STREAMLINING PRINTING PRESS SALES AT HEIDELBERG

Managing The Value Chain

Overview

This paper is a discussion of the press sales value stream at Heidelberg, Inc . It proposes suggestions to streamline the process by adding value to certain steps or by eliminating those that do not add value.

EXECUTIVE SUMMARY

The core business of Heidelberg USA is developing and selling sheet fed printing presses. Heidelberg played a key role in making offset printing the prevailing technology today, and leads the print media industry in this segment.
The company offers two different lines of sheet fed presses: Printmaster and Speedmaster. The Printmaster series is specially geared to the need of small and medium-sized print shops that are just getting started with multicolor offset printing or want to grow into this market. The Speedmaster models offer a high level of automation and productivity, primarily targeting industrialized printing operations. These presses can also be flexibly equipped for a wide range of special applications.
Heidelberg USA is always striving to improve the steps involved in the process of the sales of its printing press machines and make it more efficient and value-added to the customer. The sales process is a multistep one, and it involves the coordination and sharing of employees, resources, and information by several departments of the company. It is also worth mentioning that the customer is an essential part of the sales process, and the company always builds a good relationship with the customer as introductory step to the sale process of its product.
Currently the entire sales process includes multiple lengthy steps. These steps range from back-office paper work to scheduling, monitoring, testing, onsite training and technical support before the machines are up and ready to be used by their new owners. Some of the steps involved in the sale process are considered to be non-value added from the customer’s perspective. In addition, those steps cost the company more of its financial and logistic resources. When evaluating each step of the process, thought was given to the outcome of that step and how it affected the final product in terms of providing value to the customer as well as how best that particular step contributed to the smoothness and effectiveness of the whole process. Any step that did not meet those criteria was deemed non-value added.
Out of the twelve steps it takes to sell and deliver a printing press, four steps were considered non-value added. Our analysis will support the need for either eliminating some of those steps or combining them with other value-added steps of the sales process. The preparation for demonstration of the press could be eliminated or combined with the step of the customer demonstration since both steps can serve one purpose. In addition, during a pre-installation meeting, company representatives from Heidelberg should perform an inspection of the customer site to look for any potential problems that could delay the installation. Finally, cross-training for mechanics and instructors will result in a more talented pool of employees that is less likely to allow the continuity of an installation to be disrupted by other projects.

INTRODUCTION

Heidelberg, considered to be a conglomerate in the world of print media, employs almost twenty thousand employees globally. With its headquarters in Germany, it competes in every major printing market around the world. The company manufactures prepress, press, and postpress equipment, as well as software and consumables for all printing aspects. As a leader in the industry, it has more than two hundred and fifty support centers worldwide providing accessibility of service to more than a quarter of a million consumers.1
Heidelberg has positioned itself to capture the demand for printing presses worldwide. By investing in more sophisticated technologies they are better equipped to handle customer demand and capture an even greater market share.
Large economies, like the one in the United States, are playing a more important role in creating growth for corporations like Heidelberg.
Since the United States is such an important market, it is important for Heidelberg to respond to the needs of their customers rapidly, making fundamental changes in their business to suit the requirements of each customer.
Currently, Heidelberg’s market share is about forty percent, which makes them the largest printing solutions provider in the world. One of the things that differentiates Heidelberg from its competitors is the fact that it is not merely an equipment supplier. The Heidelberg organization prides itself on being a true partner to its customers by offering consulting and business development services as well.
Heidelberg is rapidly expanding into other developing markets that include Asia and Eastern Europe. The company has an established a name and is recognized in more than two hundred and fifty countries producing more than 85% of sales internationally. The company generated more than $3.6 billion in revenues during fiscal year 2005/2006, a large part of which was due to the sales of printing presses.2

