Published In:
CFO Date Published:
15th July 2002 Author:
Simon Segal
One of the great puzzles of the modern workplace is the extent to which paper is still used, despite the surge in information technology. Printing costs are still a major cost factor for many corporations. Indications are that it will remain so.
Writing in The New Yorker, Malcolm Gladwell notes that "every country in the Western world uses more paper today, on a per capita basis, than it did 10 years ago".
Consumption of uncoated free sheet paper - the most common paper used in offices - rose nearly 15 per cent in the US between 1995 and 2000.
Cognitive psychologists and ergonomics experts are not surprised that paper has persisted. Although digital documents can be easily searched, shared, stored, distributed and linked, paper provides some crucial tasks, not least in facilitating collaborative iterative work processes.
Paper is tangible (it can be felt, picked up, turned), flexible (it can be spread, arranged) and tailorable (it can be written on without changing the original text).
Gladwell observes: "It is only if paper's usefulness is in the information written directly on it that it must be stored. If its usefulness lies in the promotion of creative thinking, then, once that thinking is finished, the paper becomes superfluous. The solution to our paper problem is not to use less paper but to keep less paper.
"In the tasks that face modern knowledge workers, paper is most useful out in the open, where it can be shuffled and sorted and annotated and spread out.
"The mark of the contemporary office is not the file. It is the pile."
How then to best manage printing costs? An entire industry of "print managers" is devoted to this issue. Their pitch is that analysis of a client's needs and maximum use of technology can substantially reduce the workload and range of products while streamlining and eliminating internal processes.
As a result, some claim to be able to halve the client's printing costs and deliver ongoing efficiencies and savings.
E-Bisprint managing director Paul Freeman believes that integrating print management with e-procurement is all about reducing costs and delivering savings; continual improvement, with productivity gains providing ongoing savings through reduced transaction costs; being a single source supplier for all printed products; developing a customised service/solution for each client based on their unique needs; simplicity of ordering and the ease of doing business together; accuracy and speed of order processing from input to accounts; linking to other e-commerce marketplaces; and linking directly to manufacturers' software packages for real-time information on the status of each order.
Freeman adds that electronic forms are the most efficient method of providing cost savings. "They encompass the enterprise using intelligent workflows that deliver ongoing savings. E-forms can be developed for virtually any application or business unit."
For its part, Print Management Australia (PMA) emphasises "the overall management of print and information transfer needs - namely the entire process by which a print or communication piece is created, how the print is distributed and to whom it is going, and the management of all costs associated with this process."
Managing director Phil Okill identifies the reasons for outsourcing corporate print requirements typically include a need to control print expenditure more efficiently (to track costs and usage); to better utilise in-house storage space for core products; to access multiple printers without having to deal directly with them; to centralise the print process across multiple company divisions; and to better manage print related materials and, therefore, the corporate brand.
Okill finds that the largest savings are derived through streamlining the processes by which print is sourced and used, rather than the hard cost of the print itself. "It is not unusual for the hidden costs associated with print - the time and resources a company devotes to creating, sourcing and managing materials - to be nine or 10 times greater than actual production costs. Through implementing a total process outsource solution, utilising technology and industry best practice to reduce these in-house soft costs, quantum cost savings can be achieved."
Okill adds that reductions in the hard cost of print materials are, naturally, easier to identify. "These savings are not that difficult to achieve for most organisations. However, the real value of true print management is in creating a highly efficient end-to-end process."
Cost management expert Ian Kinnaird from Expense Reduction Analysts Consulting (ERA Consulting) notes that printing can be highly complex due to the enormous variety in design, equipment, material and vendors. "It is amazing what can be achieved in reducing printing costs when the time is taken to consider and properly review this expense category. The review ought to include everything from looking at new suppliers and the impact of this decision on artwork and film transfer to stock issues, account set-up and contract negotiation. Then ordering systems and methodology, ongoing stock levels, staff training and supplier liaison should not be overlooked.
"Few companies are aware of the changes that continue to take place in the printing industry," he adds. "These developments can reduce not only the time and effort involved in managing printed material but can also significantly reduce the annual costs associated with these products."
ERA identifies four steps to reduce printing costs: rationalise forms to see if several items can be combined to achieve a common result; look at more economical print production in terms of stock, number of colors used and the actual production method chosen; at the printing stage prices are volume-sensitive, so look at ways to either increase batch size or print same stock items together; and aim to contract the entire job with one supplier to simplify the ordering methods as well as the invoicing (see accompanying box).
