Artgrafix Blog

We came under fire recently because a product we introduced, Liner Free films, we marketed as a waste reducing product and a ‘green’ oriented product as it eliminated the silicon coated liners which are disposed of in our landfills.  The criticism was that while they conceded reducing waste was okay, to be ‘green’ by their definition, the film should be biodegradable and should be used with other recyclable boards and papers.  The person saying this was someone we do a fair amount of business with and they wanted me to drop promoting the attributes which are good for the environment as a ‘green’ product because the whole product did not meet their standards. (By the way, there is not such a product I know of today)
To be sure, the focus on ‘Green’ products has been rapidly increasing.  There has been a lot of work done, particularly in the paper field on post content and recyclable standards.  To that end, we have been looking at boards made from pulp which can be recycled, liner free films, acid free adhesives and more.    Because of the wide range of applications, we test thoroughly and often err on the side of conservatism in deciding whether to launch a product because the bottom line is that the adhesive and films have to work in the applications end customers demand.  Accordingly, our gains in ‘going green’ are often incremental and made one step at a time.

But those steps are real progress and I believe that by highlighting this progress creates a pressure for others to follow.   It’s through that pressure that we may get to the products our critic wants to achieve.  Also by highlighting our successes in becoming more a more ‘green’ industry, we build confidence in the market that we are investing our research efforts wisely.  You can’t trumpet the total cure if you don’t have one, but I liken this to improved gas mileage.  Your goal may be to get to 75 miles per gallon (mpg), but if your new product raises your current 20 mpg average to 40 mpg, let people know.  It’s an important step on the path where you need to go.

Did you ever notice while that there are 100’s of different papers, many choices of laminating films and mounting boards, there are really a small number of factories actually making those products.  I was at a tradeshow recently and a colleague criticized us for being so open about who are suppliers are.  Companies go to great lengths to protect their sources so that it is more difficult for you to change from them and consider competitors.  They argued that I would be “safer” if I kept our suppliers invisible to our customers.  I disagree and I think that is really pretty short-sighted on their part.  While it may make it a little more difficult for customers to change suppliers, each of the suppliers has particular strengths and their products do process differently.  Accordingly, not disclosing your supplier makes it more difficult for new customers, especially those who know what they need, to try your products.

As a converter, we do not extrude foam board, coat adhesive on film or make equipment and we do not pretend to “develop” those products.  We bring those components together to make our customer’s lives easier and less complicated.  But when we say an adhesive is acid free and archival or that an adhesive has been certified by Xerox, it helps to know who stands behind that statement with the testing and qc resources to insure that.  Just as when you build your house, you want to know you have Kohler faucets or Pergo floors or Dupont laminate.  You want to know the quality you are getting because it is important and quality makes things better.

I have been through the plants and used the products of all of our primary vendors.  Our key vendors include the D&K Group, 3M, Gilman, Sekisui, Seal and Elmers.  These are all adhesive, board, film and equipment manufacturers with rigorous quality control, products engineered to meet the changing needs of a digital marketplace, and most important of all - people who know their product and can answer questions.  And all have significant local presence in the USA so the time to get supply and information is short.  So when you deal with us, we can tap into their resources and bring them into a conference call so our customer needs can be met quickly and you can have a double layer of quality control which definitely adds value.

I am sure that the private label products are also good quality (and I usually know where they come from), but when you need to know a specific attribute or need a certificate for any purpose, transparency to the manufacturer makes things a lot smoother.   And given our market niche to deliver products which are designed to make laminating less of a hassle, knowing our primary suppliers helps make using our products easier.

In a past post, I noted that you “can’t assume your competition is standing still” and that we are always looking for ways to add more value.  One of the ways we identify opportunities is to look at others and see what we like and try to replicate that in our way.   Perhaps that is not the classic marketing way to approach product and channel development, but for us it is cheap education and usually a sound way to go.

I don’t want to name the companies I really respect because I do business with a lot of folks and some companies are just way too big for us to emulate.  But I want to share a couple of observations we have seen and thought were neat.  If you are in those companies, you will probably recognize yourself.

