Following on from part one, in this interview Dominiek Arnout talks about his view that many traditional manufacturing businesses are missing the big picture when it comes to digital print.

How has COVID changed the scenario for manufacturers and inkjet innovators?

Trends were already visible that have been accelerated and accentuated by this pandemic: higher demand for short runs, faster reaction, increasing relevance of variable data and customised products printed on demand. There was also a movement towards reducing risk, WIP, inventory - better use of working capital.

COVID increases urgency to react perhaps to secure and shorten supply chains for new demand unpredictability, and on-line shopping adaptation forced by staying at home,

Clearly business generally is evolving from push to pull, a change involving many challenges. Pull with ‘lot size 1’ raises the bar for the whole supply chain performance. It needs lean, agile, responsive, reliable systems to cope with demand complexity from order processing to fulfilment, including printing. Security of supply probably means more local and cost efficiency at lower scale is a must. This needs a look at the big operational picture.

An example is packaging – flexible or cartons. Conventional processes and technologies are complex and not agile. Operations are consolidated and big scale for producing millions the same rather than variety: differences cause down time and wastage of materials. The high volume, centralised nature of package printing cannot be helped by simply feeding digital print in place of analogue. This fails to address the key challenges. Making big operations agile with growth towards small lot sizes is not easy. As consumers and markets change, inventories and waste in packaging are bound to increase unless there are structural changes in the supply chain to use digital capabilities.

Wood décor production, laminate flooring and furniture board, has a similar challenge. Conventional printing for impregnated paper is large-scale, centralised – rotogravure and, so far, inkjet too. How can such a centralised model support the value chain with more short runs, increasing frequency of new design introduction, faster response and so on? The same applies for textile production.

The need to reduce waste is key for financial as well as environmental reasons. Environmental aims may have lost some attention for the short term, but these are important and will regain attention.

Incidentally, ‘conventional’ supply chains are a major cause of environmental issues. The textile industry generates 30% waste in finished product due to long supply chains and lead times. Shockingly this contributes 10 % of the global carbon footprint and 5% of global landfill. Technology can not only reduce this waste and the associated impacts but can also drastically reduce the impacts inherent in traditional textile printing, currently amounting to around 20% of global water pollution.

Interest in inkjet right now is accelerated and, in particular, people increasingly see the value of decentralisation of manufacturing. However, mature and established industry players are struggling to know what to do.

The printer itself is not the problem: Everything around the printer makes their lives difficult. Complete process flows need to review and, in many cases, structural revision. The direction and speed of travel post-COVID may force changes in our assumptions. Printer vendors should reassess the whole operations they serve, and how to enable what will come. It isn’t as simple as swapping analogue to digital.

Some digital printer OEMs target fast and high throughput: as close as technology will allow, direct replacement for analogue performance to fit traditional operating models. However, we must ask ourselves, what problem is a huge “digital analogic” machine going to solve? This is an essential question.

Simply copying and pasting a format from analogue to digital won’t work. In the big picture, the real solution may be smaller, less productive, lower capital cost and better suited for use closer to the end-customer or consumer. Local and late-stage is vital, and contrary to the historical drive towards central and consolidated.

Such a profound change is hard. However, to be overly protective about what exists now, reluctant to deconstruct and consider fundamental needs, risks missing the opportunity. Most likely, some will adjust and adapt faster than others and those that go first could gain an advantage.

Many printed product manufacturers, plus retailers and brands, are starting to realise that they need to do something. The model has to change.

So, what is the answer?

One answer is what we’ve started to call digital micro-factory (DMF). This does not indicate that the operation is microscale. A DMF has an optimal scale to fit into a decentralised, local operation landscape. To be cost-efficient, it needs to be automated, connected with balanced throughput capability to serve the needs of an appropriately ‘local’ market. ‘Connected’ means really connecting end to end with all relevant business processes, for example

• Customers via e-commerce platform (B2B or B2C)

• Design software and design databases with direct access for design input from individual designers and brand-owners

• MIS and MES systems

• Quality management to ensure, for example, consistency between DMF sites

• Suppliers and customers for ordering, invoicing and shipping,

• Other ‘sister’ DMF’s in a network

Ricoh started such a DMF model for textile production, automating the end to end process from fabric to shirt or dress, or for interior decoration, etc… DMF ‘s for other applications like merchandising goods, small objects, decorative surfaces, etc. are planned. This should be a generic model.

Ricoh has the technology scope to connect and run processes in this model.

This is not a direct switch from old to new, from analogue to digital. Comparison needs to take in to account much more than ink price per litre. Direct materials and their costs are important but so are balance sheet items like inventory and WIP, logistics and storage overheads, transportation, ROCE. Then there are some less measurable factors like the capability to respond to customers now and to respond to market change in future. Top line sales revenue opportunities, market share growth and even higher product sales value are often not properly considered: They are real and must be considered. Thinking needs to include a lot more.

Ricoh – as a digital service company - can study industries and create options to address operating challenges. We can support customers to define problems and solutions, in the big picture. We can provide hardware, technology, concepts and formats, software and services, and so can many of our partner OEMs. These change issues are complex, and we think maybe business process reengineering support is a more immediate need. We know what and why, but help is often needed to identify how.

One common problem is that production centres and managers don’t clearly see the real or whole cost of operating. For example, some only see direct costs or narrow KPIs, then make specific micro comparisons to draw conclusions. Only seeing part of the whole reality can be misleading in cases of such profound change. If we fail to measure the right things, then we’ll make the wrong decisions.

The future of retail is related to supply chain decentralisation. Some retailers are huge organisations and, affected by the switch to online, estimates show that many will reduce or close. Consumers now at the very least will do their research online. Many still want the experience, to touch, feel, sample and compare.

Inkjet could play a key role in retail at the point of purchase to increase traffic through retail shops. For some products, the dream is to stock plain and configure by printing in store to individual order. A shopper will view options on screens and software will help the consumer to design their own clothes or whatever – unlimited design. Clothing retail figures in particular amidst COVID dropped 80% (Eurostat), i.e. to 20% of normal revenues! With such a shock new initiative is essential. Ricoh has the software to manage this dream and the power to upscale. Only the more sophisticated operators can do this. Ricoh wants to do it. As a manufacturing company with some strengths in production processes, we want also to extend services that use those strengths.

Conclusions?

It seems COVID is accelerating trends which were already in motion. The main trend is the move to a real market pull model.

Changing printing from analogue to digital is only one part of the story, a lot more needs to be changed which impacts the whole value chain, to generate full potential benefit.

Once industries understand real cost impacts and revenue potential, an important strategic direction is the implementation of DMF networks, with the right scale, automated and cost efficient, operating reliably, decentralised and positioned downstream closer to the end customers, connected and also contributing to social development and environmental goals.

Ricoh has and is further developing technology, products and services. We can support customer with the digital services needed to implement and utilise technology.

I guess my key message with ‘Missing the Big Picture’ is that simply looking at digital as replacement for analogue printing seriously limits the potential and perhaps misses the main point. There are a lot of openings in industries and markets with a growing demand for reorganisation accelerated by COVID. “Doing nothing” could have serious consequences in some cases.

Ricoh will increasingly position itself as a matching agent based on capability to manage complex technology and change, in addition to being an owner and producer of some of those enabling technologies. We want to partner to help companies unlock new potential.

We need to think that the battle is not about building an industrial printer but instead to use inkjet to build new fulfilment networks.