"To achieve any of this you need to work with your staff to engender a sense of ownership. Often with the technology now available to facilitate orders, staff need to be educated and others deployed."
Standard Approach
Analyst Ian Kinnaird of Expense Reduction Analysts Consulting (ERA Consulting) identifies stages in reducing printing costs.
Standardisation: The first step in reducing printing costs is to look for areas where standardisation can be applied. One company had several departments that were in control of doing their own design and sourcing of sales and information pamphlets to distribute. Due to lack of standardisation, each department produced the pamphlets in slightly different sizes, and only a minority was produced to the standard sheet or roll size.
By bringing all the pamphlets together, an agreement was reached to make some minor size adjustments. This produced savings by the printer eliminating paper waste. Additionally, pamphlets with the same or similar colors were printed together to reduce printer set-up costs. Standardisation helps to control the design process where different graphic design houses are being used.
Economic order quantities: Printing is a manufacturing process that involves the setting-up of equipment. Therefore, the quantity being printed has a significant effect on the unit cost of an item, as the equipment set-up has to be amortised over the print run.
It is not uncommon to analyse a company's invoices over a period of, say, 24 months and find the same item being ordered every three to four months. The company may think it is keeping costs down or helping its cashflow by only spending in small amounts.
One company went from purchasing an item in batches of 1000 every two months to placing one order per annum for 6000. This produced savings of 50 per cent after taking into consideration stock holding costs.
Administration: Reducing administration costs can be achieved by cutting the number of printers. Soliciting, evaluating and approving offers from several printers can involve a purchasing person, an accountant and a department manager.
This means knowledge of the marketplace is helpful in the careful selection of the printer in terms of reliability, quality and price.
Consolidated billing: Many printers now offer electronic billing - a monthly soft copy is sent to the client, who can transfer to their internal system for processing. This produces efficiencies in the accounts payable dept.
Print management: Has grown out of the old print broker service. By utilising this service, the company effectively outsources its printing to a print manager who will procure, store and deliver on demand. Most print managers also have sophisticated reporting and billing systems that can provide information in terms of stock holdings.
Technology: With the relentless progress of technology, some digital print equipment is at the stage where companies are now printing their own letterheads, invoices, business cards, brochures and so on. An evaluation needs to be carried out in terms of technological and economic life that includes cost of ownership and payback of the investment.
Maintaining reduced costs: Hard-won cost savings need to be monitored to ensure they are maintained. A couple of ways of doing this is to put in place key performance indicators (KPIs) and then hold regular review meetings with the printer. The KPIs give a snapshot of how things are progressing in terms of cost, quality and delivery. The regular face-to-face meeting with the printer via a review meeting is a good means to discuss how things are perceived from both points of view, and can lead to ideas of further savings.
Technology halved - TMP's printing costs
Expense Reduction Analysts Consulting (ERA Consulting) assisted TMP Worldwide with new corporate identity stationery requirements. TMP new business development manager Ross Kirby says the group wanted to review its entire printed stationery needs and print management processes following its decision to consolidate into a single Australia-wide brand. "We took the opportunity to consolidate our various needs and utilise technological solutions to supersede everyday office processes as far as possible."
TMP's Ross Kirby: we took the opportunity to consolidate our various needs and utilize technological solutions to supersede everyday office processes as far as possible
The results, as reported by ERA and TMP, were effective in freeing up staff time, saving more than 50 per cent in the actual cost of printed stationery, speeding up delivery and achieving brand consistency.
Prior to this decision, TMP had used a traditional print management process with manual records and standard forms. Printers had been advising on likely future needs while each of the different businesses in the group co-ordinated their own brand, style, quality and stock that had led to significant variations in product, quality and pricing.
Kirby points to the successes. Firstly, TMP has saved staff time by developing a tailored online catalogue that individuals use to place their order rather than a co-ordinator. This is used for business cards, letterheads, followers, envelopes and even invoices and cheques.
"The new ordering process takes only a few minutes, as compared to business cards alone, which required one staff member three days per week because of the sheer volume of managing the requirements of 1500 staff members."
He adds that each item of stationery uses a template that not only speeds up the process, but raises the standard of checking and proofing while ensuring strict adherence to the corporate style and quality guidelines.
A second success Kirby highlights is that selected staff have taken the role of "print champions".
"They provide advice and direction when needed and work with the printer in determining future print production runs. Stock levels are monitored regularly and reorder thresholds have been established."
