Ed Avis:
Good morning, everybody. This is Ed Avis. I'm the managing director of APDSP and I want to welcome all of you to today's webinar. We are delighted to have you here and hope that you have a lot of questions planned because the topic we're going to talk about is something that is on a lot of people's minds these days. This event is being recorded. So if you want to watch more later, or if you have colleagues who want to watch, it will be available on the APDSP website. If you want to ask questions, and we definitely encourage that, please use the Q&A tab on your Zoom panel. We'll take the questions whenever you have them, and we'll either hold them to the end or present them right when they come in. So don't wait, go ahead and fire those in.
Today's panel is an update on the situation regarding pricing and delivery on supplies and equipment in reprographics and we are delighted to have a panel of four distinguished people who can address this topic knowledgeably. Let me introduce the panel. Danny Ionescu is North American Sales Director, Large Format Technical Production Solutions for HP. He is responsible for monitoring market trends and customer needs for AEC, CAD and graphic applications. Danny has been with HP for 25 years.
Tim Horn is Vice President of Sales for KIP. He's been in the industry for 40 years, including the last 20 at KIP. Tim is a former APDSP and IRGA board member, and KIP has been a vendor member of the association for as long as I can remember.
Dan O'Malley is Vice President of Sales for RB Converting, and he's a life-long veteran of blueprinting, engineering graphics, reprographics, and wide format printing. Dan started his career with 13 years at Oce. Then co-founded National Azon and spent eight years there, then five years at Nashua. And he's been at RB Converting for 14 years.
And finally Jim Walsh, Vice President of Sales and Marketing for media supplier, Felix Schoeller. Jim has been with them for the past 22 years. You can read an interview with Jim on the APDSP website in an article about paper prices that was published a couple of months ago.
So welcome panelists. We're grateful to have you here today. We are going to begin the panel by asking a set of questions that I have prepared in advance. And my first question will be presented to Jim and Dan, but let's start with Dan on this. Dan, what are you seeing regarding media pricing trends at the moment?
Dan O'Malley:
Well, from our standpoint, we're trying to recover from some of the COVID shortages and the COVID situations. So we've seen transportation costs go up, we've seen packaging costs go up, we've seen just about everything... and the mills, the domestic mills are on shortened schedules. A lot of them, they don't want to make xerographic type paper as much as they did because corrugated is, like Amazon and some of those places. So we're trying to find more sources for wide format papers, the various ones. And obviously, I mean, a lot of stuff comes in from overseas for the graphics. But we're just trying to navigate through price increases that are just continuously going on.
Ed Avis:
And you're still seeing these prices increase, even right now?
Dan O'Malley:
Oh, yes. Yeah. We just got an increase from one of the mills for November, one of our major mills are going up. And usually when one goes up, everybody else does too, unfortunately.
Ed Avis:
Dan, can you explain RB Converting's spot in the supply chain?
Dan O'Malley:
Well, our spot, I mean, we do a tremendous amount of OEM converting, private OEM converting. Then on the other side, we manufacturer for, and and sell only to, engineering supply companies, traditional printing companies, no direct sales.
Ed Avis:
Mm-hmm (affirmative). Okay.
Dan O'Malley:
That's where we fit. We've got three plants in the US and three warehouses. Plants in Binghamton, Reno and Dallas, Texas with warehouse in Chicago, Atlanta, and Los Angeles.
Ed Avis:
Okay. Is the media that you supply specifically for reprographics or is it other printing graphics industries as well?
Dan O'Malley:
Mostly for signs. I guess it would be mostly traditional reprographic type media. If you want to throw in the signs, the banners, the vinyl, those types of products, and that's where we're at.
Ed Avis:
Okay. Thank you. All right. Let me present that same question to Jim Walsh from Felix Schoeller. Jim start, please, just by briefly explaining Felix Schoeller's position in the supply chain? I know you're located in Germany, right. Your headquarters? What happens from there?
