Many corporate buyers are surprised to learn that their companies spend 1-3% of their total revenue on print services. Often times, print services is the third or fourth highest spend within an organization.

Print services can be a difficult commodity for a corporation to manage and control. Every department within an organization has a need for print and frequently buys such services on its own. Sometimes print is purchased on behalf of an organization by an outside entity such as an advertising agency. Usually the buying decision is based on different criteria depending upon the needs of the individuals involved. It is not unusual for print-related services such as design, storage, distribution, or kitting to cost as much as print.

While complex, the print spend represents an area of opportunity for organizations that can effectively capture, manage and control it, says Ron Seavey, managing partner, The Open Approach Consulting Group, Westmont, Ill. "It is not unusual to realize 15-20% savings." Seavey, who helps organizations manage the print spend, suggests buyers keep the following points in mind when purchasing such services:

• Attempt to leverage as much as the company's print spend as possible. There are rewards for capturing the entire spend and effectively leveraging it. Economies-of-scale result in lower prices for products and services. Print industry overcapacity can benefit companies that leverage their spend.
• Half of all print organizations will not be in business in five years. Print industry overcapacity and technology changes are projected to result in up to a 50% reduction in the print suppliers that exist today. It is critical to select suppliers that are viable partners to be part of the organization's long-term strategy.
• Determine the company's print services spend. There are numerous services associated with most print programs: design, process management, kitting, warehousing and distribution. Often the cost of services is as high as the cost of the print. It is not unusual to bundle print and services into one package. Corporate buyers need to research whether the bundled approach is their most effective answer and, if it is, Seavey recommends a periodic review of each segment of the bundled offering: "The bundled offering tends to take the spotlight off the price and service levels of each segment."
• On-demand print may be a solution. Technology is a fast-moving target in the print industry. On-demand print costs are lower, obsolescence and storage less of an issue. It is important to review the product base periodically to determine if on-demand is a better alternative.
• Up to 30% of print is never used due to obsolescence. Obsolescence is a big issue in most organizations. Printed materials become obsolete sitting in a warehouse or a desk. The latest advertising campaign is scrapped or changed. Usage may be overestimated. The key to controlling waste and obsolescence is to know the organization's print program and implement checks and balances.
• Eighty-five percent of printed documents are manufactured only once. Most documents are revised, replaced by other items or become obsolete. Key is to maintain consistent, competitive pricing although the product is custom and has changed. Many print suppliers use change as opportunity to increase profit margins. One answer is to solicit bids for every order. This is time-consuming and expensive. Another response is to put checks and balances in place on print contracts and agreements that result in consistent pricing.
• Most companies overpay taxes on the print spend. Taxes on print are extremely complex. Every state, county, and sometimes city has unique taxing methodology for print. Where ownership is taken, if an item becomes obsolete and is destroyed on the supplier's shelf and the end use of the product, all have a bearing on taxes. "Our recommendation is to audit your own taxes and don't depend on the print supplier to determine how an item is to be taxed," says Seavey.
• Paper can represent up to 85% of the cost of the printed product. Controlling the raw material portion of the spend is critical. The paper market is extremely volatile and it is not unusual to experience 20% price swings in a one-year period. Key is to ensure that the correct price increases are being applied in an increasing market and that the entire decrease is being applied in a declining market.
  Two critical areas to monitor are price-escalator clauses and real paper prices. The escalator clause must be representative of the real amount of paper involved in manufacturing the product. The real paper prices must take into account rebates that are eventually applied by the paper supplier to the print manufacturer. Rebates are significant and represent real paper costs and should be passed on to the print purchaser.
• Freight can be 20% or more of the product cost. Key is to control the freight spend. Paper is heavy and transportation costs are high. Seavey suggests buyers use the best freight alternatives. Often a company already has a competitive agreement in place that is preferable to a supplier's alternative. If selecting a supplier's alternative, watch for rebates. Rebates are common in the shipping industry. Freight is a real part of the print cost and needs to be monitored.
• Print represents a substantial corporate asset. Every picture, graph and script created has value. Key is to manage the asset in such a way that it is readily available for reuse. Ideally, it should be stored in library fashion so that it can be found and is transportable. Cost avoidance is substantial.