Outsourcing Management of Print can lead to 30% cost savings

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Gary Davies.JPG

"The world-wide trend in commodity spend management is to either appoint speciality managers internally, or to outsource the spend to a credible third party service provider", Gary Davies, Managing Director of Print Outsource International (POINT), told SmartProcurement in a recent interview.  In the industry, this specialist outsourced service is neatly captioned "Print Management".  Furthermore, it is necessary to make the distinction that these services are normally engaged in managing the organisation's 'external' print requirements, i.e. where you send the jobs out and do not process it internally, using your own resources.


One such service presently based in South Africa is Print Outsource International (POINT).  During his interview with SmartProcurement, Davies pointed out that their company focus (and efficiency) lies in the top-end of the market where spend exceeds R20,000,000 per annum. The introduction of more visible data through improved Enterprise Resource Planning (ERP) systems has also raised the level of awareness around print spend. It is estimated that on average 2-3% of a company's total spend is on print. POINT's current client base includes major brands such as Old Mutual and Unilever.

"The beauty of our service is that it breaks the old fashioned legacy mould where companies engage the printer on a relationship basis", says Davies.  "In our methodology, it is strictly business.  The result to the client and not the relationship is what matters."  And, the result that POINT requires?  "We are confident in this area of expertise which we have built up over the past eight years.  In some instances our clients have been able to bank in excess of 30% on their print spend."

"And, just so you understand these statistics better", he concludes, "in a Request for Quotation for a standard spec we can get up to a 50% price variance.  It is thus all about what you buy from whom, and when..."  While this formula sounds simple, it is reliant on advanced (and customised) technology, a well researched network of suppliers, and constant attention to detail.

By way of understanding the depth and scope of print management services, SmartProcurement is fortunate to be able to refer you to a concise summary of this spend management category, directly obtained from the Aberdeen Research Group Report of October 2006.

Aberdeen Report, October 2006:
Spend Management Category:  Print & Print Services
Print is a category that is complex to both purchase and manage due to numerous specifications and continuous change in requirements, each with their own pricing structure.  There are various types of print, including offset and digital, as well as hundreds of differing grades of paper, inks and finishing options.  The category touches various areas within an enterprise, such as marketing (including brand management), communications, finance, investor relations, human resources and many others.  For this reason, the methods used to purchase printed materials or services are often fragmented with limited enterprise-wide visibility into expenses.

However, despite the volumes spent on print and associated waste, print procurement has eluded widespread optimisation to date.  Print purchase requisitions are too often spread throughout an organisation among employees unfamiliar with the industry.  These frontline individuals are blind to true costs, the consequences of change orders, and the cumulative effect of sub-optimal ordering and over-ordering.

Key Business Value Findings
Enterprises report that their top strategic procurement action is the continuous effort to aggregate and centralise enterprise-wide spending.  With the category of print specifically, Aberdeen has found that many enterprises do not leverage volume discounts, but instead continue to engage multiple print suppliers and utilise ad-hoc purchasing methods that may vary in different business units or regions.  A centralised approach allows for improved monitoring and tracking of purchases.  Also, we found that on average, 41% of print is purchased off-contract, leading to significant lost savings opportunities.

Print Procurement & Management Process.pngAs shown in the above graph, approximately 80% of respondents are manually sourcing and procuring print materials and services, 27% of which is sourced and procured by whoever has the need.  However, if we consider 'Best in Class' enterprises (top 20% of performers) and how they responded to this particular question, approximately 67% of these enterprises use automated processes for print management.

Implications & Analysis
'Best in Class' enterprises are able to achieve significantly better results and on average, are sourcing and procuring 64% of their print online.  This not only refers to their use of automation tools but also means that they have standardised policies and are involving the procurement function.  These enterprises are also able to achieve faster lead times (i.e. order-to-delivery cycle time) and as a result have gained significant savings.  On average, top-performing companies have realised 23% hard-dollar cost savings compared to the average of 8% for all other enterprises.

Recommendations for Action
  • Assess and map out current processes for purchasing print and print services.
  • Streamline procurement processes and collaborate with marketing / design departments.
  • Identify current print suppliers and optimise the supply base.
  • Improve collaboration between procurement and other internal functions, especially marketing / design departments.
  • For larger printing requirements, utilise sourcing events.
  • Measure and report on savings, performance and compliance with contracts.
For those of you tasked with managing your external print spend, it will be well worth your while to investigate the potential benefits to your organisation that this highly specialised service, now available throughout South Africa, can bring to you.
 
For more information, please contact:
Gary Davies
Managing Director
Print Outsource International (POINT)
Tel: 011 783 0295

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