:

• 
Binary—A single drop size is ejected from the printhead. This type of printhead can simulate greyscale effects with multiple passes but, in doing so, will consume more ink.
• 
Variable-drop—Different sizes of drops can be produced, but only one size per graphic, as this type of printhead is not capable of dynamic drop-volume changes within the same image.
• 
Variable-drop greyscale—Different sizes of drops can be ejected from the printhead within the same graphic, making it easier to produce near-photographic image quality.

RIPs
Another aspect of printing that affects ink consumption is raster image processor (RIP) software. The RIP allows the user to control and manage image colours, contrast levels and ink laydown, optimizing the final image quality within profit targets. With the right RIP, ink volumes can be better managed from job to job.

Finishing
There are many finishing options for signs and display graphics, including cutting, lamination and mounting. With this in mind, it is important when choosing a printer to consider the entire in-house workflow, including floor space, labour and time to market for finished goods, rather than decide on the printer in isolation.

By purchasing finishing equipment in parallel with the printer, sign shops can often improve delivery time to customers and their own ROI. A hybrid or flatbed printer, for instance, can print directly onto rigid substrates, often preventing the need to mount the graphics to another substrate and reduces waste material. A cutter or router may still be required, however, with its own floor space allotment.

So, when upgrading or expanding from solvent-based roll-to-roll inkjet printing to UV-curing hybrid printers, there are new finishing implications that will need to be considered, with an eye on freeing up additional production time, reducing labour overtime, enabling more just-in-time (JIT) output and improving profitability. Speed 
of delivery is more important to customers than speed of printing, after all, and proper workflow planning can help to better optimize turnaround times.

Workflow
To accurately calculate ROI, it is important to take a close look at the actual production workflow in the shop. Workflow is an end-to-end process, involving not just the speed of the printer and time for drying and finishing, but also file processing with the RIP before printing.

An average day might include eight hours of printing and four hours of finishing, but the capacity of the new printer will determine how much can reasonably be printed within each shift. This should be considered in relation to the growth objectives of the business.

The shop may also anticipate handling larger jobs in the future, in which case the purchasing decision would need to lean toward a higher-volume printer. If large orders are not an immediate concern, on the other hand, a lower-volume device could be a better fit, particularly while striking up a partnership with another shop to take on ‘overflow’ work as needed.

In either case, wide-format inkjet printers are available today that offer capabilities for sign shops and PSPs to produce new applications, pursue diverse opportunities and enjoy more profitable margins.

Calculating ROI

Here is a conservative example of an ROI calculation that can be used as a basis for building a sign shop or PSP’s own analysis, based on the notion of profit equalling sellable price minus the costs of substrates and inks. An entry-level ultraviolet-curing (UV-curing) hybrid printer offers both roll-to-roll and flatbed modes for production printing, yet carries relatively low operating costs. It uses cyan, magenta, yellow and key/black (CMYK) inks, plus white as a standard ink, and its printheads offer variable-drop greyscale capabilities. It can print up to 42.3 m2 (455 sf) per hour on both flexible and rigid substrates up to 1.7 m (65 in.) wide and 46 mm (1.8 in.) thick. According to data collected from actual use of the device, the profit on its printed output ranges from $1 to $3 per square foot across the mix of rolled and rigid media. To cover a 36-month lease payment, the break-even point is as low as 5.4 m2 (58 sf) per day, for the $3 profit level, or as high as 16 m2 (172 sf) per day, for the $1 profit level, based on running the printer for a single shift 20 days per month. Given the printer’s speed and capacity, this means the break-even point can easily be achieved with less than one hour of production time per day. Beyond that volume is ‘pure’ profit, where the upfront cost of the printer itself is no longer a factor. When creating this type of model, it is essential to compare various options on an apples-to-apples basis. There will be financial benefits and deductions associated with various features and functions as they pertain to the sign shop or PSP’s particular business needs, but the ROI analysis method will ultimately suggest which device will best drive profitability and growth.

G. Scott Wood is the wide-format product manager for Electronics for Imaging (EFI), which manufactures Vutek printers. For more information, visit www.efi.com/WideFormat.

Source URL: https://www.signmedia.ca/factors-affecting-print-profitability/

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