Jim Walsh:
Oh, thanks Ed and thanks for including us in this discussion. Hopefully this gives a little insight to the market with respect to what we can share. We are a German headquartered company. However, we are a global company. We have installations across the globe where we have manufacturing. We started Germany, and from there, we expanded into the various different regions. We have three locations in the United States... well, I'm sorry, North America, two in the United States, one in Canada. We have locations in Russia. We have locations in China. And where we are... and actually Dan O'Malley's company is a very good partner of ours. They buy some of our products and distribute them. And where we are in the supply chain is we manufacture, we're a paper mill. We also provide various different solutions with films and our assets are aligned to produce imaging products. Those range from bond, all the way to the various complex structures, photo base, and photo based, being a paper with an extrusion and a coding. And we provide all of those in a variety of different formats. We also accent our portfolio with various different grades that are produced outside of Felix Schoeller, to round off the portfolio.
Where we are in the supply chain is, we are a paper mill. We produce paper. We have paper machines, and imaging is just not the only market where we're active in. We are also very active in the decor business, which is laminated papers. Those go into a variety of different applications, ranging from furniture to flooring. You're probably familiar with the words, Wilsonart or Pergo Floors or things of that nature. We produce that type of paper that goes into those applications. We also are a very big supplier into the release business and we just recently announced that we are opening a coater in North America, particularly in Pulaski, New York. That will be directed towards the siliconization of paper that's directed towards adhesive coaters. So we do hit a lot of sectors within the market.
The one that we're talking about today, the reprographics, we do make bond and we do purchase bond, and we are an offshore supplier to this market. So the recent, let's say price increases, has exposed us, as being an offshore supplier. Because where Dan was detailing the domestic suppliers', let's say juggling of business with respect to assets, we're also impacted with logistics and the logistics, especially since COVID, and the supply chain starting back up, has created a, I don't call it an artificial demand, but it's created a demand situation where the available containers that are out there are in high demand. Therefore, as the demand goes up, the price goes up and the contents within the containers have to absorb that cost. And that gets passed on to the market.
Think about paper and think about the, I mean the value of it, it's a commodity. And as you go up in different technologies, sure, there's a value add to it, but those containers that are in high demand are being filled with cell phones and things that could absorb that type of cost. Then when you apply paper to that type of exercise, you can double the price of a bond roll. So, yeah, we're very cognizant of the situation. There's certain things that are being understood with respect to when is this going to relax and when are these costs going to recede? And people are saying that it's not going to happen until Chinese New Year. But it started in the Asian market and it migrated over to the European market. And everybody's getting hit with these types of costs.
Now that's one aspect. The other aspect is what Dan touched on, the domestic mills are looking at their assets and they're saying, "Where are we going to make the most margin on what products?" And the bond business, being a very mature business and costs being taken out in competition and everything else with respect to that, has created a situation where the margin associated with that business has the mills looking at their assets and they're doing what anybody else would do. They're determining what they're going to put on their assets and what they're going to produce. What's more appealing to them are the products that are attached to the higher margin. So unfortunately, that also creates a situation and a demand. That's everywhere, that's across the globe, people are going through that diligence and determining where's their best opportunity with respect to investment.
So that all filters down to the situation where we've had three price increases, which is unheard of, and this situation reminds me back, because I started with this company and I've been with them for 22 years and I saw the introduction of digital and what that created. I think back then I was quoted as saying the market's like riding a psychotic horse through a burning stable. It's been same for the past two years through this situation. So we're just trying to be reactive, trying to get product out as best we can and that's the situation that we're in right now.
Ed Avis:
Thank you, Jim. Now you mentioned that the Chinese New Years may be a turning point. When is that? And why does that matter?
