CTP: Understanding the Real Costs

by John Zarwan, Ph.D.

Editors Note: In the first of a two part series, we’ll dive into a discussion on the production factors associated with computer to plate systems. The study is based on work conducted by John Zarwan Ph.D. a graphic arts consultant. Look for Part II of this article next month!

The move to computer-to-plate has increased the productivity and efficiency of printers by simplifying the production process and streamlining workflow. But despite the cost savings achieved by moving from film-based plate making to CTP, there are still important costs incurred in getting the plate from the platesetter to the press. Most printers accept these as unavoidable costs of doing business, and therefore do not track these costs very carefully. As the pressure on printers to increase efficiency and speed continues to grow, understanding these costs and their implications becomes increasingly important. This article is based on a research project completed in 2003. The study identifies and highlights some of these often overlooked costs and summarizes the experiences of printers using different types of digital plates. Reviewing this information will assist printers in developing a clear picture of the costs they actually incur during the plate making process.

Key findings include the following:

Overview
Introduction
Computer-to-plate (CTP) systems today all work very well. They differ in features, speed, automation, and, the type of laser, but just about all can reliably image a plate and produce a high quality printable dot. As they move to computer-to-plate, printers have improved workflow efficiencies, in part by simplifying and streamlining the prepress manufacturing process. This is obviously true of the shift from analog to CTP. But it also applies to the CTP process as well; printers must continue to rationalize and increase the efficiency of the production process as CTP technologies continue to mature.

The cost of CTP is not limited to the cost of the system and of the plate. Keep in mind that CTP systems—and the costs associated with them—vary, and there are subtle differences in how they operate, the cost centers associated with their operation, and the overall implications to the production workflow. This results in real differences in the true cost of getting the plate on to the press.

Printers must understand and know all of their costs, regardless of where they are incurred within the operation. They should never assume that a given cost is unavoidable or cannot be improved.

It is an absolute requirement—especially in today’s competitive environment—to have all production processes under control. It should also be kept in mind that each step in the production process represents an opportunity for error. The elimination of process steps not only increases efficiency and reduces cost but also reduces opportunity for costly and time-consuming mistakes that can increase product cycle time, cause extensive rework, and ultimately lead to customer dissatisfaction and defection. Thus, it is critical to understand the potential sources of error and the costs associated with making these mistakes. A critical element in this analysis is understanding the cost of each and every piece of the operation.

A recurring theme in this study is printers’ lack of awareness of the total cost of getting a plate on press. While some printers do an excellent job of accounting for costs, most do not, and many printers, unfortunately, do not even understand the requirement. For example, as computer-to-plate solutions began to hit the market, many did not recognize the potential benefits of migrating from traditional analog processes to these new, more efficient, digital solutions. Additionally, it is important to keep in mind that while the cost of the chemistry itself may appear to be relatively small, it in fact often represents a significant proportion of the overall cost of producing a plate. Moreover, the National Association of Printing Leadership (NAPL), estimates that the cost of operating a plate processor can be as high as $90,000 per year or more. These are not insignificant costs, and it is critical that they be well understood so that opportunities to reduce them can be exploited.

After imaging, most plates need additional processing. These post-imaging costs are often considered unavoidable, or even ignored; yet they can add significantly to the total cost of plate production. And remember, each additional step in the production process represents an opportunity for error. According to CTPeXPOSURE Newsletter, "All the benefits of CTP can be thrown right out if the imaging and PROCESSING parameters are not kept in check. One bad plate can cause countless hours of press downtime if it has not been developed properly and will bring about a hasty, unscheduled, processor clean. This usually means diverting staff (from an already reduced workforce) away from their dedicated jobs to carry out the maintenance."

This study presents a thorough discussion of the costs incurred in getting the plate on press experienced by printers of different sizes, with different CTP systems, and using various types of plates, focusing principally on chemistry, processing, and maintenance.

Plate Production Process
CTP systems use five primary methods of production, and all are outlined in Figure 1. Each method requires steps in the process, and the steps associated with each method are noted in the chart.



On the platesetter, the image formation is initiated by the laser. The latent image then must be brought out or "developed" and fixed. For almost all plates, this requires chemical processing. Some plates require preheating prior to developing, either as a separate step (as with KPG Thermal Gold, for example) or integrated into the processor (as with many visible light plates). The plates are then developed and rinsed, with a gum finisher applied at the end of the process to protect the plate and image. Many plates can be baked after processing to improve run length and/or chemical resistance.

Plate developing chemistry, by its very nature, is unstable. For example, for positive working thermal plates, the developer is typically an alkaline solution. As plates are run through the processor, the developer tends to neutralize and weaken. Many systems rectify this through the addition of replenisher to boost the pH. But after a certain number of times, the pH level of the developer can no longer be restored — it gets "worn out" and needs to be changed. The frequency depends on plate volume, the time interval between changes, and other manufacturer recommendations. During the change of chemistry, most printers completely clean the processor.

The cost of plates can vary widely from plant to plant, from less than $0.80 per square foot to more than $2.00. The volume-weighted average price paid by the plants surveyed, adjusted for rebates, is $1.14 per square foot. A number of reasons account for the wide range of prices paid for plates, including volume of plates purchased; plate contracts that leverage preferred customer status (particularly for national accounts); and sizes of plates. Other, more hidden influences include rebates; using plate purchases to finance a range of equipment; and other incentives. While it is difficult to determine the impact of special deals and incentives on nominal prices, two key areas: plate size and volume; and plate manufacturer and type, can help to gain a better understanding of plate pricing variances.

