This article originally appeared in the September/October issue of Mailing Systems Technology.
Not that long ago, when evaluating inserters, our customers looked mostly at the functional specs. They’d consider things like machine speed, the ability to handle in-line envelope printing and varying mail piece requirements, and all the latest features available. They’d weigh all these things, along with monthly volume, support options, and costs to purchase or lease the equipment.
But for many customers, there’s now been a big shift in the buying process. Both in-house mailers and service providers have become more financially savvy and data-driven. Instead of looking at just specs on paper, they’re evaluating return on investment (ROI). They want to determine what the payback will be not simply against equipment and service costs, but against the total cost of ownership (TCO).
How to Determine Inserter TCO
The TCO of an inserter is arrived at by calculating the full cost of producing mail pieces, which includes expenditures in three key areas:
1. Consumable costs. These are the expenses for paper, ink, envelopes, inserts, etc. Consumables represent, on average, 60% of the TCO.
2. Operational costs. These include the money you spend on labor to operate and service the inserter, as well as the financial impact of the downtime required for changeovers. These costs make up an average 25% of the TCO.
3. Equipment cost. This covers what you pay to purchase or lease the inserter equipment. It comes in at an average 15% of the TCO.
It’s important to remember that the percentage of TCO for each of these expenses varies across the globe, as labor costs for operators and service professionals can range widely from country to country.
Lowering Inserter TCO
The percentage that each of these costs contributes to TCO tells you their relative importance and prioritizes your efforts at TCO reduction. Therefore, let’s start with consumables.
It used to be that higher speed inserters required higher quality consumables. But now, innovative technology enables inserters to run less expensive consumables just as fast as higher quality ones. This allows you to maintain high net good yield on the belt while running lower cost substrate — and more substrate as well.
When considering TCO, net good yield per hour is the key performance measurable, not the raw speeds listed on a spec sheet. Because today’s technology can give you a wider range of materials to run, you can insert at high speed and still maintain productivity with lower quality, less expensive substrate.
Reducing Running Costs
Now let’s consider operational costs. First, look at the cost of the labor needed to operate and service the inserter. Again, innovative technology is lowering the TCO. Inserters are now smarter, providing their own automated maintenance, resulting in fewer service calls. And because so much of the maintenance is done by the machine itself, less skilled — and less costly — support people can handle the rest.
The same goes for operators. You used to need highly skilled operators to run an inserter. But now, operational controls and decision-making have been automated into the systems. This innovative technology is making the most sophisticated inserters far easier to use, so they can be effectively run by personnel who do not need special skills or extensive training.
If you look only at raw speeds without considering these operator costs, you can miss a TCO advantage. For example, an inserter putting out 20,000 mail pieces per hour with one operator will have a lower TCO than one putting out 26,000 pieces with two operators. Going from two operators to one will do a lot to reduce your TCO.
Maximizing uptime also lowers TCO. Engineering advancements, including the automated maintenance mentioned above, will often double service intervals, cutting downtime in half. And since the service required is typically simpler, you need a lower headcount for support personnel. If you only need one person instead of two for every service interval, that cost is reduced by half.
The latest inserter technology also reduces downtime by enabling faster changeovers. This allows service providers to take on smaller jobs profitably — as well as further build their business by taking on jobs with very challenging service level agreements (SLAs).
In addition, the most sophisticated inserter solutions give you in-depth tracking and reporting. With this data in hand, you can redesign workflow to fit your financial realities, optimizing throughput with the most efficient use of labor and materials. Solutions that focus on productivity can even provide real-time feedback on job progress and operational efficiency, so you can easily implement continuous improvement initiatives to lower your cost per mail piece. Small improvements in workflow efficiency — 0.5% to two percent — can produce large reductions in TCO.
All these capabilities also deliver greater accuracy. This is particularly important when it comes to regulatory compliance for mailings in the financial and healthcare industries.
Some Real World Examples
Companies who have looked at their inserter investments from a TCO perspective have seen some impressive results. L & D Mail Masters is a direct marketing company that offers a full range of services, including printing and mailing production, to companies in highly regulated industries. They were producing approximately 21 million mail pieces each month, but they needed a new solution to meet growing demands.
The capabilities of their legacy inserters limited the number and quality of the jobs they could bring in. For example, job changeovers — from #10 to 6X9 to 9x12 insertions — took up to half a day. The advanced technology of their new system cut that time to 20 minutes. They also moved from cut sheet processing to continuous form processing (rolls). The new inserter, running this continuous platform, delivered a 30-40% jump in productivity.
Best of all, the higher yield resulting from the reduced changeover time allowed the company to accept jobs it could not consider in the past. This boosted revenue and drove up client satisfaction. Their new system also supports file-based processing, tracking every page of every mail piece to ensure an extra level of integrity for clients concerned with regulatory compliance.
For another example, Financial Statement Services Inc. (FSSI) produces, prints, and distributes documents for an array of clients in the banking, finance, and insurance industries. FSSI needed to improve inserting speed and efficiency to accommodate the demands of a growing client base. They were looking at SLAs that required documents to be printed, inserted, and entered into the mail stream the same day they received the print file.
Their new inserting solution delivers automation capabilities that lets them quickly switch between flat and letter jobs in order to cut downtime and improve capacity planning. FSSI can now handle up to 270,000 pieces of mail and more than 70 changeovers per day. The fast changeovers allow the company to take on smaller jobs profitably. And all of this is done with lower operator payroll costs.
There are many ways it pays to look for the inserter solution that will give you the lowest TCO. Innovative technology can deliver improved consistency, greater uptime, a wider choice of materials to run, lower operator and support costs, and the data you need to optimize workflows. This all points to not just lower TCO, but to higher revenues and happier customers as well.
Eddy Edel is Vice President, Inserting Product Management, Pitney Bowes. He received his Bachelor of Science in Paris, France, majoring in Electronics, minoring in Economics. Eddy is a guru of technology in the mailing industry, with 20 years of experience. He regularly applies a strong expertise in data-driven, long term strategic planning.