BACKGROUND INFORMATION
Although Heidelberg sells a vast array of equipment to the graphic arts industry, its core business has always been sales of offset printing presses. Presses are, by far, the most expensive machines sold and account for the lion’s share of revenue. In recent years, intense competition from German and Japanese manufacturers has reduced profit margins on these sales and increased the need for a lean sales process. At this point it is necessary to look at the key points in Heidelberg’s press sales value stream. Only then can the non-value added steps be identified and possibly removed.
The sales process normally begins with a visit by the Heidelberg field sales representative to the customer’s plant. Each visit requires the salesperson to evaluate equipment needs in each step of the manufacturing process. If there is a need for newer technology and/or extra capacity in the pressroom, the salesperson discusses it with the customer to determine whether a new press will fill the need.
Since there is such a wide variety of machines and printing processes, a press specialist is often brought in to determine the perfect press for the situation. This person is an expert in their field and is supposed to set the expectations for the entire sales and installation process. The specialist is the liaison between Heidelberg and the customer.
For most printers, the decision to buy a press comes once every four to eight years. Buying the right machine can affect the financial fitness of the entire organization for years to come. Since this decision cannot be solely based on meetings with a salesman or a specialist, a demonstration of the equipment is organized so the customer can see it in action.
Heidelberg operates a demonstration facility at its headquarters in Kennesaw, GA. Current versions of its equipment lines are installed there and operated by factory trained personnel. Customer demonstrations are scheduled with at least a week of lead time to allow the equipment demonstrators the time to prepare and make sure the machine is in top running condition.
On the day of the demonstration, the idea is to exhibit a press that is quickly and easily set up, produces fast, and is easy to operate. If the press performs better than the competitors’ and if the price is favorable, the customer will buy the press in most instances. If the demonstration is unsuccessful, there is a reduced possibility of the customer buying a machine.
If the customer buys a standard configuration machine, it may already be assembled and in inventory in the United States or Germany. If this is the case, delivery can take place in just a few short weeks. Presses can weigh in excess of 100 tons and are shipped in pieces on ships from Germany and then on rigging company trucks from the port or warehouse to the end customer. If there is no press available, it must be given a production slot at the German factory which can delay delivery by several months.
Most of the time, the delivery delay is acceptable because the unique features of the press would require any press manufacturer to customize the machine and make it to order. In the case of inventory presses, the lead time of several weeks allows the customer time to prepare for the installation.
Even though a thorough discussion of the press specifications has already taken place, the customer is given an installation guide that details the electrical requirements, floor load requirements, and other aspects of site preparation.
It is the customer’s responsibility to follow these instructions in order to have an efficient installation. Any steps that are not followed can potentially disrupt the installation and waste time and resources.
When the customer acknowledges that they are ready, the press is then scheduled for installation. A mechanic from Heidelberg’s service department is dispatched to arrive at the same time. The mechanic is factory trained for the installation and repair of specific press series. Once on site, the mechanic must verify that the machine delivered matches what was ordered and that the site is properly prepared. Any missing parts must be ordered and any site preparation issues corrected so that the installation is not delayed. In most cases, a few missing parts that are ordered quickly will have no effect on the process. Depending on the size of the press, the installation can take from several days up to several weeks. Usually the same mechanic will work from start to finish on a job, but there are times when emergency repair work at other locations requires them to leave and be replaced by another mechanic. The priorities for each mechanic are determined by a regional dispatcher in the Kennesaw office and also by their individual skill set.
When the physical work of installing the press is near completion, Heidelberg dispatches a press instructor to train the customer’s operators and verify that the machine meets industry (and customer) standards. Like the mechanics, the instructors are trained to work on certain press lines. Their job is to train the customers to operate the presses as efficiently as possible. This requires not only intimate knowledge of the press, but the ability to communicate their skills as well. The instructor is often the last link in the sales process and, to a great extent, can determine whether the customer ends up with a favorable opinion of the product or not. Depending on the press configuration, instruction can be completed in days or weeks. During this time, the instructor identifies any defects in manufacturing, assembly, or in training. Sometimes a mechanic must be called back to resolve the issue, but most problems can be handled by the instructor. Once the press instructor is satisfied with the performance of the press, the customer completes their own evaluation and “signs off” that they accept the machine. If the customer does not sign off, the instructor and/or mechanic must resolve any outstanding issues. In rare cases, a press may be removed and replaced with another.
The customer acceptance of the press is a very important step, because only then are they responsible for full payment of the equipment.
The sales and installation process requires a concerted effort between Heidelberg and the customer. Even within Heidelberg there are many departments that play a role in a seamless value stream that ultimately leads to a satisfied customer.

