Category Archives: Market Intelligence

How to Keep Print Costs Manageable — or Find a New Printer if Your Old One Can’t Part II


Today’s guest post is from Brian Seipel, a marking project expert at Source One focussed on helping corporations achieve both marketing and procurement objectives in their strategic sourcing projects.

In Part I, we noted that the printed materials that accompany products are an important part of any business. Yet, despite the slipping quality or rising prices, it is all too easy to stick with the same print shops year after year to fulfill this need, never pushing back, even when the cost savings can be substantial. In our last post, we addressed some ways to control costs without changing suppliers. Sometimes they are enough, but if they are not, then you go back to market.


Taking a Look at New Suppliers

For every good relationship between a printer and customer, there are plenty of bad ones as well. With a long-term relationship, it is easy to hold a supplier less and less accountable — Quality issues may arise more often, SLAs may be ignored more frequently, and pricing could easily become less competitive if you aren’t challenging your incumbent. For any of these reasons, it may be time to start looking for a new supplier.

So, what are the most important factors when searching for viable alternates? See the list below for just a few key criteria:

  • Start your search with shops that specialize in your specific type of job.
    Would a digital print shop be more viable than an offset printer? Are you looking for single pages of print or full color, bound product manuals? Do you have a need for variable-data printing for labels?
  • Evaluate shops in terms of their capacity.
    Is there facility and staff large enough to complete your jobs? Is there enough storage space to handle the capacity you are bringing to them?
  • Keep an eye on deadlines.
    Make sure all shops can describe their turnaround time and on-time delivery rate guarantees.
  • Quality control is key.
    You’ll want to be sure to learn not just about QC programs in place, but how the shop responds to drops in quality and the escalation procedures they follow to get things back on track.
  • Identify distribution centers and map them against your final destination points.
    Other logistics concerns, like multi-point shipping, inventory management, warehousing, and kitting services may also be key to your relationship.

These are all excellent points to cover when vetting potential partnerships, but it isn’t enough to take their word for it. The proof is in the pudding, and you’ll want any shops on your list to back up their claims:

    • Bake key promises into SLAs.
      When shops make promises around any of the points above, be sure to get them in writing. Codify not just the promises made, but also any related KPIs, penalties for not living up to expectations, and a clear plan for escalating and rectifying problems should they arise.
    • Schedule facility tours.
      Take a look around the shops, themselves, and consider whether the capabilities and capacity visible match the company’s claims.
    • Ask for references, and follow up.
      Tours provide a snapshot of what a shop can do for you, but you will need some history to understand if a prospective alternate is a viable long-term partner. Ask about consistency in quality and ability to hit deadlines. Find out how shops perform when something goes awry, and how they managed to fix the issue.


Push Your Suppliers to Do Better

Some printers, recognizing their role as a partner and not just a supplier, will approach clients with ideas for process or product improvements, and recommend cost savings strategies that alleviate budget pressure without reducing quality. Many other printers — don’t.

When was the last time your printer came to you with a great idea to achieve any of these goals? If it’s been too long, or never happened in the first place, now is the time to push them to prove why they’re the best shop for the job. If they can’t, it may be time to see what else the market has to offer.


Thanks, Brian.

How to Keep Print Costs Manageable — or Find a New Printer if Your Old One Can’t Part I


Today’s guest post is from Brian Seipel, a marking project expert at Source One focussed on helping corporations achieve both marketing and procurement objectives in their strategic sourcing projects.

The printed materials that accompany products are an important part of any business. Yet it is all too easy to stick with the same print shops year after year to fulfill this need, never pushing back against slipping quality or rising prices.

This is a mistake — Reexamining these relationships offers a great opportunity to identify best-in-class suppliers, learn about innovations that could better serve your needs, and ensure market competitive pricing.

Too often, however, organizations go to market with a sole focus on just that last point: price. This is a common strategy when searching for printers, and is just as much a mistake as not going to market in the first place (if not more so)… You don’t have to look far for horror stories about the bargain basement print supplier who held up a new product launch because they couldn’t keep up in terms of quality, capacity, or both.

So, how should Procurement proceed? What can we do to ensure our incumbent suppliers are pushing themselves to remain competitive and, if they aren’t, what is the best strategy for identifying a new supplier that can meet our needs?


Cost savings without changing suppliers

First and foremost, let’s discuss incumbent suppliers and what we can do to determine if any production improvements or cost savings can be found in these current relationships.

Review what your current supplier offers, and compare to what your needs are today — things might not align as well as they once did. A shop may have been brought onboard to fulfill a printing need that no longer exists in your organization; newer jobs could be getting shoehorned into presses that aren’t really suitable for your current-day needs. Ask your supplier what their forward-looking plans are for business — what is changing in the world of print, and how are they seeking to adapt? What new technologies may address quality or process problems that they have, and how can they use them to improve the relationship?

