How to Optimise the Procurement of External Print Services
“To start with there is a confusingly wide variety of specifications, different types of print (offset, digital) and hundreds of differing grades of paper, inks and finishing options. In addition to this, print suppliers, more often than not, specialise in specific areas of competence and thus there is often a need to have several printers on the vendor database”, Gary Davies, Managing Director of Print Outsource International (POINT), told SmartProcurement.
The Aberdeen Research Group Report of October 2006 (as referred to in previous articles on this subject) highlights the extensive nature of print. In this report they have divided ‘enterprise-wide printing’ into 6 categories, namely:
- Office Document (Desktop Printing);
- Marketing Collateral (Product, Service and Company Collateral);
- Point-of-Sale Material;
- Office Stationary (Envelopes, Letterheads);
- Business Forms (Invoices, Statements); and
- Packaging Materials (Cartons, Labels).
With this in place, procurement can now examine where print expenses have increased, decreased or stayed the same, as well as look at the distribution of print expenses across the categories as identified. The Aberdeen Research Group Report provides us with the following graphic in this regard:
From the above it is clear that most spend will usually be found within the Marketing Collateral, Documents and Office Stationary categories. On average some 37% of all print expenses are attributed to Marketing Collateral and the fact that this is trending upward is significant from the procurement point of view.
With regard to marketing expenses, printed materials and services make-up, on average, 18% of an organisation’s whole marketing spend. Marketing expenditures are a key factor in generating sales and revenue at organisations and are thus often sacrosanct in many organisations. This is even truer at organisations that spend a lot of time, money, and energy on ‘brand-building’ marketing.
From the above, it is noticeable that print spend merits priority, and as such, should be brought fully onto the radar of the procurement department. This will enable an organisation to adopt the ‘total cost approach’: Organisations often fail to realise that costs associated with printed materials continue to increase even after material is printed. In many cases, organisations will print thousands of documents at a time to achieve a lower cost per unit. However, the material is not used immediately and must be stored in inventory (storage costs) until they are distributed (courier costs) or thrown away because the content of the materials become outdated (obsolescence costs). Other costs to consider include errors, reorders and rush charges which can significantly add to the total cost of printed materials.
Given the significance of print expenses, the procurement department must take time to formalise a programme around print procurement and its management. They should further look to consult and engage a specialised external print management organisation where the spend, enterprise-wide, exceeds, for example, R20 million per annum. The following list of prioritised strategic actions would make sense to the print commodity manager and would certainly contribute to some real annual savings:
- Aggregate and centralise enterprise-wide spending on print.
- Improve the ability to aggregate and classify spend data for printed materials.
- Secure executive support for print purchasing policies and procedures.
- Improve compliance to negotiated supplier contracts (i.e. reduce maverick spend).
- Establish standards policies and procedures for sourcing, procuring and managing print projects.
- Support aggressive supplier rationalisation under the preferred supplier program.
- Outsource the management of all print expenses to a specialist print management company.
“If your organisation does opt to appoint a print management company, all of the responsibility for reducing external print spend will transfer to this company. This will, for instance, immediately reduce ‘maverick’ (off-contract) buying, which is so endemic in most organisations that have yet to adopt these strategic spend priorities. In addition, the responsibility of monitoring compliance with negotiated contracts will now vest with the print management company who will put the contracts in place. This is clearly an ‘all-win’ strategy and will lead to cost reduction, year on year!”, Davies concluded.
For more information, Gary Davies can be contacted on the details below:
Telephone: +27 11 783 0295
Cell: +27 76 859 1304