Commentary & Analysis
Are You Utilizing All Your Purchasing Options?
There are a variety of ways that you can gain leverage and reduce costs in purchasing. Peer groups, Associations, Purchasing Groups and your Vendors can all be utilized to lower your costs.
By John G. Braceland
Published: July 29, 2014
At one time, size was the primary means for independent printing companies to gain leverage in the purchasing arena. Few other options were available. Today, however, companies can maximize their profitability in a variety of ways. Here are a few ideas:
Peer Groups are usually 8 to 12 non-competitive companies that meet either by phone or in person to share ideas. These groups offer excellent opportunities to benchmark costs and operating systems. It is often difficult to know if you are getting the best deal from your vendors. Peer Groups often share this type of information and help you better understand how you are doing. They can also make you aware of other factors to consider in purchasing decisions. Areas such as mileage, total waste, longevity, stability and latitude can all be highlighted with a plant visit or meeting.
Associations in the industry, such as PIA, NAPL, etc., and outside the industry, like your local Chamber of Commerce, have group buying programs that can save you money. These programs usually have a variety of contracts, such as freight, small package rates, credit card services and insurance. Local associations often have group medical insurance, and office supply programs. Because associations offer these programs to a wide variety and various size companies the programs are sometimes better suited for smaller companies. As you get larger, or your usage volume increases, you may be able to negotiate better deals on your own.
Over the years the printing industry has gone through major consolidation, which has driven independent printers to look for new ways to remain competitive. Purchasing Cooperatives, which have been around for many years in industries such as farming, dairy and lumber, first began to appear in the printing industry in the early 90’s as the internet gained popularity. Some of these early groups did not last. However, today, groups like Graphic Arts Alliance, International Printers Worldwide and The Graphic Source give printers the opportunity to sharpen their competitive edge.
Purchasing Groups or Cooperatives usually operate under By Laws or Operating Agreements, which spell out the rules for the members. These groups can be more effective than Association buying programs because they are targeted to a smaller number of members. By establishing national contracts group members can consolidate volume, benchmark pricing and obtain deals that embers would be unable to get on their own.
Your existing vendors are sometimes not fully utilized to help maximize profitability. Some companies create only one touch point with the vendor. This may be at the purchasing or production level, although vendors have a wealth of expertise and depth at all levels of the organization. When was the last time a vendor’s regional manager, vice president or president stopped in for a visit? These executives are looking for more customer interaction. As various management levels from your company interact with multiple levels from your vendor’s company you will gain information, resources and opportunities.
Today’s lean printing companies need to take advantage of as many options as possible to maximize profitability. How many are you using?