As long as you’re still happy with your incumbent, and aren’t at a point where you need to jump ship due to quality problems, a few methods can be used to achieve savings:

  • Drive savings by streamlining business processes.
    This tends to be a soft dollar savings, but can easily add up. Step back and consider how much time is spent on managing print on your end — from placing an order to handling the PO process to delivering files and finally reporting. An inefficient process can drain hours out of your week. Review each of these steps with your supplier — What steps can be automated? If a step cannot be automated, can it be streamlined by removing excess information collection? Can templating be put in place? Can the supplier provide data back in a way that is more conducive to your reporting needs?
  • Consider the impact of larger print runs.
    The cost savings impact of larger print runs is immediate. Larger run jobs are cheaper, because the setup costs are spread over a larger number of prints. However, it would be short-sighted to leave it at that. If you aren’t able to make use of a larger run quickly, storage costs come into play. Worse, a larger run of product manuals relegated to a warehouse may be made obsolete by a new job, or if the associated product is discontinued. Examining inventory levels and turnover is key to achieving savings here.
  • Cut costs by reexamining your specifications.
    A word of warning: Changing up specs won’t lead to an apples-to-apples cost savings over your current print spend, and making a move based solely on price can be a disaster in terms of quality. However, analyzing the materials used can easily cut costs dramatically. Paper weight, for example, can easily be over-specified compared to need.

Unfortunately, there could be a quality problem or a lack of effort on your supplier’s part to help you reduce costs. If this is the case, it would serve you well to look into the market for either negotiation leverage with your incumbent or to identify a suitable replacement.

Tomorrow, in Part II, we will address the issue of the best way to go to market.


Thanks, Brian!

Category Aggregation – How Far Do You Go?

Category Aggregation is one of the tried-and-few methods for spend leverage in Procurement — aggregate a bunch of items, go to market simultaneously, and demand big discounts for big awards. The first time a significant category of significant size is aggregated, and offered up, the organization will see savings … often significant savings.

But does the spend have to be aggregated to get the savings? Let’s examine the likely reasons why a supplier will offer up savings.

  • They were making a fat margin and could give it up.
    For example, maybe a healthy margin for the industry, unbeknownst to your organization, is 10% and they were making 15% (because of internal efficiencies or collusion that prevented you from knowing the true margin). In this case, they would be happy to sacrifice 5% to triple their business.
  • What’s lost on unit is made up in volume.
    If volume allows them to not only maintain their profit level but potentially increase it, they are likely to go for it.
  • Big orders allows them to get discounts on raw materials.
    Smarter suppliers may realize that the more volume they can commit to, the better prices they are likely to get and offer discounts based on projected cost savings on raw materials.
  • Big orders allows them to operate more efficiently.
    Some suppliers might have plants that operate most efficiently at large volumes, and will take slight margin cuts to maintain peak production level (and enough cash flow to pay the workforce without expensive “payday” loans).

If you look at these reasons, it would seem that the best way to get better savings is through aggregation as this is the only way to make the buy more enticing. But is it?

Not necessarily. Let’s start with the fact that suppliers might be willing to give you price reductions if they get price reductions. You could always give them price reductions from the get go by buying raw materials your organization uses a lot of across categories at prices better than smaller suppliers could get and, as part of every bid, noting that they will have access to necessary raw materials at a reduced cost when serving your organization. They can pass this savings on to you as part of their bid.

You can also engage your best engineers and production consultants to create detailed should cost models that take into account market pricing on raw materials, labour rates, energy costs, and average production line maintenance costs, tack on a fair margin, and use this information as leverage in negotiations in conjunction with open book costing requests. You can ask not only for a price breakdown, but compare it against expected prices and see which suppliers are trying to keep the wool over your eyes, eliminate them, and work with those focussed on win-win cost reductions. (You’ll allow them to maintain a healthier than average margin if they cut your costs by using your lower cost supply, optimizing production runs, and implementing the lean process improvements you dictate.)

You can guarantee them a certain revenue in the following year if they meet performance targets. (For example, if they maintain an on-time delivery of 90%, a defect rate of under 2%, and costs are maintained, in 12 months you will guarantee their annual revenue will increase by 50%.) Now, you might think this is hard to do, but with an optimization-backed sourcing platform, you can dictate minimum award requirements in a scenario, or determine impact across a set of scenarios, and pick the categories where an additional award will most benefit your organization.

You can allow them to specify optimal order sizes based on their factory. For example, if they produce 10,000 units a day, you should order multiples of 10,000 at a time — otherwise, they might have to switch dies, etc. during the day and take down the production line while staff are still on the clock. Tying order sizes to production runs means that they only have to reset the production line once a day, before or after a shift, and the supplier can keep their overhead down.

