Let me explain. If you acquire a printing machine today and aren't able to utilize the machine 100% the only one to take up the bill is YOU. With Heidelberg's model, they sell you the service on a per consume basis. This I can imagine comes at a premium price, which is both fair and square, but that price obviously needs to give the subscription customer a position in the market that is on par with every other customer. If the price is too low regular customers may choose another vendor if better and more competitive, and if too expensive, the subscription customer may be less profitable. It has to be almost on a level.
As many offset printing companies, today experience a far too low utilization of their equipment, I am wondering who pays for this? Heidelberg, of course, makes money from the consumable business, but they have no interest in giving away the profit to cover the loss on a too low utilization. Most printing companies today acquire printing machines with a depreciation time of maybe 7-8 years. However, if you look back 7-10 years from today, the market has changed completely, and therefore the forecasts for utilization of printing machines is not easy. The market can change, the competitive situation can change, and even new technologies can change the market overnight.
Printers should, of course, embrace the Heidelberg subscription models, since, if the terms described above, gives you a competitive edge, and eliminates the risk, it's not a question about "jump", but more about "how high."
Heidelberg tells in the video that they have already signed 300 contracts globally. They didn't say which of the different models, but I would assume quite a few with equipment since this is where the model offers their customers the most significant advantage?
In the video, Heidelberg gives some examples of how they increase the productivity of their equipment. Every time you see these kinds of numbers, you can't help being impressed. It's impressive to see how machines under the right conditions can perform more, and better. If your utilization of equipment is close to its max-performance, you gain value from existing equipment, and will for sure monetize on this. However, this is rarely the situation. I am not saying most, but I dare to say that a lot of printing machines in the market isn't performing anywhere close to their max capacity, so therefore, an even more efficient utilization can lead to a lower profit. Remember that most companies in the printing industry, price their products based on a full-cost calculation model, that unfortunately is partly responsible for the problems the industry has.
When I was a kid, my best friends grand-farther had a shoe factory. The sales prices were a direct relation to the production cost of the shoes. Today that isn't the case anymore. Prices are based on supply and demand, and the full-cost model only serves one purpose, namely, to estimate your profit. Many printing companies, and ERP systems, and MIS systems, and calculation systems, offer you rapid prices based on the full-cost model and don't support you in judging what the market eventually will pay for a product.
So the more efficient printing machine in a printing company with low utilization can, unfortunately, lead to lower prices, unless Heidelberg together with their customers can convince either a new pricing model or at least keep the prices on the level the prices have now.
30% of index 97 isn't as good as 30% of index 100.
In the presentation, the essential question isn't asked - how to get more customers?
If the printing company can eliminate the risk of paying for more than the equipment is utilized, somebody else must. I can't see any other than Heidelberg, and I am wondering how they are planning to handle this?
Will somebody please enlighten me?
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