MAIN BODY
Like any large corporation trying to remain competitive in today’s world, Heidelberg is constantly reviewing its processes in order to find and cut wasteful practices. In recent years the press sales process has undergone several continuous improvement projects that have each streamlined the value chain. However, there are still areas for improvement, which will be the focus of this section. Instead of eliminating two “non-value added” steps, they will be either reduced or modified in a way to produce value. These steps include the preparation that goes into a press demonstration and the delivery of site preparation information for the customer. The third area for improvement deals with the Heidelberg technicians that provide mechanical service and instruction to the customer. In order to reduce wasteful travel expenses and unnecessary overlap, it will be necessary to provide more comprehensive training to these two groups. The benefits will be increased perception of value to the customer and, ultimately, a reduction in expenses for Heidelberg.
Part of the press sales process involves the completion of a successful machine demonstration. The day (or days) leading up to the demonstration involve preparation to ensure that the press runs flawlessly. Cleaning and maintenance are performed to reduce the chance of a machine breakdown. Sample jobs are printed to verify that the press is fine-tuned properly. Every possible scenario is planned for. This preparation is usually one full workday that is in addition to the full day allotted to the demonstration.
There is no question that this preparation time is important—a successful demonstration results in a press sale 90% of the time. However, the amount of time and resources spent preparing is excessive most of the time. The presses employed for the demonstration are less than one year old and are not run in a “production” environment. They exist at the demonstration facility strictly for the purpose of training and demonstration. They do no experience the same “wear and tear” as the machines in the field, yet they sometimes have a day of maintenance and preparation for every day of running. In contrast, presses in production receive a day of maintenance for every two to four weeks of running. Instead of the present practice of a one to one ratio of preparation to demonstration, it is feasible to reduce this ratio to one to two or one to three. This will save one or two preparation days per week. For every day of preparation saved, the company saves the salary of two employees plus the cost of paper, ink, chemicals, and electricity. The presses can still be maintained to the highest standards and there will be no drop in demonstration readiness. It stands to reason that if the quality of demonstrations remains constant, that the extra day of preparation adds to value to the customer. This is a step that they never see.
An added benefit to this plan will be the additional days available to do customer demonstrations. During the busy times, it is often difficult to schedule a timely demonstration. Adding even one press demonstration per week could possibly add a press sale. Since customers have to take time out of their own busy schedules for a demonstration, the extra days will allow more flexibility for them as well. Flexibility is a key to keeping customers satisfied in this industry.
One of the hurdles in implementing this practice will be the mentality of the demonstration staff. For years, they have been used to having more preparation time than they really need. Management will need to the demonstrators to buy into this new philosophy that will involve more planning ahead and more efficient use of resources. Luckily, much of the demonstration staff at Heidelberg’s Kennesaw location has been hired within the last twelve months, so there will not be many old habits to break.
Ultimately, the excessive amount of preparation time is a waste of motion. This includes any people or machine activity that does not add value to the end product.3 The proposed changes can be implemented immediately and should begin to yield results within the first weeks.
The presses sold by Heidelberg require certain conditions to be met in order to ensure a timely installation and reliable operation over the life of the machine. The customer is responsible for providing the proper electrical service, ductwork to exhaust heat, and a stable floor for the machine. To help with this, Heidelberg provides a detailed manual that is specific to the requirements of the type of press each customer purchases. Most customers have a maintenance department that will take on the task of site preparation. In many cases, this is not the plant’s first press, so the preparations are routine. But in some cases, the customers do not adhere to the specifications outlined in the manual. When this happens, the problem is not detected until the installation. If the floor or even the subsoil cannot support the weight of the press, it may continually shift during installation. The mechanics will not be able to level the machine so it can run properly. When this happens, the press must be moved to another location while the floor is excavated to pour a stronger cement pad. This process can delay the press by up to two weeks. There is little for the mechanic to do during this period, so he usually travels home or to the next job. The schedule is disrupted and extra travel and labor costs are incurred. The floor is the responsibility of the customer, but ultimately, they will look unfavorably on Heidelberg.
In cases where the electrical power supplied to the press is insufficient, the local power company often has to come in to increase the service amperage. If this discovery process takes place during the installation, the delay can be weeks. There is also the corresponding disruption of the schedule and extra costs.
To avoid these situations, Heidelberg must be proactive in its approach to site preparation. The installing mechanic and the press specialist should hand deliver the pre-installation manual in a meeting with the customer and physically inspect the site. Heidelberg can recommend a local structural engineer to verify the floor can hold the press weight. They can often verify sufficient electrical power and they can walk the floor where the press will be installed. This visit can determine whether or not the parts of the press will fit into the building through existing doors. It is often the little things that the customer overlooks that will be seen by Heidelberg personnel. These wastes of labor and resources fall into the category of defects that are often caused by weak process control and incomplete engineering specifications.4 If these “little things” can be avoided, the installation will be more streamlined and make the most efficient use of resources.
By having a “Pre-installation” meeting, key relationships can also be established between the two companies. The meeting should take place far enough in advance of the installation that the customer can correct any defects in time. This channel of communication between Heidelberg and its customer will go a long way towards eliminating long installation and excessive travel expenses and finally increase customer satisfaction. The pre-installation meeting can be put into practice immediately so that results can be achieved during the subsequent press installations.
Heidelberg mechanics and instructors have two types of work: installation and repair. So far, this discussion has dealt exclusively with installations, but repair work has an influence also. All press mechanics are able to complete installations, but some repair work requires certain mechanics that have had special training. This becomes a problem when one of the specialized mechanics is pulled away from an installation to perform repair work in another location. The repair work is usually very urgent and cannot wait until the installation is complete. In order to keep the installation going, a replacement mechanic is sent to finish the job. If the installation and the repair are geographically far from each other, there can be a significant travel expense. Additionally, the new mechanic coming into the installation usually takes half a day to assess the situation and pick up where the first mechanic left off. This is apparent to the customer who often becomes frustrated at the increased installation time. The mechanics themselves can be frustrated by the constant shuffling and pressure from the customer.
Press instructors are in a similar situation. Some instructors are good at instruction; some are good at trouble-shooting and repair work, while others are good at both. They do not all have the same skill set, which leads to the same shuffling around from one customer to the next. Travel expenses increase, installation times increase, and morale is affected. Making the morale issue worse is the fact that some instructors are dispatched to do jobs that they have not been trained to do. This is also apparent to the customer who does not perceive value in the service.
Heidelberg should focus its training efforts on bringing all press mechanics and instructors to the same high level of competency. Each technician should be evaluated for strengths and weaknesses and receive training in their areas of deficiency. Such action would raise the morale of these two groups while giving the dispatchers a bigger pool of talent to choose from. Customers would see continuity during their press installations and the technicians will take greater pride in seeing a project through to its completion. The resulting decrease in installation times and travel expense will add value for the customer. This plan would likely take several months to a year to implement and the benefits would come shortly after.
Wasteful practices such as these can be considered defects, but also wastes of personnel.5 Heidelberg is not using its employee’s abilities to their fullest potential, contributing to low morale and turnover in some cases.
Heidelberg has a streamlined sales process, but there is still room for improvement. Elimination of excess preparation time for demonstrations will save labor and materials costs. Adding pre-installation meetings can find problems before they delay an installation. Training for mechanics and instructors will increase morale and decrease travel expense and installation times. All of these suggestions will either eliminate activities that do not add value or improve those that do add value. The end result will be more satisfied customers and a better bottom line for Heidelberg.