Aggregation is not always necessary, but sometimes it does make sense. Why do three sourcing events for essentially the same product or service? Especially when you can do one, implement one or more of the above strategies, and potentially identify more value than your peers. In other words, you should aggregate when it makes sense, and be aware of the “6 Critical Success Factors for an Aggregation Approach”, as summarized by the public defender, but not depend on this strategy or overuse it.

Authoritative Sustenation 65: Solution Partners

In our post on authoritative damnation 65: solution partners, we noted that solution partners are their own breed of damnation and can be much more annoying than activist investors and boards of directors, that you might only hear from at quarterly or annual meetings (who will stomp their feet, bang their drum, but eventually settle down and go away for a while), as they could be a pain in the backside on a daily basis.

We said this was because you often depend on these solution partners to serve your customers, run (parts of) your organization, and bring you innovation that you can’t develop in-house (due to lack of time, money, or external ideas). As a result you can’t just tell them to sit-down, shut-up, and wait their turn … especially if their support is essential to keeping a million dollar client happy or a multi-million dollar category stocked and selling.

So what is an organization to do? Especially if it can’t reasonably meet all their demands, err, requests in a short time frame?

Include them in roadmap planning for products and services.

If you include them in roadmap sessions, where they can see all the requests and demands being placed upon you by the organization, customers, and other solution partners, they will understand better that you can’t do everything they want now and that will focus them onto platform, product, or support enhancements that they really need versus those that they think they really want. For example, they might want more do-it-yourself configuration options when they are supporting your software in their country or in their client bases, but if you can typically turn requests around in 2 business days and they see how new features could benefit the customer base more and possibly help them sell more (and earn more commission), they will quiet down about saving 24 hours on a new configuration or install.

Offer them your innovations in Procurement, Planning, and CRM.

Chances are your solution partners are great in manufacturing, production, solution delivery, support, etc. but pretty bad in procurement, project management, or CRM (and why even their best bid doesn’t match your should-cost model with a fair margin). Offer to help them innovate their processes and platforms in exchange for product innovation, production cost savings innovation, and service level improvements.

Help them sell to your customer base.

If it’s a product provider, offer to help them understand what your customer base values most in terms of product purchases (low cost, reliability, innovation, etc.) and what the supplier needs to do to win more of your business. If it’s a service provider, help them understand not only what you need of them to support your customers, but what common services your customers need that you don’t provide, that the provider might be able to up-sell to them (without violating the terms of agreement). This will be a big plus in their eyes and they will start treating you as a customer of choice (who is their favourite customer to work with) and the complaints will go away, with only the odd helpful suggestion here and there.

Solution Partners can be a pain in the backside, but inclusion and support can replae the thorn with the rose. It’s up to you.

Coupa IPO: Good or Bad?

Coupa has filed for a 75 M IPO. Coupa is going to go public, like heavyweights before it, and things are going to change. The question is, for better or worse?

Many bloggers, analysts, and even journalists have written much about the subject, and you can probably buy at least a dozen in-depth analyst reports by now advising you on whether you should invest, how much, when, and how to make money off of it.

And if you are interested in that, go and Google that Sh!t, because, you guessed it, SI doesn’t care about that in the least. What it cares about, and the only thing it cares about, is whether or not its good for Procurement. This blog is about education — process transformation, technology, and talent enablement — not about how to make the most money (or even save the most money, because it’s not savings, its value generated … savings are here today, gone tomorrow without foresight).

So is it good for Procurement? Yes and No. That’s right, Yes and No!

The 75M will help them considerably expand their platform, their support, their global reach, and, most importantly, their sales force. As with any big company that goes IPO, they will need ramp up their sales quickly to support their overhead, which means more big ticket sales. The only way to do this will be to focus on the Global 3000 or the large mid-market companies growing fast that are willing to invest extra dollars in an effort to crack the Global 3000. And if you are one of these companies, they are going to do everything they can to be the perfect solution for you, or at least the best option you have, as they try to win the P2P market away from SAP (Ariba), GEP, and SciQuest and fend off the European heavyweights, like Basware, that are making inroads in their home turf.

But if you are a mid-market Procurement organization, or smaller, and the Procurement organization that Coupa was originally designed for when they launched on Procurement Independence Day ten years ago, not so much.

Big organizations want big, extensive, bloated, solutions with lots of features, and lots of support, that come with big price tags — price tags that are often higher than a smaller organization wants to, or can, pay. And even though Coupa could offer a slimmed down offering at an affordable price tag if they wanted to, it’s not going to be their first priority when they have to prove the value of their IPO. So if you are in this group of Procurement organizations, its not so good for you – at least not in the short term. (Longer term, they could create a platform license model for their core, like Trade Extensions does, and allow a third party to bulk sell at lower rates in exchange for them taking over support and the associated overhead costs, the same way many companies offer SAP support, but that’s not likely in the short term.)

So that’s the short answer for Procurement organizations, which is not the same answer for Investors or for Coupa, but we’ll leave those answers to the analysts and investment advisors.