Plant Size and Plate Volume
All things being equal, one would expect larger volume plate users to pay somewhat less than those who use a lower volume of plates. This is generally the case; but the association is actually fairly weak. In fact, volume of plates consumed at the plant only accounts for about 8% of the variation in plate prices. Other factors include such things as whether plates are purchased on consignment; are financed as part of an equipment purchase; or if the plant is part of a national account or buying group.

Manufacturer and Type of Plate
Plate prices can also vary dramatically by type of plate and, especially, by manufacturer. Figure 2 shows the range of reported prices paid for plates by manufacturer and type of plate. Note: The prices reported by most plants were pre-rebate; others, however, reported net prices after rebates; and of course, some plants do not receive rebates. In order to make the reported prices consistent for comparison purposes, we adjusted where appropriate for actual rebates, or assumed the industry-standard 30%. As we are primarily interested in the range and variation of prices, and in order to maintain confidentiality, the prices are indexed. The unweighted overall average price paid by each plant is shown as 0%. The high, low, and average prices for each plate are shown relative to the overall average price.



The ranges can be quite wide. One plant, for example, switched from the KPG 830 thermal plate to Spectratech to the KPG Thermal Gold plate (not always because of price), with a price swing of more than 40%. There are, of course, some differences between vendors. Western/Lastra and Spectratech, for example, tend to be less expensive than other brands. Presstek Anthem, which uses no chemistry, is generally found among smaller printers. As they have less purchasing power based on volume than larger plants, they tend to pay more for consumables. This is reflected in the survey results. Nevertheless, the typical price paid by a printer is fairly consistent across brands and types of plates, as one would expect for a mature product. Because of the wide range of
prices for thermal plates, there are no significant differences between prices paid for visible and thermal plates.

The prices paid, however, differ much more widely within a brand or type of plate. As a relatively new product, pricing is naturally more consistent. As Figure 2 indicates, the prices for Fuji violet plates appear to have much less variation than other vendors. This may change as it enters into wider distribution. In contrast, the more mature KPG plates have the greatest variation in price. There are a number of reasons for this. First, KPG has by far the largest market share in digital plates and would, therefore, have the greatest variety of customers. This not only means that KPG sells to both small and large plants, but also that KPG customers are likely to have plate contracts and pricing that reflect the full range of pricing options, financing, and creativity. This is compounded by the fact that KPG does not manufacture its own CTP system; the company has, over the years, had strategic relationships with a number of equipment suppliers, including Creo, Heidelberg, and Screen. Moreover, "national accounts", which are most likely to use KPG Thermal/Gold plates, are able to negotiate very low prices for plates.

Perhaps nothing in the current market for products in the printing industry is more complicated than the pricing for plates. The nominal prices shown on the invoice often bear no resemblance to the real price. First, a majority of printers receive some type of "rebate" directly from the manufacturer, from their dealer, or both. Rebates can be provided on specific products (e.g., plates only) or on all purchases. These rebates can be substantial, as much as 30% or more. They are paid periodically, at varying intervals, with quarterly being the most common, and are "earned" based on meeting an agreed-upon volume commitment. For various reasons, the printer may elect to receive a rebate rather than a lower price at time of purchase.

Second, plate pricing can also be used to subsidize equipment, either directly or indirectly. In a "direct" subsidy, the price of the platesetter, for example, can be tied to a plate contract, with the platesetter price lowered as the plate price and contract length increases. Less directly, the plate processor is provided at "no charge," but, of course, it is in fact paid for by the use of plates and chemistry.

Third, a rebate on plates can be applied toward loan or lease payments on the equipment. These payments can be made by the printer (in which case the rebate provides a more predictable cash flow with which to make the payments) or by the plate supplier, who may finance the purchase. While the plate price and/or rebate is most typically and obviously tied to the relevant associated equipment (plates and processor or platesetter), this is not always the case. One printer notes, "Our consumables finance all kinds of equipment, but we don’t receive a rebate." In another more complicated example, the printer has a CTP system from one manufacturer, workflow from a second, and is using plates from a third vendor. In this instance, the plate supplier purchased the workflow software for the printer and is applying the higher plate price toward the software purchase.

Another respondent stated, "Plate pricing is extremely complicated. We’re on all sorts of different contracts. We don’t pay for service at all; on some devices, plates are tied up with the lease agreement, on others not."

Once the plate is imaged, it needs to be processed. The cost of processing is not trivial. This is a real cost center; whether or not you choose to track these costs, you must be aware of them. NAPL estimates the annual cost of operating a 4-page plate processor to be $80,000 to $100,000 per year (Source: Cost Study on Digital Prepress Operations). These estimates are fully burdened and include labor, depreciation, overhead, and other costs.

In the next issue of BPTR, we will explore the details and dig deeper into the costs of processing a plate. Specifically, we’ll cover:

A special thanks to John Zarwan for contributing this article.
John Zarwan is president of J Zarwan Partners, a consulting firm specializing in market strategy and implementation; product planning and positioning; and market research. From 1990 to 2003 he was principal of State Street Consultants, a sales and marketing consultancy serving manufacturers and distributors in the graphic arts industries, where John was responsible for sales and marketing and directed research activities and publications.

He can be reached at:
165 Queen Elizabeth Drive,
Charlottetown,
Price Edward Island C1A 3B2 Canada
Phone: 902-892-7272
Email: jzarwan@islandtelecom.com

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