The first company was going through some difficult times a couple years ago.  They decided the best way was to develop a new adhesive which stuck to a much wider range of surfaces and papers.  As you know with introducing a new product, it takes a long time to get sales traction.  But they stayed the course, and promoted their new adhesive aggressively.  As new papers and boards came out which had adhesion properties, they had the solution.  So while many folks outsourced products and became more “me too”, they developed their own strengths which became a more valuable resource for us (because I can get the “me too” products anywhere).  We also have some items which are unique to us.  We fabricate them in-house and it furthers our internal knowledge of mounting and laminating.  Like this partner, they take time to take hold, but we know that if you need to depend on us, we must make a commitment to these products and we do.  So just like this partner, we think this builds trust with our customer’s and further’s our knowledge which is also a valuable commodity to our customers.

The second observation comes from a company which is really “tight” with their customers.  They identify needs and have developed the resources to source those needs and satisfy their customers.  As such, their customers have no where else to go.  To communicate this, they put a lot of information on their website and are very generous with their knowledge with me and others.  Knowing that they are forthcoming with information, makes me want to call them first when I have a need, and I do call them first.  We try to replicate this by also putting a lot of information on our web-site and will help people secure what they need.  As a custom house, we are often accused internally in our fabrication area of being like Burger King (”Customers, Have it your way”) and all the demands that puts on us.  But without questions, it keeps folks coming back, focuses on value added and not price and is a good model.  The company we took this from does this really well in their area and we look at them frequently to see if we can do something better.

There are a lot of other observations I like too but I do not have time enough to write about them.  We do not hide who we do business with and will always tell our customers the adhesives, boards and laminate manufacturers we use.  I think it gives us more credibility because we partner with some outstanding companies and reflects well on us.

Over the past several months, I have seen our competitors invest to fabricate similar products, make deals with our suppliers to promote similar products and have seen others bring out new products which may have an impact.  It is common to get so absorped in your new products and promotions to assume you are the only company moving forward, but I can assure you everyone is moving forward or they are going to go out of business.  Knowing what is going on is critical to our success so we can adjust to it, learn and get better and counteract those moves.  It keeps you from some unpleasant market surprises.

We spend a lot of time talking with others in the industry - both customers, manufacturers and distributors who are usually a little different than us, as well as monitoring the web sites of our competitors.   Our suppliers are successful and as such supply a number of our competitors (after all we can’t guarantee their mortgage payment and we need our manufacturers to be very successful so they are in a position to do things for us).  We often ask our suppliers about things we see on our competitor’s websites.  If it is not their product they will be more than happy to tell you why the item is not that good!  And if it is a good product, it may be a product your customers need you to offer them.

Also, you may find that your competitor is going in a different direction or focusing on a different market than you and that is good to know too.  While most of the things that drive us originate from our customers, knowing what is going on helps us do a better job, and that is what it is all about.

So cultivate your network of contacts.  I encourage everyone who works for me to do the same.  Also it can be fun.  I have spent 25+ years in this industry (don’t guess my age now!) and know and like a lot of folks in our industry and it can fun to gossip about them (always in a nosey, but positive way - and I assume they gossip about me too!)  It may not sound adult, but I only say that to illustrate that it can be fun to keep up on everything and make your business better at the same time.

Today as gas prices go to $3.30 a gallon and beyond, the cost of shipping is going up also.  Freight surcharges on our truck shipments are now at 20%.  Whether I think its fair or not (and you can probably tell I think the surcharges are high because while fuel is up, the cost of their trucks, terminal and people have not gone up), all the carriers are doing it.  We have taken a lot of efforts in the past year to bring the cost of shipping down to remain competitive and we have been pretty successful at doing so.

The steps we have taken include using deferred and consolidated services, identifying carriers which specialize in either a location or type of service, increasing our pruchase levels to gain free shipping, and just plain old negotiation.  Being small, our leverage may not seem to be great, but if you can educate yourself you can find a good amount to save.  And freight is imporatnt, after materials and salaries, it is our third largest expense category.

