After squeezing costs out of the office supplies buy with spend analysis and contract compliance tools, corporate purchasing managers are looking to demand management as a new way to drive additional savings.

Many buyers are seeking out more information about demand management tools and strategies. As is often the case—most notably with e-procurement—buying organizations use office supplies as a guinea pig commodity to try out a new tool or strategy. If successful, they move on to use the tool with other more strategic commodity groups.

Purchasing managers today are looking to demand management as a way to work with requisitioners to limit spending where possible. Purchasing managers may recommend requisitioners place orders with preferred suppliers and select less costly alternative products—and then closely examine individual buying habits, asking questions such as:

Does the requisitioner really need to order additional reams of paper or file folders? Can he or she make do with that stapler or tape dispenser?

Office supplies distributors have identified demand management as a topic generating much interest among their customers, and they're responding with tools to drive demand management across an organization.

"Purchasing operations are looking to suppliers to help them understand and manage spend behavior at the individual end user level," says Brandon Choice, vice president of marketing, Business Service division, Office Depot, adding that buyers at both large and midsized businesses have expressed interest in demand management. "We have a tool that works in conjunction with our e-commerce offering that enables the customer on the front end to define items each business unit and individual user sees when looking at their organization's office products catalog. The tool is based upon analytic models that assess individual spending within the organization."

Distributors say that office purchasers also continue to seek their assistance with cost reduction/management, supplier consolidation, e-procurement and meeting requirements of supplier diversity programs.

Before purchasers can better control costs related to the office supplies buy, they need to have a good handle on spending. Distributors have long helped buyers with this effort. In many cases, they provide customers with usage reports and audits that relay such information on requisitioner spending activity as frequency of orders, items ordered, and ordering tool—phone, fax or Internet. Distributors have the unique capability to gather this information on requisitioners working at multiple locations. At Office Depot, Choice sees continuing demand for spend data from purchasing operations at companies of all sizes. The distributor re-sponds by delivering customized reports in a variety of formats.

"It's easier to drive contract compliance when the customer knows the individual's behavior or lack of it," says Dave Goudge, senior vice president, OfficeMax. This is possible through the distributor's customer relationship management capabilities. "And if an individual is using the phone in-stead of the Web and the contract administrator wants him or her to place orders online, which is less costly, we can send information to this fact almost instantaneously."

The data can also point purchasers to individuals in the organization who may be best served by buying office supplies at the distributor's retail outlets. With an identification card, customers of OfficeMax may make purchases at any store in the U.S. and receive contract pricing for the items. The distributor is working towards providing customers with direct billing to further manage costs.

With spend data provided by office supplies distributors, purchasers looking to further reduce costs may work with their supplier to substitute less pricey, alternative products. More recently, distributors have put increasing effort into developing and enhancing private label brands to meet a growing demand that they anticipate will only increase. As a result, they offer private branded products at a substantial discount, they say, without compromising quality.

"I have yet to walk into an account and have a customer say that he would like to pay more for office supplies," says Dave Grove, senior vice president, Corporate Express. "There's increasing pressure to find new ways to control costs. From our conversations with customers, we find that many don't really have brand preferences. We believe that we can meet 70-80% of a customer's entire spend with private label products."

Through its Corporate Express and Corporate Express Signature brands, the distributor offers customers more than 1,600 SKUs (stock keeping units) representing a range of products, from furniture and seating to paper clips, writing instruments and file folders, paper, computer supplies (i.e., toner cartridges, mice, etc.) The products are quality tested by a third party independent company, Bureau Veritas. "We try to over-specify product functionality," says Grove. "If you buy brand x pen that writes for 800 meters, our pen is going to write for 850 meters. At the same time, we offer 5-15% savings versus the national brand equivalent." At Corporate Express, sales of private label brands as a percentage of overall sales jumped from 12% to over 20%.

Still, office supplies distributors make it clear that they are not attempting to eliminate the national brands they carry.

As buyers well know, another way to keep costs in check is to purchase through fewer suppliers. Satisfied with the performance of office supplies distributors—through national networks of distribution centers, most can deliver orders placed on the Internet to requisitioner desktops in 24 hours—they look to the suppliers to provide them with an increasing number of diverse products. In response, they now offer computer supplies, furniture, promotional items, printing services, and facilities supplies in addition to paper, file folders and toner cartridges. Corporate Express, for one, has separate software, promotional marketing, and facilities (janitorial and break room) supplies businesses. The company will conduct a usage audit for buyers and recommend products to meets the needs of their businesses, which can then be purchased through its E-Way e-commerce website.

Grove says he's seen a pick-up in demand for office furniture in the past year, as companies start to spend more on capital projects, purchasing both contract (i.e., workstations for 50 to 100 people) and commodity products.

Through OfficeMax's Print and Documentation Services business, customers can send electronic files to any of the supplier's retail outlets. OfficeMax will print the document to specification and have it available for customer pick up or delivery. Its distribution centers are capable of large print jobs that it will deliver to customers with their regular orders. It also has opened a new print center in Seattle and has plans to open three or four more by the end of the year.

Office Depot's Your Company Store offers apparel and letterhead and envelopes suitable for applying a company logo.

Purchasing operations continue to use the Web to place orders for office supplies, and while use of third-party software systems provided by such companies as Ariba has leveled off a bit, distributors still see no sign that online sales overall have started to flatten out.

And, as business continues to be competitive among the big players, purchasers will continue to see distributors enhance their websites to streamline the procurement experience. Buyers can expect by year-end additional self-serve applications from office supplies distributors, as well as more features and increased functionality.

"We're still seeing noticeable trends toward the Web," says Goudge at OfficeMax. "You'd think it would have leveled off by now, but there are still customers moving away from using the phone or fax to place orders." He points to changing demographics as a reason that his company's business is now about 60% electronic. Of this figure, about 8% of sales is through third party e-procurement systems. "New customers almost always are looking to purchase office supplies through our website," says Goudge, adding that these systems tend not to be plug-and-play. Working with purchasing operations to integrate systems in just about every case requires some customization.

At Corporate Express, e-commerce now represents 68% of sales, up from 59% at the end of 2003. This year, the distributor plans to increase that figure beyond the 70% mark. To that end, it's adding click to respond (click to chat or click to call) capability, reporting features such as dashboards, which allow customers to view pie charts that illustrate metrics important to them in managing their spends.

Buyer demand for office products distributors to work with MWBE (Minority and Women Owned Business Enterprises) suppliers through tier-one and tier-two relationships continues to grow. In the five-year period ending in 2004, spending with MWBE suppliers at OfficeMax increased 95% from $58 million in 1999 to $113 million in 2004. Today, more than 1,140 of the distributor's national account customers purchase office supplies through 143 MWBE suppliers.

In response to increased demand from customers for products that meet diversity requirements, Office Depot offers solutions that include tier-one and tier-two relationships with MWBE suppliers. "The purchasing trend has been developing momentum," says Choice. "We see demand for a representative solution that's in line not just with the law but with the spirit of the law as it relates to providing opportunities for historically under utilized businesses such as job creation, economic development, and capacity building."

Corporate Express has a diversity supplier network called Star Consortium, which is a group of more than 25 independent locally owned and operated companies with whom the office supplies distributor has partnered. It also has a relationship with MWBE supplier Faison Office Products in Denver. To meet customers' requirements for relationships with tier-two suppliers, the distributor has created a private label brand called DPS, Diversity Products Solutions. This is a line of approximately 200 SKUs made up mainly of such high volume commodities as paper clips and remanufactured toner cartridges sourced through MWBE businesses.