Oliver Luedtke of Kornit delves into the TCO of DTG
Many garment decorators that are starting out on their digital printing adventure focus primarily on one number: the purchase price of their direct-to-garment (DTG) system. In reality, this figure is only one cost factor to consider and, when compared with the total amount of money you are likely to spend on a DTG system over its lifecycle, it is likely to account for a much smaller proportion of the overall spend than you might imagine. Other factors to consider include: ink costs; the cost of consumables, such as purging and cleaning fluids; service contracts or time and material costs; and the cost of employing the staff members who will operate your systems. The financial term for this full view of costs over the lifespan of a production system is ‘total cost of ownership’ (TCO).
Here’s a simple but realistic example that illustrates the importance of looking beyond just the price of the printer: DTG printer 1 costs £75,000 to buy, while DTG printer 2 costs £35,000 – a £40,000 ‘saving’ over DTG Printer 1. You could be forgiven for thinking that DTG printer 1 is the ‘expensive’ option and DTG printer 2 is the ‘cheaper’ alternative. But before you choose to dive in and buy DTG printer 2, pause to factor in the number of shirts you are likely to be printing. Let’s say you print 200,000 garments over five years (that’s just 90 per shift using a two-shift model) and let’s assume the ink cost per print is 60 pence for DTG printer 1 and £1.20 for DTG printer 2: you will spend £120,000 on ink with DTG printer 1 and £240,000 on ink with DTG printer 2. By opting for DTG printer 1 you would benefit from £120,000 in ink savings – that’s three times the £40,000 difference between the purchase price of the ‘expensive’ and the ‘cheaper’ systems. Based on the purchase price and total ink costs in this example, the ‘expensive’ DTG printer 1 would cost £195,000 over five years, whereas the ‘cheaper’ DTG printer 2 would cost £275,000 over the same period.
Calculating print costs
So the first and most important rule is, ‘the higher your productivity, the more important it will be to check the cost per print’ – ie the millilitres of ink per shirt multiplied by the litre price. Don’t forget that not all ink may be used for printing as some systems consume ink when powering the system up and down, as well as for intermittent cleaning cycles. Most vendors will provide you with a tool that will help you to gauge the cost per print: these tools are based on the area coverage of each colour, which then gets multiplied by a certain factor that translates area coverage into ink consumption. Such tools can be a big help in calculating your cost per print, but you need to make sure that the conversion factor is accurate. Check with existing users of your system of choice or calibrate this tool for your equipment and operation later on. As well as the headline costs outlined above, you’ll also need to factor in the expense of additional equipment, such as a heat press, hot-air dryer, pre-treating equipment and more, depending on the complexity of your process.
The best approach to calculating TCO is to make a list or a spreadsheet for the year detailing the amounts that you need to spend on your DTG enterprise:
Preparing the site, including installation of power (three-phase in most cases) and compressed air if required
Infrastructure requirements: do you need a new computer to run your prepress software and/ or a RIP? Do you need any software licences for applications such as Photoshop or InDesign?
Depending on your intended business model, you might require the development of a new website/ order storefront, together with a workflow solution
Lease rates (recurring item) for the DTG system
Lease rates for auxiliary equipment such as a dryer
After warranty, payments for a service contract or sum allocated for time and material (recurring item)
Inks and consumables (you should check with existing users of your desired system to establish the real number)
Rent for your production room or facility, if applicable
If your DTG system requires pre-treatment as an external process, then this deserves a detailed list in its own right as it requires a separate set of hardware, maintenance, consumables and staff. If you are planning to ‘buffer’ pre-treated garments for later printing, then you need to take space or storage cost into consideration as well.
Getting the price right
Once you have completed your ‘spending calendar’ you will have an overview of the actual cash that will be going out. In order to take this one step further towards an actual business plan, you need to consider how you will generate the incoming cash and how closely the two will need to be linked to each other – in other words, how much of a cash buffer you will need in order to run your operation. In order to calculate profitable sell prices, there are a lot of different calculation models. The full cost calculation, on one hand, tries to understand the total costs incurred by the production of each garment, including indirect and allocated costs. The direct cost calculation models only take into consideration the costs that can be directly assigned to the produced goods, and your fixed costs will need to be covered by the profit margin in a later step. Whichever way you go in setting up your cashflow plan and cost calculations, if you’re planning for your DTG printing operation to be more than just a hobby, you should seek the help of a professional business or tax advisor in checking the solidity of your assumptions and calculations.