There are freight consolidators who pick up freight locally and take it to another trucking company (interline service) in another part of the US for delivery.  They like to have full skids (that is skids which are 6-7 feet high) and for those type of shipments, they are 15 to 20 percent less expensive than traditional long-haul carriers.  For minimum type shipments (i.e. under 200 pounds) the shipping consolidator will not save us money.

We also have the opportunity to use carriers who like to go to a specific region.  This includes firms who specialize in going to New York City or we have a similar arrangement with a firm who goes to the Carolinas. 

Deferred services usually add 2-3 days to the transit time.  In return, you can save 30% of the shipping charge.  This is available for cross country shipping.  What we have done on shipments accross the country is to expedite our shipping of those orders so that we can use deferred shipping and the product arrives at our customer with our usual leadtime.

We have negotiated standardized freight programs (known as FAKs) and tried to minimize special charges such as single pickups, government and elevated tailgate services.  We tend to focus on those services  we experience a demand for and negotiate to have all of carriers standardize on the fees they charge for those sevrices.

Finally, there is just plain old negotiating for discounts.  We talked with some big people to see what they got and while we coldn’t expect to match everything, it gave us some good benchmarks. 

It’s all about being as efficient and lowest cost as you can be.  So while we have made shipping a little more complex, we have reduced our shipping costs 15 to 20 percent from a year ago which helps us hold our prices steady.  I did not think we were doing a bad job, but there was significant room for improvement (and I am sure there are other savings opportunities too). 

While we are in the sign and display business, shipping charges can often be over 20% of an invoice.  So while we face competitors who want to add a fuel surcharge or raise  minimum orders, we have been able to hold the line and keep the total delivered cost in line.   And the improvement helps us to be more competitive and grow our business.

Like a lot of people, the first time I saw products we use that were being made in China, I was bowled over by their prices.  Many of these items were 40% of the cost we have been paying and certainly when we looked at these at tradeshows, they looked good, worked well and were not poorly made.  So following the herd (I never said I was an original thinker!), we have been trying to import directly and have found the original promise to be less than we thought although still an option for certian items.

First of all, our costs rapidly rose.  As a small company, we found that on our purchases of less than $10K, shipping, duty and clearance fees were approaching 25%.  Plus what we found was that with the time to get products here being 45 to 60 days from when we ordered (and paid), we had to have 2 orders going at a time (staged 30 days apart) to have product arriving every month because we didn’t have the space to hold 4 months inventory.  And finally, we inspected every unit and for those that had any damage or needed rework, the Chinese are good at sending parts but the rework and repackaging is all on us. Not including the management time to control the importing, the landed costs rose and the savings became about 30% instead of the 60% originally thought. 

The ongoing support for imported goods, tech support and alike, is all on us.  Not that that’s a problem, but we do have some challenges with component changes from lot to lot and communication always takes a couple of days and is sometimes problematic. So when you factor everything in, importing is a an opportunity, but not the ‘no brainer’ the herd makes it out to be.

What this means is that YOU NEED SCALE and you need to to provide all of the resources to make it work.  Not only economically, but also to get the Chinese’ attention to correct issues on a timely basis.  This requires working directly with the Chinese  For certain items, we have stayed with our US sources and what we have done to bridge the gap with other items is partner with others to combine bringing these items in, have additional people we can network with on Technical issues, and make it so we can maintain sevice levels.  This has diminished some of the financial luster these originally had, but gives us a sustainable position which we can service and grow our business.

In the past couple of months, I have written about the challenges of higher energy costs, longer lead times and the challenges that poses to a small company.  In addition to the passion we have for our products, we go through our financials pretty rigorously to make sure that costs are not moving in the wrong direction (and like the salt shaker on my kitchen table, we always have to scale back spending on a couple of items to get them back to the ‘center’ of the table!)  Even though business has been good, with $4 gas we are expecting the ’shoe to drop’ and business to slow down.  Increasingly, we are looking for ways to automate and to outsource actions to limit the growth of staff to both protect our downside as well as handle additional sales while maintaining our overhead costs.