Press schematics for the pre-installation meeting.

Heidelberg sheetfed offset printing press

Heidelberg Press Sales Decision Tree
Salesman visits customer
Salesman visits customer

No
No
Is there a need for a press?
Is there a need for a press?
No press needed
No press needed
No
No
Is there a need for a press?
Is there a need for a press?
Customer demonstration
Customer demonstration
Yes
Yes
Salesman brings press specialist in to talk to customer
Salesman brings press specialist in to talk to customer
No press needed
No press needed
Yes
Yes
Yes
Yes
Customer receives installation manual detailing proper site preparation
Customer receives installation manual detailing proper site preparation
Press is pulled from inventory or assigned a slot for manufacture
Press is pulled from inventory or assigned a slot for manufacture
Customer signs order for press
Customer signs order for press
No press purchased
No press purchased
Successful demo?
Successful demo?
No
No
Preparation of demonstration press
Preparation of demonstration press
Press demonstration scheduled
Press demonstration scheduled

Mechanic dispatched to customer site
Mechanic dispatched to customer site
No
No
Press is removed
Press is removed

Repair work performed
Repair work performed
Customer training and final evaluation of press
Customer training and final evaluation of press
Press delivered and installed
Press delivered and installed
Yes
Yes
Instructor dispatched to customer site
Instructor dispatched to customer site
Customer pays for press
Customer pays for press
Press is accepted?
Press is accepted?