Jim Walsh:
I think it's a, let's see, a date cast out there that's after the first of the year. It's in the first quarter. And again, everybody's trying to project a time when this is going to relax and we are all still waiting patiently. I just dropped out of, as I told you, I dropped out of a board meeting where we were discussing just those types of situations. Again, the diversification within Felix Schoeller, where we have touchpoints to the market on all sectors. We have divisions and colleagues that are enjoying great growth due to the products that we make. And one is decor, which is the home products. I mean, everybody's fixing their houses up, or have been. That extends into the cabinetry, the flooring and things of that nature, countertops. Those guys, it's great for them, but then you talk to somebody like myself, who's associated with the imaging graphics market and we've been impacted heavily.
And every time we try to think that it's starting to get better, for instance, this first quarter, this first quarter, we were hit with a huge Corona spike and that created a retraction back into the economy. We are a definite barometer of that type of, let's say, we're aligned with that type of market. So we're looking, we're looking as the vaccinations went up, people were starting to gravitate out again. There was talk that there was going to be conventions again, there was going to be trade shows. I mean, even as late as two months ago, there were still, like at Yankee Stadium, they were still doing just limited seating. I was at a Yankees-Red Sox game and there was 10,000 people. And if anybody knows that venue, that is always sold out and it was so bizarre to see that game with only 10,000 people in attendance.
But that's the situation. The NFL is reporting that they're filling the stands again, but they're not at full capacity. Everybody's still maneuvering themselves, trying to understand the situation. And that's the same as it is with our business, our business is we're trying to understand the situation, and again, Felix Schoeller has not said Chinese New Year, it's kind of the ambiguous type of message that's out there. I mean, it's like, who said that? Well, the market has said that. So it's a point in the future that is thrown out there and we're, I believe, hoping that, after the first of the year, this is going to start to, the situation's going to start to recede and we're going to see some normalcy by then.
Ed Avis:
I've heard the Chinese New Year, one aspect of that time is that the Chinese factories shut down temporarily. So maybe that will free up the shipping containers or something and lower the prices. I don't know, that's speculation.
Jim Walsh:
Yeah.
Ed Avis:
Jim, I want to ask another question of you before we go on. When you and I talked to a couple of months ago about that article, and I wrote in our article, I summarized part of our conversation in that the reprographics industry as a whole, because of price competition, pulled down prices. I implied in this summary of our conversation that it was partially reprographics' own fault for this. Can you elaborate on that? How much of a role is the fact that media at the repro shop side, the prices are so low because of competition, that that is affecting now the ability to ship and deliver media from suppliers?
Jim Walsh:
Well, I mean, it's a mature market and it being a mature market and also being a market that has a great amount of volume to it, that has created the perfect storm for competition. My company included. Certain portions of it likes to discuss square meters as opposed to margin. And they view business from a volume standpoint because you're filling up assets. If you can fill assets and you can run them efficiently, that's the goal at times. As you have cyclical terms within the economy and within the market and within the industry, and we're going through one right now where all assets are, they're at capacity. So that's why the diligence is going on with respect to what do we put on those assets? How do we maximize our profits on those assets? I mean, it's business.
There's times when those assets are, they're screaming for capacity. And that's when prices go down. And you see it. I mean, we've seen what's influenced this market, not only this supply chain, but we saw the increase in pulp. We've seen the increase in energy. We've seen what pertains to us on certain chemicals that go into the recipe, which impact it. Everything. Everything has been impacted over the past, let's call it, since COVID started in March of last year. So with regards to your question on reprographics creating their own... it's a normal progression and result of a commodity. This has been around, it's a mature market. And this business has been managed by competitors. Someone like Dan's company is a very strong, let's call it, supplier into this market. In the past, there was a load of people like Dan's company, and they've been able to develop a solution to the market with respect to service and there's limited numbers of those type of companies that are still out there.
Some of those companies right now are going through their, let's say, they're reacting to where they're at. That being said, they're being viewed internally and externally as what their future looks like. Again, there's probably another consolidation just within that layer of the market. We saw it too with Georgia Pacific. Georgia Pacific moved out of that business, as Dan mentioned, they were making products that went into the reprographic and due to the location of where their mills were and the logistic impact where it was to service the market, didn't make sense for them to continue. Their assets were probably, or are, better off utilized making other products which are more profitable. So yeah, there's going to be probably even more continued consolidation within the market.
