by Ivars Sarkans

Practically all the statistics that show a decline in forms production don’t really show the whole picture of today’s forms market as they reflect only the shipments from conventional forms plants. This presents an incomplete picture of the actual total forms printing volume. A substantial volume of forms production has migrated from conventional forms presses to other types of equipment in facilities not considered part of the forms industry.  In forms industry shipment statistics, this volume shift to other production facilities is treated as a demand decline.  In reality the demand and production still exists, and forms manufacturers have an opportunity to reclaim some of this volume.  During the last five years, forms migration out of traditional plants has occurred most frequently in high volume statement, invoice, check and direct mail printing applications.  Recent introductions of new monochrome and color digital printing systems with lower-cost toner can be expected to promote additional gradual migration of both medium and short run forms volume out of traditional forms plants.

The challenge for forms suppliers is to find ways to follow this migration of forms and prevent further loss of business to new types of production facilities outside the forms industry.  Some direct-selling manufacturers and distributors have established new service bureau operations and document factories to capture the forms business that is migrating from conventional offset presses to digital printers.  From an industry-wide prospective, these efforts to date have been rather timid, allowing new participants from outside the traditional forms industry to capture a sizeable share of the forms market.

Hidden Market Segment
Data from a variety of sources indicates that over 25% of the actual current demand for forms is served by suppliers outside of what has traditionally been defined as the "Forms Industry."  Estimates of forms shipments based on U.S. Department of Commerce information obtained through the North American Industry Classification System (NAICS - which replaced the previous SIC code system) recognize mainly production by traditional forms industry participants.  A similar limitation exists in other models used to estimate the size of the forms industry from surveys or other statistics on traditional forms manufacturing plant output.  The result is that a large part of the forms market, including conventional forms produced by commercial, in-plant and quick printers and migration of forms from traditional plants to new digital production systems remains hidden from conventional views of the forms industry.

Estimates of this "hidden" forms market segment are not readily available due partly to the variety of new types of facilities that produce forms on digital equipment or combinations of digital and conventional presses.  Indications that this "hidden" market segment is large can be seen by examining the exhibitors and attendees of the On Demand Expo, coming up in May, 2005.  (Incidentally, DMIA is hosting the 2005 Manufacturer and Supplier Print Conference in conjunction with On Demand this coming May 18-20 in Philadelphia so you can see it for yourself—click here for more information.) Forms production is one of the common applications demonstrated in digital printing exhibits at On-Demand and Xplor, another document processing and production equipment show. Even at major printing industry shows, digital printing of forms now rivals or exceeds the number of conventional forms production exhibits.  Other indications can be obtained from surveys of document factories that serve the mutual fund industry, large insurance firms and other financial service organizations.  Presentations by IBM, OCE, Xerox, Kodak, Nipson, Delphax and other digital equipment suppliers at business document industry conferences have clearly signaled that a sizeable portion of the machines that they have installed are used exclusively or partly for forms production.

The size of the "hidden" segment of the forms market can be expected to grow, as introductions of new monochrome and color digital printers and declining cost of black and color toners continue to facilitate migration of forms production away from conventional offset presses.  One of the most powerful new forms and direct mail production machines is the Kodak Versamark  Business Color Press using ink jet technology.  The latest high-resolution (300x1200 dpi) version was introduced at Drupa 2004 and demonstrations of this machine included printing of statements, invoices, other types of documents and direct mail in full color from blank mill rolls at speeds up to 350 ft./minute.  Recent Kodak press releases describing Versamark digital web press installations include as customers direct mail printer Transcontinental CC3 and forms supplier Miami Systems. Forms are also migrating to various service bureau operations, mailing houses that have expanded into document printing, in-plant printshops and end user desktops.  A wide range of sheetfed highlight and process color digital production printers are available to document printing specialists and departments within large corporations. Production level digital print quality of some machines now rivals offset printing and color toner costs are declining. Hewlett Packard, Konica Minolta, Oki, Ricoh, Lexmark and others have recently introduced color laser printers with prices under $1,000, and only the current high cost of color toner for these machines limits their widespread use by small businesses to print forms and other work previously supplied by conventional printing plants.  The high cost of toner for desktop color laser printers is a temporary limitation.  Color toner costs can be expected to fall rapidly.   Some distributors currently report brisk business in MICR toner cartridges and check base stock for users that have replaced pre-printed and encoded checks with internal on-demand production.

Document Factories
Advances in document production software and digital printing equipment have led to the development of various high volume document factories as alternatives to traditional forms plants.  These facilities usually combine digital and conventional printing capabilities with information processing services, envelope inserting and mailing for one-stop production of invoices, statements, checks, survey forms and direct mail.  These document factories differ from traditional forms plants in the way they compress and speed up the typical forms production cycle.  Traditionally, forms plants have printed and collated computer forms and sent them to a data center for imprinting of variable data, messages and other personalized information.  Data centers normally send the personalized forms to a mailing facility for finishing, inserting in envelopes, sorting by zip code and mailing.

New types of document factories or digital print centers condense the multiple steps into a single in-line process with machines that can print fixed formats and variable information in one pass and transfer the forms to in-line or “near-line” stations for finishing, inserting in envelopes, sorting and mailing.  The entire forms production cycle, from blank stock to mailing of a finished form with attachments becomes an integrated process.  Some document factory operations have production lines that include punching and perforating stations combined with digital and conventional printing units.  As the choice of digital color printers increases and the cost per page continues to decline, the number of document factories serving both high volume applications and medium size business can be expected to increase.  The time and cost advantages of a fully integrated printing and mailing facility are large in comparison to a traditional forms production cycle.

