Jul 29, 2011
The Hidden Cost in Plain Sight: Printing
By William Gindlesperger
Few CEOs worry about the cost of printing marketing brochures. Likewise, few worry about the cost of printing packaging, labels, direct-mail pieces or any number of other separate print categories. Some may worry about the cost of printing the annual report, because that’s often a question asked by a stockholder concerned about the company’s bottom line.
What that stockholder should be asking is how much the company spends overall for print -- everything from advertising flyers to CD-ROMs to proxy statements to vehicle wraps. It all adds up, but few companies identify printing as a corporate expense. Printing typically is an expense that’s buried in a host of departmental budgets, so it never appears in aggregate as a bottom line item. If it did, shareholders and maybe many CEOs would be surprised to learn that the company may be spending as much as 20 percent of its operating revenues on print if the company is a heavy marketer and consumer-driven business. On average, most organizations spend about 3 percent of operating revenues on printing.
In today’s belt-tightening environment, savvy executives are examining “hidden” printing costs. They’re learning that 25 percent to 50 percent can be shaved from their corporate print spend without disrupting the supply chain and without risk of quality and service infractions. When this is done, three-quarters of one point to one-and-a-half points of gross operating revenues will be added to the bottom line. This will impress stockholders.
But how is the 25 percent to 50 percent in print savings realized? That comes first by educating those in the c-suites on how printing is bought, whether it’s handled by a procurement office, the marketing department, the supply chain, or all of the above. Print buying is traditionally the single most out-of-control major buying activity and expenditure of any organization.
Being decentralized, printing is too often -- and unfortunately -- not considered strategic by c-suite occupants. In those types of organizations, few at the top seem to be concerned about overall printing costs as long departmental printing is within budget. Consequently, in those types organizations, every department has its own preferred way of buying print, among them putting in place huge contracts that only a few vendors can handle, negotiation, designing projects so competition is limited, bidding and then subjectively choosing the best value (not the lowest responsible bid), and allowing everyone except procurement professionals to manage print buying.
Now, however, new technology and procurement practices developed and tested over the past dozen years are giving executives a better, more welcome option. No longer are prices driven by negotiations with a few favored printers that set pricing on their terms. New automated vendor selection (AVS) technology, technical services, and a Web-based communications and workflow system make it possible to automate, streamline the print-buying process, expand the vendor base and lower costs without comprising quality or on-time delivery.
With an AVS technology license, organizations benefit from patented competitive procurement methods, best practices, a secure communications and workflow system, and the guidance of print experts. This eliminates the haphazard nature of traditional print procurement methods by creating a competitive bidding environment. Here’s how: Preferred print suppliers -- all chosen by the buyer -- are entered into the AVS computer database. (It’s imperative for each printer to meet quality, timeliness and other specifications to remain in good standing with the buyer.) Once the buyer has entered job specifications in the AVS system, the computer matches the job with only those printers capable of doing the work, and only they are invited to bid. Typically, returned bids offer deep discounts because those bidding realize that bidders are lowering their prices by 25 percent to 50 percent to fill otherwise nonproductive, non-revenue-producing scheduling gaps.
Rather than days or weeks of meeting face-to-face with printers, this 21st-century approach returns results in a matter of minutes. The buyer feels comfortable with any of the competing printers, because each has been pre-qualified by rigorous vetting. A low bid isn’t a concern, because all know that the winning printer is filling downtime, not cutting corners or skimping on quality.
Adding to the attractiveness of this new way of buying print is the detail with which the buyer can control the entire process, from start to finish. The robust communications and workflow system begins working from the time the first printer is entered into the buyer's supplier database, and the first job specifications are written, to when changes are made, and reports are provided showing the exact amount of savings.
Who makes changes, who reviews and who approves are all determined by the buyer, who also decides who can see what and when. To all with access, everything is transparent and easy to understand. This continues through production to packaging, delivery and billing. An indelible and auditable task-by-task record of each project also is established for future reference.
Organizations in the United States and Canada are realizing an average 42 percent cost savings on procured print comparing the historical cost of projects prior to the usage of AVS technology with the pricing obtained thereafter.
When all of the print bills are tallied at the end of the fiscal year, everyone wants to be on board when credit is handed out for saving the organization 42 percent on printing and adding 1.2 percent of gross operating revenues to the bottom line. Leaders in the parcel delivery, electric utility, hospital, construction materials, heavy equipment manufacturing, grocery, financial, higher-education and association sectors are now reaping these rewards by embracing change and licensing AVS technology.
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