Ed Avis:
Jim, isn't it true also that the number of mills has reduced?
Jim Walsh:
Right. I was just commenting on that with respect to Georgia Pacific. Yeah. We do see that, we see that with regards to the global participants. Even Felix Schoeller is going through a skew rationalization as we speak and determining what our future portfolio and future, not respectful to this conversation, but in a whole, there will be certain products that we'll harvest, that will make the cut of profitability. And again, this is all a function of when a mill or a market is at capacity, which we're at. How that is, again, arranged in the future... that same conversation happens in the inverse way. Where can we go get business to fill our assets? Right now, we're looking at where are we going to trim our assets.
Ed Avis:
Mm-hmm (affirmative). Dan, I'd like to hear your response to Jim's comments, in particular about the potential for further consolidation among the converter layer. What do you see there, is that?
Dan O'Malley:
Well, if you'd go back in time, there were 6, 8, 10 coaters/converters. Then, in the last 20 years, this one went out, this one stopped, say quit manufacturing. They started going to OEM places like ourselves, to where there's really only two major converters, ourselves and obviously [Deedskin 00:26:13]. Then there's several smaller ones that are like in Chicago or Milwaukee places. But that said, it's because, to touch on what Jim had mentioned, the assets are being utilized in other fortes. The bond paper that we, and our philosophy on bond paper here at RB is we want to be the last man standing when it comes to putting a roll of paper into a chip machine, or putting a roll of paper on an HP, we want to be the last ones that are doing that. So we're committed to the bond market and we're committed to finding new sources. Like GP was one of our big suppliers at one time and to have that rug pulled out from under you, you have to really scramble because the mills only give you so much paper... you can't just say, "Hey man, I'm tired of Georgia Pacific. Now I'm going to buy all my stuff from you." It doesn't happen like that on this side of the house, mills tell you what you can have and what you can't have.
I would advise anyone out there who's listening to, when they're doing this repro work, it's always been in the marketplace, well, if you don't do it... it's been driven by the customer saying, "If you don't do it for X dollars, we'll find somebody else we'll do it for X dollars." I think we have to take a stand and let the reprographers get a better price per square foot for what they're doing. And let somebody else have it if it's going to be like that.
Ed Avis:
Dan, it seems so in un-intuitive that a customer such as you is being told by a supplier, "Oh, you can only have so much paper." But I understand that, I know you're speaking the truth, but is it logical to think that at some point the mills will say, "Hey, we're selling a lot of this stuff, we need to increase capacity."?
Dan O'Malley:
I'm sure that that will happen.
Ed Avis:
Okay.
Dan O'Malley:
Right now, the mill has all the power. But as supplies and demand, things change, we'll have some buying power. The converters and the manufacturers like Jim Walsh's company, Felix Schoeller, will have more say so in the matter, but right now with this situation from coming off a COVID, logistics, trucking companies are just brutal right now to deal with. So we're just trying to pick up the pieces and see where we're at.
Ed Avis:
Now Dan, Jim mentioned the vague rumor of the Chinese new year being a time of maybe relief. Have you heard anything in terms of pricing? Will prices go down at some point?
Dan O'Malley:
I haven't heard anything going down. I guess you can always go up, but you can't go down.
Ed Avis:
Okay. So you're saying that you're hearing that maybe prices will just continue going op for the time being then?
Dan O'Malley:
I mean, we're here to help the public, and I say that, yeah, prices are probably going to go up.
Ed Avis:
Great. Well, thank you. I'd like to move on the conversation to the equipment side now, but let me remind attendees, if you've got questions, fire away, use your Q&A tab. I know that Jim and Dan provided a lot of info, but you guys are on the front lines, if there's something you want to know, now's your chance to ask or just to make a comment for that matter. Let me turn to Tim Horn. Tim, what are you seeing in the current state of equipment availability and shipping times and things like that for KIP?