Within the forms industry, document factories are operated now by some direct-selling manufacturers and a small number of distributors.  Outside the forms industry, large document factories have been developed to support the financial services industry, communications industry, utilities and other applications involving high volumes of statements, invoices, checks and other types of printed customer communications.  Some of these document factories are owned by end users, such as Fidelity Investments and the Vanguard Group, some are independent service bureau type operations, such as ADP and the DST Output Division of DST Systems, Inc., and others are expanded versions of digital printing or mailing centers.  The document factory that has been producing millions of social security statements in the U.S. on a Kodak Versamark digital forms press started as a mail processing business.  In most cases, document factories have extensive data processing capabilities to adapt different data streams to their printing equipment and to prepare and format fixed and variable information for printing.

The Document Factory is the Future
Forms manufacturers have been tardy in recognizing the forms migration trend and the opportunity to develop strategies for capturing some of the "hidden" forms market.  Forms suppliers have started to follow the migration of forms by developing new document factories, but there have been no large-scale acquisitions or bold moves to consolidate traditional forms plants with digital printing, service bureau and mailing operations.

The slow and limited response to market trends can be attributed partly to the lack of data that shows the extent of print industry product migration within all segments of the graphic arts industry. Today a typical commercial printer does forms work alongside their traditional products, and forms manufacturers are moving into commercial work. Also, data centers do not usually identify themselves as part of the graphic arts industry—but this is changing. A more serious constraint has been the traditional forms supplier’s focus on products, to the extent that many valuable services are offered free in an effort to gain or retain product sales.  Most forms manufacturers still have a product-centered business model, while the opportunity to add value has shifted from products to services.  Another challenge for forms suppliers is the high level or information technology and database management skills required to operate large scale digital document production facilities and market these services. 

To contain the migration of forms from offset presses to document factories within the forms industry, manufacturers will have to expand the range of their service capabilities to include information processing, digital printing and mailing.  Manufacturers will also have to learn to market these services and move from cost-based to value-oriented pricing.  Current trends in the broad business document industry suggest that within five years over 50% of forms may be produced in document factories, various types of service bureau facilities, and on digital printers operated by end users.

The availability of low-cost desktop printers with in-line folding and pressure-sealing capabilities illustrates how the integration of printing, finishing and mailing tasks will gradually affect even the short run segment of the forms industry.  End users that want to avoid pre-printed forms can buy a desktop digital printer combined with folding and envelope inserting stations.  One of the opportunities for forms suppliers lies in focusing more on selling printing, finishing and mailing as a service rather than selling pre-printed forms and finishing equipment.

Trade Manufacturer Challenges
Direct-selling manufacturers and distributors have been successful in selling more services combined with printing.  Some distributors have been able to take advantage of the trend to outsource data center printing and have learned how to offer integrated document factory service programs to retain business that otherwise may have migrated outside the forms industry.  Sales and implementation of a program to take customer data, prepare it for printing, produce statements, invoices or checks and mail these documents requires an extremely close working relationship between the customer, distributor and manufacturer or service provider.

The challenge for trade manufacturers who would like to follow the migration of forms from conventional to digital or hybrid presses is to find the small number of distributors who can sell an integrated document production and mailing program. Then, manufacturers have to find the even smaller number of distributors who are also willing to bring the plant into such close working relationship with the end user that the distributor functions more like a manufacturer's representative and one member of a program sales and implementation team.  Many commission-driven distributor salespersons, even if they have the necessary technical knowledge, may not be willing or able to invest sufficient time to complete the typical long selling cycles associated with digital document printing programs.

Traditionally, distributors have been very possessive of their relationships with end users and have insisted on controlling individual orders even when they sell forms or print management programs.  As a result, some of the distributors who sell integrated document production and mailing programs have developed their own small document factories to maintain the maximum level of control.  The number of distributors who sell these programs and are willing to form the necessary close alliance relationship with a trade manufacturer may be too small to make the indirect channel a generally viable means of following the migration of forms.  This means that many trade manufacturers who want to take advantage of the opportunities in digital printing of forms and print-related services will have to find alternate means of reaching selected customers or groups of end users that want to outsource their data center or departmental printing of documents.

Document Industry Outlook
While many conventional forms plants have experienced declining volume for several years and some manufacturers have closed plants, these events by themselves present an overly pessimistic view of the forms market.  The forms market also includes document factories that are experiencing sizeable volume increases.  In the past, forms producers did not pursue cut sheet documents very intensively, allowing some of this volume to migrate to commercial and quick printing plants.  In the last five years, traditional forms manufacturers have become more aggressive in cut sheet documents with dedicated roll-to-sheet and sheetfed presses and some plants have installed digital equipment for on-demand color and black toner printing.  Industry surveys indicate that forms suppliers, and especially distributors, appear to be capturing a greater share of the market for cut sheet documents and other products that can run on forms-type presses or high speed digital color printers.

Printing in general, including forms, is becoming predominantly a service business.  Print-related services, reliability and speed of service tend to carry much higher value than ink-on-paper.  As more forms migrate from offset to digital or hybrid presses, the capability to market and implement integrated document printing and mailing programs will be vital to future growth and profitability of today's forms manufacturers.  The forms migration trend is another signal that many forms suppliers will have to change their business concept from product orientation to a service enterprise model.  Forms manufacturers will have limited future success if their business vision is restricted to the existing forms industry and traditional practices of giving away valuable services to obtain what is now mostly commodity-level ink-on-paper work.  The greatest future opportunities will be available to those who can combine a service business model with a clear vision of how to establish a strong competitive position in the large business document industry.

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