Commercial printer Quad/Graphics evolves to succeed in a world with more digital publishing.
You may never have heard of Quad/Graphics, but you’ve likely read a magazine or two the company has printed.
The Sussex, Wis.-based commercial printing company made its name decades ago printing many of the weekly periodicals, like Newsweek and Sports Illustrated, that were delivered to doorsteps and newsstands, not to mention catalogs and direct mailers.
Somewhere along the way, the publishing industry changed—from print to digital, from standardized to customized editions—and Quad had to keep pace with that change.
Until six years ago, that change was largely driven by what company officials called “greenfield growth.” That meant organically growing into one of the world’s biggest commercial printing companies. It also meant understanding how changes to its industry were affecting its transportation network.
“The Internet has changed printed content,” said Dan May, director of operations at Quad Transportation Services (QTS), the company’s internal logistics division that manages all the freight Quad produces.
May described how the company began evolving transportation-wise in the 1970s, when it developed its own truck fleet.
“It started pretty small,” he said. “It was a niche in there to offer customers white-glove services, or expedited. It also gave us protective capacity.”
May said that in-house division now operates around 50 trucks. Quad also works with 50 owner-operators and has a contracted dedicated fleet of another 110 trucks.
“Twenty to 25 percent of outbound volume is handled by those three buckets,” he said.
That dedicated or owned capacity is important because Quad’s business is more reliant than ever on the fourth quarter, when catalogs and other seasonal mailers flood mailboxes ahead of the holiday season.
Another development in Quad’s transportation network was its use of so-called “pool cycles,” where it started having products delivered in bigger batches, involving multiple customers.
“Instead of shipping exactly every day, we started to consolidate and hit a targeted window,” May said. “That transformed us into a distribution and logistics company, not a print company. It helped us grow in the ‘80s and ‘90s.”
Then 2000 hit, and volumes dropped off.
“The world got more personalized and specialized than before,” May said. “Customers began asking for more different catalog versions. There might be 100 versions of Sports Illustrated—a Big 10 cover or a Pac 10, regional advertising. Our competition today is other forms of advertisement, it’s not other companies.”
Today, the company delivers to 200 to 300 U.S. Postal Service destinations every week—around half of its outbound volume is delivered via USPS.
In the last six years, Quad switched from organic growth to acquisition, buying three of its major competitors—World Color, Brown, and Vertis—to create scale in a changing market.
“There was too much capacity out there, so as we’ve acquired, we’ve rationalized some of that capacity, shut down plants and moved it to more efficient production,” May said.
The World Color acquisition in 2010 was particularly interesting, and not only because at the time World Color was the second biggest U.S. commercial printer, slightly bigger than Quad. It was also because World Color had itself grown through acquisition and developed into a decentralized production company, with a handful of sites that looked unique and operated with multiple enterprise resource planning systems.
That was hugely different to Quad’s organic and centralized model, where each plant looked and functioned the same. The knock-on effect in terms of logistics complexity was palpable.
“From a freight distribution standpoint, our optimization requirements grew substantially,” May said. “With digital print, you could theoretically produce every book or catalog to be different. It makes freight and distribution so much more difficult. The shipping requirements have grown exponentially. Then add the acquisitions.”
The other interesting part of the World Color deal is that the acquired company had operated a third party logistics division, a business that Quad has continued in a rebranded form. It’s a growing subsidiary within Quad, leveraging the company’s expertise and freight-buying power. May reports to the company’s president of logistics, who oversees not only QTS, but also another division that handles regional retail printing—essentially short runs with a tight delivery window, like seasonal mailers—and the 3PL arm.
The impact on transportation is being keenly felt from a technological perspective.
“We were previously home-grown in terms of our systems,” May said.
Indeed, most of Quad’s systems are still proprietary—the company employs 250 IT staff—including a transportation management system developed in-house that QTS uses. But this year QTS will begin using tools from JDA Software’s TMS to supplement the system.
Quad is targeting Aug. 1 to go live with its JDA implementation, incorporating JDA’s rates and tariffs and load optimization modules for QTS and the decentralized load operations. Future phases involve using it for Quad’s 3PL business and tying it into that company’s in-house TMS, called Silver Express.
“We had track-and-trace and load planning,” May said. “But we had no optimization for load planning and building. And our rates and tariffs were very disparate. It’s difficult to make centralized decisions with [less-than-truckload] and truckload rates in several places. The reason we signed with JDA was their ability to bolt optimization and rate management into our TMS. With the majority of our users, it won’t change their experience. It will only affect those who deal with load building and rate shopping.”
The rates and tariffs will load directly to Quad’s system via application program interfaces (APIs), a communication structure that allows systems to transfer data back and forth in real time. It’s an alternative to electronic data interchange (EDI) that is gradually growing in prominence in the freight transportation industry.
JDA executives emphasized the flexibility of their TMS offering in recent briefings with American Shipper. While Quad is using elements of JDA’s traditional on-premise TMS, JDA is refining its approach to a more segmented market in two primary ways.
First, it is partnering with other technology providers to extend its visibility capabilities across domestic and international transportation modes. And second, it is offering a stripped-down, cloud-based version of its TMS for companies that want quick implementation and lower costs and don’t mind sacrificing some of the bells and whistles of the full product.
The stripped-down version is part of a suite of products JDA is calling Stratus, and is intended to complement its existing products, not replace them. In essence, JDA is heeding calls from the market to offer a product that competes more directly with lower-priced, software-as-a-service-based TMSs.
Joe Stone, group vice president of North America pre-sales with JDA, said the key is the Stratus TMS is not a different product than the company’s core TMS, it’s simply a template-based version that’s not customized and where some of the environment is withheld.
“JDA has always seen new products as new software,” Stone said. “This was an opportunity where we saw taking the existing software and changing the service element as a new product. And you’ll see more of that with cloud.”
May, however, said Quad preferred the on-premise deployment due to reservations about performance of cloud-based systems—not necessarily JDA’s, but cloud-based systems in general.
“You’ve got to look at each company,” May said. “For a medium-sized company with no internal IT support, cloud makes perfect sense. But it’s been a different model here.”
He said the objective of the JDA implementation is to reduce freight spend.
“Everyone’s on a different playing field,” he said. “If you’re not doing optimization or logistics planning, you could be looking at a 15 to 20 percent savings [by using a TMS]. We do a decent job with those things. We think with the amount of carriers and contracts we have, we’re looking for a minimum of 2 percent [reduction]. They feel with the analysis we did with them that we can probably get a 7 to 8 percent freight spend reduction. If we could hit 5 percent, we’d be very happy.”
In the meantime, May called back to something the founder of Quad mentioned to his employees decades ago—that there could be a time when every single item they print would be unique. May said he thinks often about that prescience, and how it impacts his role in the company’s future.
“Print hasn’t gone away, but it certainly changed a lot,” he said. “If you’re not growing, you’re dying.”
The fine print