Tim Horn:
Well, of course, it's getting better. We've all gone through, obviously, the pandemic times where inventory was very limited due to personnel outages... excuse me. Mostly the shortages today, whether it's equipment or in our supply chain, really are related to personnel outages and shortages at factories, ports, rail yards, trucking companies, et cetera. So when the supply chain is affected, of course it affects the factories. Then of course, we can't get things to the ports, can't get them on ships, we can't get them here into the United States.
Generally speaking, we believe, to go on the heels of both Jim and Dan, we think we're going to be in a constricted shipment scenario, really into the middle of next year. That's really what we're looking at. I understand the concept of the Lunar New Year, and it may be bring some reprieve, but I believe it's quite temporary really. Because the container costs are going to continue to stay fixed at exorbitant rates. We're paying, right now, anywhere from three to five times more for containers than we did in the past. As an example, in 2019, a 40 foot container was somewhere around $3,500 to $4,000. The spot price for that same container today is somewhere in the neighborhood of $20,000 and $25,000.
Then the next side of that is, is that that's being driven primarily right now by the large retailers. So if you look at the Walmarts, Kohl'ses, Amazons, others who have been ordering their holiday shipments in advance, you're going to see more constriction in the fourth quarter on containers. And I do agree with Dan again, I think costs are going to go up again, particularly just for that period of time. I think once we move past that period of time, and that's what might be being referred to in the media and other general resources about the Lunar New Year, there might be some reprieve. But I think, particularly here for North America, the holiday season is going to be tight.
To go back to your question, what's the availability today? Well, it depends on the product that's being ordered, of course. Just like the media processes and manufacturing, we focus on what products are in the highest demand. And of course in the technical print market, the low volume products are in the highest demand. We're trying to do everything that we can to get those products here into the states in a timely manner. Our orders have been up 25% over the same period last year, January to August. So not only have we had an increase in orders, but of course we've gone through literally the daily routines of trying to manage logistics and customer expectations and allocations. We think, particularly for the next quarter, and I think that's what we should look at first because that's near term, it's something that's a little more in sight, so to speak, because the crystal ball is just a bit murky as you move out beyond that. I think if customers and our partners plan for a 60 to 90 day target timeframe for new product deliveries, I think it's reasonable. Now, of course, we're going to try to improve that at every opportunity.
As you look into '22, our goal right now is to move towards a 30 day delivery window. Now that's still quite achievable, we think, probably by the middle of the year, of next year. Please remember, we all, we're very accustomed to just in time manufacturing, but just in time just doesn't work anymore. We were very accustomed to receiving equipment orders and shipping them the same day or the next day in 2019. But of course those days are going to be a ways off. So I think setting the right expectations in the market with customers that they're in that 60 to 90 day window with us trying to improve that at every opportunity and also making certain that we have good communication with those customers, with their business in mind and what they need, I think are the important pieces.
With all that being said, moving forward into 2022, the variants can upset all of our plans, as we know. And of course, the United States, Europe and some of the other advanced countries are enjoying somewhere between 60% and 70% vaccination rates right now. But the rest of the world is not there. And the rest of the world is what we really depend on, particularly when you look at the supply chain, when you look at those Asian countries. Now we don't manufacture anything in China, but of course we do have some supply coming from countries like Malaysia and Taiwan and Vietnam and Singapore, and all of those countries, as you look in the news, have been affected by the Delta variant. And of course the Mu variant and some of these others are still out there. So we will have to keep a careful watch on that and then make some predictions sometime after the first of the year about product availability improvement.
Ed Avis:
Thank you very much, Tim. That's very good and practical information. Attendees, I hope you caught the timing that Tim said, that if you can plan for 60 or 90 days, you're probably being more realistic. Tim, let me ask one follow-up, and this rides on something that Jim mentioned, and that is, okay, so when we're talking about containers, media, especially bond or pulp for that matter, is so low margin that it's very difficult to absorb the higher cost of containers, but is equipment the same? I mean, your products are more finished, are your margins enough that you can absorb these costs? Or is it still affecting your shipping time regardless of that?