 Right now, we are looking at automated cutters with computerized stops, new software and updated computers.  The technology which is available is affordable and can have a meaningful impact on productivity as well as help to give better service and make better products.  It also takes time to evaluate and implement which takes time away from product development and being with customers, but right now we feel an urgency to focus on these internal improvements to protect us against downturns as well as give us capacity for future growth.

I would be interested in how others look at their business right now and what steps you are taking for the future.

Business has been holding steady and is off to a pretty good start in 2007.  Given everything you hear on TV about interest rates, China, oil, and more I am pretty happy with how things are.  Not relaxed, but happy.  What keeps us from relaxing is higher cost pressures and longer lead times.  Keeping an eye on these and planning will be critical to both keeping customers happy, costs in line and profitability.

What we do see in our business is lengthening lead times to get products, still some upward pressure on costs and manufacturers looking for longer runs and therefore larger orders.  Our leadtimes have moved out a couple of weeks on average from about 10 days to over 3 weeks for our basic materials we fabricate.  While it is due to a number of understandable factors, the industry does not always have the mechanisms in place to communicate the changes in longer supply times.  As you move closer to the end user of the product, this compresses the time we all have to turn items around to meet the promise dates we all have.  We can not ask customers to stock more as they do not have the space or are seeing the same economic predictions we see.  For us, more inventory is a quick fix for this (but it takes time to build it up because you are playing catch-up) or doing more fabricating (cutting and adhesive coating in our case) and of coarse all this costs more.  We do see competitors who do not have items in stock and their customers call us for supply, our challenge is to make these customers permanent, have supply for them and our current custmers.  It is a balancing act and sometimes it’s tough to keep your balance.

Costs, notable electricity and fuel continue to climb like a rocket.  Even with oil down from $75 to $60 a barrel, our energy costs have gone up more than 40% from 2006 and they do not seem to be headed down.  After an inital spike of price increases at the end of last year, we are seeing folks try for another round of increases now, but they are not sticking as well as last fall and are not as aggressive yet.  Companies are increasing the orders required for shipping to keep costs in line but eventually we see increasing costs for raw materials. 

Whether its bigger shipments, higher costs, doing more or whatever, the pressure on costs and prices is coming.  The fact the economy stays strong certainly helps with dealing with these pressures.  The choices, while not always pleasant, are not the difficult ones we have all faced in the past.  It’s just important to stay on top of things and make the best decisions to insure service levels and to meet our commitments.

Hi and welcome to our Company blog. our purpose in starting this is to create an informal communication with you and those involved in print display. Artgrafix is a company which focuses on servicing people just starting out mounting and laminating larger prints. Our view on mounting and laminating is while it shouldn’t be hard to do, it’s not always obvious what to do and finding out how can be frustrating. We hope this blog is a tool to help us understand what is important as well as a resource to get you information you need.

To give a little structure to our blog (and only a little), we will write a short recap each month on the following items:

• New product ideas we are working on
• Industry trends which have effected us
• Problems we incurred and how we’ve addressed them

By way of background, we ventured out and started our business over 6 years ago and had many of the ‘near death’ experiences new businesses endure. While I believe the axiom ‘what doesn’t kill you makes you stronger’ has some truth, I could have lived with things going closer to plan. Needless to say, we have learned a lot in the past 6 years.

We are a typical small business. We have a 7,000 square foot warehouse in a not so pretty industrial park. But it’s clean, functional and serves our purposes well without breaking the bank and is convenient and safe for our 11 great employees. Everyone here has touched our products in tangible ways. From coating and cutting boards, everyone has played a vital production role in times of rush orders or covered when folks are out sick. And everyone has an opinion from what they hear customers say on new laminate films and products. Our customers can talk to anyone here and all of our employees can take an order. We are not big on Job Description (although we have some), but it all comes down to quality and service and everyone here knows that.

We hope you like spending a couple of minute a month seeing what we are working on and if you desire, add your comments for us to learn from. Thanks again!