Proposed Heidelberg Press Sales Decision Tree

No
No
Press demonstration scheduled
Press demonstration scheduled
Yes
Yes
Yes
Yes
Is there a need for a press?
Is there a need for a press?
Salesman brings press specialist in to talk to customer
Salesman brings press specialist in to talk to customer
No press needed
No press needed
No press needed
No press needed
Is there a need for a press?
Is there a need for a press?
Salesman visits customer
Salesman visits customer
No
No

Streamlined preparation and Customer demonstration
Streamlined preparation and Customer demonstration

No press purchased
No press purchased
Yes
Yes
No
No
Pre-Installation meeting in which customer receives installation manual. Heidelberg technicians make sure site is prepared.
Pre-Installation meeting in which customer receives installation manual. Heidelberg technicians make sure site is prepared.
Successful demo?
Successful demo?
Customer signs order for press
Customer signs order for press
Press is pulled from inventory or assigned a slot for manufacture
Press is pulled from inventory or assigned a slot for manufacture

No
No
Press is removed
Press is removed
Customer pays for press
Customer pays for press
Repair work performed
Repair work performed
Press is accepted?
Press is accepted?
Customer training and final evaluation of press
Customer training and final evaluation of press
Instructor dispatched to customer site
Instructor dispatched to customer site
Press delivered and installed
Press delivered and installed
Mechanic dispatched to customer site
Mechanic dispatched to customer site
Yes
Yes

CONCLUSION AND DISCUSSION
Based on the information presented here, the recommendation to Heidelberg is to eliminate all non-value added activities identified in the previous section that account for a total of 30% of the total steps. This can be implemented by taking several proactive steps. Firstly, combining the activities that are deemed necessary non- value added activities into other existing value- added activities to maintain a smooth streamlined value to the customer. For example, excessive preparation and demonstration time can be eliminated by altering the ratio of one to one of preparation and demonstration to a more efficient ratio of one preparation to tow or even three days of demonstration. This will give more flexibility not only to customer’s time, but also to Heidelberg staff time and resources. An additional day of demonstration will bring in more sale of press machine to Heidelberg and will keep the customer satisfied and relaxed. Secondly, a pre-installation step should be added where a meeting is scheduled between a Heidelberg specialist and the customer. This step is necessary for various, important reasons such as establishing a line of communication and having a good relationship with the customer. The most important reason for this meeting is to inspect the site and to discuss and make site preparations, as well as handing over the installation manual to the customer. This step even though it is an additional step to the current sale process, could save both Heidelberg and the customer time and resources, and ultimately deliver a vital value added step to customer. Thirdly, the discrepancy in the level of training and skills among mechanics and instructors causes delay, frustration, and waste of company and customer resources. All Instructors do not possess the preferred level of expertise required to do the various jobs related to installation, repair, and training. Its often been the case that when an emergency occurs during the installation and training process, an employee on the site is not fully equipped with the trouble shooting skills required to take care of those emergencies. He might possess a good set of troubleshooting skill, but lacks the training or repair skills. This can delay the closing on the sale, and ultimately leads to frustration of the both side the company and the customer. Therefore, it is an essential matter that all Heidelberg mechanics and instructors acquire the most up to date training and technical skills to deal with any emergency situation. This by itself adds a tremendous value to the end user, and ensures the smoothness of the value chain.

REFERENCES 1. Heidelberg-Company Profile. Retrieved September 24, 2008, from Heidelberg Web site: http://www.heidelberg.com/www/html/en/content/articles/about_us/company/company_profile 2. Heidelberg-Company Profile. Retrieved September 24, 2008, from Heidelberg Web site: http://www.heidelberg.com/www/html/en/content/articles/about_us/company/company_profile 3. Solutions Source: Eliminating non-value added effort through lean manufacturing. Retrieved September 24, 2008, from IMEC Accelerating Business Results Web site: http://www.imec.org/imec.nsf/All/Solutions_Source_Eliminate_Nonvalue_Added_Effort?OpenDocument 4. Solutions Source: Eliminating non-value added effort through lean manufacturing. Retrieved September 24, 2008, from IMEC Accelerating Business Results Web site: http://www.imec.org/imec.nsf/All/Solutions_Source_Eliminate_Nonvalue_Added_Effort?OpenDocument 5. Solutions Source: Eliminating non-value added effort through lean manufacturing. Retrieved September 24, 2008, from IMEC Accelerating Business Results Web site: http://www.imec.org/imec.nsf/All/Solutions_Source_Eliminate_Nonvalue_Added_Effort?OpenDocument