Tim Horn:
Well, it's difficult to absorb these types of costs because, when you look at a 40 foot container, we'll get, depending on what we're bringing in, meaning the product models and configurations, we'll get upwards of 20 to 20 units, in a container. When you try to take that $20,000 and divide it over that, obviously you can calculate the increase. Now have absorbed a large amount of that for a long period of time. And of course we had to eventually announce a price increase, but it was a minimal price increase, really, quite frankly, when you look at the cost of the systems and also the cost of containers today.
Now in respect for time, as you were talking about, it really hasn't affected the time so much. Right now, the average transit time across the Pacific is around 71 days. Now, to give you some comparison from our business, in 2020, our average product transit time was around 30 to 40 days. Now, of course, this year we've seen as much as 122 days to get containers. Now that wasn't all transit time, a lot of times, even today, I suppose out in the port of L.A. and Long Beach, there's probably at least 40 or more container ships that are sitting out there anchored, waiting to birth and, and unload. And that's just the beginning of it. Even when they communicate with us, and the logistics companies have been pretty good. At first, their communications were all over the place because they didn't know themselves, but they're getting pretty good at it now. When the container ship does port, I mean, that's just one step in the equation because now you've got to get your containers off and into the port. Well, the ports are stacked up and there's a huge bottleneck on inland intermodal transportation, meaning trying to get the containers from the port yard onto rail or trucks has been very difficult, and they're all facing the same challenges too, with limited personnel.
Personnel really is the key to all of this and how we've all been affected globally by the COVID pandemic. So once we get the product to the port, it still takes quite a bit of time just to receive it here into our warehouses, just because of the inland transportation challenges that we face literally on a daily and weekly basis.
Ed Avis:
Great. Thank you very much, Tim, Danny, what are you seeing at HP in terms of equipment availability and shipping times?
Danny Ionescu:
Well Ed, first off, thank you very much for having me on this panel. I truly appreciate the opportunity and for all of those out there, listening in and attending here, thank you for your time. I hope you're all in good health in great spirits.
So with respect to availability, I think I'm no different than anyone else on this panel, HP is a global company with many, many, many touch points, across many different products and supply chain elements that really contrive to a lot of the challenges that have been articulated here. I can tell you that, in terms of how we go to market in North America, we have a distribution component of how we get products out to market. Then we have our authorized resellers who are also another touch point in terms of how we get products out to market.
So we always have a little bit of a buffer with respect to inventory that's out there. The question is, once you start running deep into that buffer and you start eroding your weeks of supply from those elements, then the supply chain pressure on to HP really becomes quite intense. Again, we are no different than what's already been articulated, the supply chain is extremely complex. Whether you're trying to procure components where a manufacturer of those components has had to shut down because of COVID, or there's a lack of a silicone chips, or there's not enough containers to be able to secure a shipment to be picked up in any of the manufacturing facilities around the world. Tim highlighted the number of ships... actually, we actually took a video and we actually counted 178 ships from what the eye could see in terms of anchored out there, trying to get an appointment to get in and offload the containers.
So all of these components really add a tremendous amount of pressure on vendors, on distribution partners, on our resellers, who are really close to our customers, usually reprographers, who are wanting to be served immediately. When we take out that element of forecasting out of the equation, we just don't have the ability to be able to turn on a dime and to turn to the demand that exists out there. So we are, again, somewhat managing the situation with the elements of our distribution partners and authorized resellers that really take a little bit of that inventory on hand to smooth things out and really help us manage when inventory is running low.
In terms of looking out into the future, it was speculated that maybe Chinese New Year, we'll see a turnaround time. I honestly don't know. I don't think HP knows. This is a dog fight every single day. Every single day, we are dealing with something. In fact, today's headlines from FedEx for serving their commercial customers is that they are increasing 7.9% of their rates to commercial customers. That's how we distribute parts across our network. So that's an added cost this morning that we're having to deal with based on this announcement from FedEx. So these are things that are continuously coming up. If it's not an increased price in containers, it's our logistics providers' cost of components going up.
We used to air freight, from time to time, some of the devices that we bring to market in North America and Tim was comparing some prices of the cost of containers, pre-COVID two to where we are today. Today, if we were to air freight for a customer who was in urgent need of a device, and it was time sensitive, we would air freight PageWide XL device. And the price of that air freight would be roughly $3,900 pre-COVID. Today, the price of air freighting that device is actually the cost of the device itself, which makes no sense whatsoever for us to even consider that option. But sometimes we do it so that we can serve our partners and user customers. But that's not a sustainable model, obviously. And I just hope that we will turn the corner here. I just don't know what that timeline looks like.
Ed Avis:
Thank you, Danny. Very much. Are there any particular pieces of HP equipment that are in better supply than others that are easier to get?
Danny Ionescu:
Well, I can tell you it's a little bit of a rollercoaster ride. We are in good inventory today, but based on the demand, the very strong demand of equipment that we are seeing, we are going to be very low in short time. This is symptomatic of offices opening up across North America. However, slow that is, there is a ramping up. And thanks to our reseller community, they're really doing a great job stimulating opportunities to drive some business out there.
We're also seeing some reprographers who are wanting to update their technology for some devices that can offer beyond commodity print type offerings to their customers, which this is something that we are very focused on. We want to make sure that we help everyone get out of that commoditization. We do not want to be part of what Apple did to the record industry. We don't want to be part of what Netflix has done to the movie industry. We want to be one of those change agents in market that really can bring what we call high value pages to market. So if we can bring ideas, real meaningful solutions to reprographers who can bring those value add products and offerings to their customers, that'll hopefully help them gravitate that mix of commodity, monochrome type print into more of a high value type page for them to be able to use, higher end... higher end. Different types of medias beyond the bond media, whether it's satin paper, whether it's photo paper, whether it's canvas, just to name a few.
But to get out of that commodity print, I think can help in this time, because the only way that you can differentiate yourself is by price. At the onset you were asking, how is it that we got to where we are from a pricing perspective, is because when you lose that competitiveness to be able to differentiate the one area, is to compete on price. And that's what the industry has done and now here's where we are.
Ed Avis:
Great. Thank you very much, Danny. Attendees. We only have about 10 minutes left. If you have questions, now's your chance. I'm going to put one last question to each panelist, just to wrap it up. Let me start, the same question for all of you. I would ask Dan O'Malley to start. And the question is this, what can a reprographics firm do at this point to try to help this situation on their own? Dan, any thoughts on that?
Dan O'Malley:
Yes. I have some thoughts and I've schooled my clients who are in the reprographic side of the world to educate their people, educate the AEC market. Let them know that, hey, everything that we talked about this morning is real. So nobody's going to be giving them anything. It's time for everybody to tighten it up, in my humble opinion, and raise your prices. Even though it's commodity driven, well, let's find something that'll separate you from the pack. So if a company's going to do it for X dollars, you can do it for a little bit more maybe, but provide it to them now. You've got to start adding value even to the commodity side. One quick final example, we've been promoting... all these people use a 20 pound bond, right? So we've been promoting 24 pound bond as opposed to the 20. And actually we're getting a lot of play with that. A lot of people have liked that little upgrade and that's just something that we're throwing in there.
Ed Avis:
Is the availability of 24 pound bond greater?
Dan O'Malley:
In some cases, it depends on the day, what's of greater availability. But yeah, the 24 pound actually has a little bit more availability right now.
Ed Avis:
Mm-hmm (affirmative). How does it price compare to 20 pound?
Dan O'Malley:
A slight difference. There is a difference, but nothing that would make your jaw drop, just pennies, I guess.
Ed Avis:
Got it. Jim, same question to you, what can our members do to help themselves during this time?
Jim Walsh:
I'll say something and it's without understanding, everybody's business is very, for the [inaudible 00:52:00] part, is unique to themselves. But, I mean, one of the things that have been said by both Danny and I heard from the other Danny from HP, add value added, let's say, solutions to your portfolio. Market penetration, branch off, you have assets, look at other applications. Blue water, you don't want to be swimming with the sharks, you want to go swim with the blue water and find those new applications. I mean, the PageWide is a fabulous piece of equipment that can produce a variety of different products outside of what the reprographic is using it for. So, try to break the mold, try to step outside the box, using all these consultant type terms, but it's true. If you want to make more money, you got to go down into various other markets and utilize your assets, direct some people, incentivize them to take that asset and direct it towards a higher end application where you could add some value to it.
Ed Avis:
All right. Thank you. Tim, thoughts? Any thoughts on that topic?
Jim Walsh:
I'm sorry, Tim, I meant you too. It wasn't just directing that at turns HP.
Tim Horn:
No worries, Jim. No worries. There's been quite a bit of a business stimulus out there and we're in an environment of incredibly low interest rates. So I think it's, in my opinion right now in the marketplace and what we foresee, if I were an owner, it would be risk on right now. I would certainly look at buying some new technologies, just as been discussed here, with KIP technologies, we bring a unique offering. It's toner-based technology, very low cost of ownership\, as a matter of fact, in our low volume print systems, it's the lowest cost of ownership. It also gives them the highest image durability. So as you're trying to differentiate your products in the marketplace, you need to have a story, and that can begin with what you're doing in your business, what technologies you brought into your business, and then what products you can obviously offer the market. Of course, we're in the technical print sector and those pages, or wide format images, get used outdoors quite a bit and having the story of highest image durability gives you a great lead. The next part of that is having obviously the lowest cost helps your margin pressure. So my suggestion right now would be, take a risk on approach to the market. I think if you do that, you'll find very favorable results over the next 18 to 24 months.
Ed Avis:
Great. Thank you very much, Tim. Good advice. Yes. Interest rates are low and there's a lot of stimulus money floating around that can be applied. So good advice. Danny, I'll end with you. You gave us good tips on diversifying your product line, but anything else that you'd like to add?
Danny Ionescu:
Well, first off, I know reprographers out there are fighting the fight and I have immense respect for the business owners who are having to manage the day-to-day operation, whether it's managing staff, which has been a huge issue, and we haven't really addressed that at all, but managing staff and keeping them motivated is a very big component.
We are of the belief that reprographers, even during this pandemic, have seen a resurgence of commercial print come back to reprographers. So, with the bad of having a lot of these commercial offices having to shut down because of COVID, a lot of the print is being farmed out back to reprographers. So we monitor usage based on what we're seeing in the industry. And so that is a great opportunity to seize the moment of serving those customers and serving them well. And rather than chase a new customer or trying to lower your price on existing customers, try to maximize the wallet spend that you have with your existing customers with superior quality, superior service, and really expand the product offering beyond that commodity print.
Yes, that commodity print is a huge portion of your business. We understand that. But add to the capabilities of how you can serve that customer with additional prints that they may require. They may not necessarily be buying them from you today, but they're definitely buying them from somewhere. So try to repatriate some of that business onto yourselves, seize the moment, capitalize on the fact that they are farming out a lot of that AEC and CAD type print to your businesses and expand your product offering to them. This will not only help you drive revenue, but it'll help you drive profitable revenue. Making a profit is a good thing, we shouldn't shy away from that and always get hung up on having to be the lowest common denominator on a price of a commodity print. So I wish you continued success and good luck to you all, and we're here to help you and support you if you need.
Ed Avis:
Right. Thank you, Danny. Okay. We are about out of time and we don't have any questions from the attendees. So let me just say thank you very much panelists. The information and advice and guidance that you've given, very helpful during this difficult time. We are grateful for that. Thank you very much.