Question:
I am a new print buyer having recently taken over responsibilities for this function at my firm. Last week I requested quotes from several printers for a brochure we had printed last year. When I got the prices back from the original supplier and others, I was shocked at the price disparity between vendors. I also looked at what we paid last year. The original vendor gave us a price that was roughly 10% higher than last year, but another supplier came in 25% lower and a third printer was 30% higher than last year. How can there be such a range of prices? Is this "Normal”? Am I being taken advantage of? Is there a reason the price should be different than last time for the same quantity?

Answer:
What you experienced is very common in the printing industry. And, no, your printers are probably not trying to take advantage of you. It is typical for there to be quite a range of prices on any given print job. There are a lot of legitimate reasons for this variation in prices. Some of these reasons are technical and predictable, others are not.

This wide variation in prices is why many print buyers get two to four competitive bids on every job they handle. Competitive bidding among qualified printers is a best practice for buying print and widely used throughout the industry. You should not feel shy about asking a couple of suppliers to quote prices for jobs you are working on. We have one customer who is required to get 3 prices on jobs under $50,000 and 5 prices for larger jobs.

I noted that bidding among "Qualified" suppliers is typical. Pre-qualifying your suppliers is very important. Price is only part of the decision making process, service and quality are also important. Only suppliers that you believe can meet your quality and service expectations should be invited to quote on a job. That avoids wasting your time and the suppliers’ time too.

And on that note I would add that getting too many suppliers involved is probably not a good thing either. It takes time for your printer to price work and if they do not get very much work from you, you may not get the best prices and service they can offer.

Here are the statistics on competitive bidding that my firm and others have compiled over the years: On average buyers save 20-40% on the cost of their printing by using a competitive bidding process rather than picking a single qualified supplier. That is a very strong motive to take the time to get competitive bids. There is also evidence that adding more suppliers to the mix results in greater savings. I know that seems intuitive and the statistics support that intuition. At some point, however, the benefit of adding suppliers to the mix is outweighed by the cost and effort. Our experience is that buyers average roughly 3.4 quote requests per job. Which supports the idea that getting 3 prices is pretty typical (for our customers at least).

The reasons that printing prices vary so much are complex and numerous. As a buyer you can make educated guesses as to which supplier(s) is right for a job, but many of the factors are subtle and very hard to control. It is very important to understand printing is a relationship business. Most printers behave with a high degree of integrity as this is the only way to forge a long-term relationship. So, the prices you receive are probably the printer's best price given their workload and other factors. This natural variation is simply part of the industry structure.

The reasons that Printing prices vary are many, but here's my top 10 list:

• 10 - Equipment configurations (press and bindery equipment dimensions)

• 9 - Hourly rate structures (how different processes are priced)

• 8 - Paper cost, brand, markup, etc. (n.b. specify paper brand clearly otherwise you get apples and oranges)

• 7 - Estimating competence/creativity

• 6 - Sales Rep Skill

• 5 - Quality considerations in estimating (e.g. adding ghosting blocks)

• 4 - Printer’s experience with client (press checks, quality expectations, changes, artwork quality, volume, work flow)

• 3 - Your quality/service/schedule expectations

• 2 - THE BIG ONE, Printer’s workload: Short-term only 40-60% of cost is variable, the rest is fixed. So there is great pricing latitude.

BUT the #1 most important factor, which by the way you have control of, is:

• 1 - Consistent, accurate, comprehensive specifications

Other industries experience similar price variations. For example the price of airline tickets varies widely by supplier for the same route. In the apparel trade, frequent mark downs and discounts make the "retail" price somewhat ambiguous. And even in the book and magazine business, where a price is printed on the product, prices can vary considerably.

It is also worth noting that competitive bidding among a limited number of qualified suppliers is not always the most appropriate method for purchasing printing. Although in your case it sounds like it was an effective approach.

At one end of the spectrum sole sourcing print jobs can lower the transaction costs and allow the selected supplier to create highly efficient systems to lower your overall cost. On a very short timeline, the time it takes to get quotes may not be worth the savings. For small jobs (under $500) the cost of getting competitive bids may be higher than the savings achieved. For jobs that are highly repetitive (same job run 50+ times per year) it may make more sense to set a contract price. For time sensitive high volume publications (e.g. Time magazine) purchasing is done on a multi year contract. Highly specialized work or experimental work may require a supplier make an investment of development time in which case you need to select a supplier based on capability and ingenuity. In the end if there is some demonstrable added value through sole-sourcing, it makes sense to explore that option.

At the other end of the spectrum, some buyers today are taking a very commodity oriented approach. They engage numerous un-pre-qualified, semi-qualified or self-qualified suppliers through a shotgun (widespread) RFQ process or an on-line "reverse auction" process. The thinking is that more suppliers will yield lower prices. This open market works very well in financial stock and commodity market exchanges. Why not print?

For print, there are many reasons that these approaches may be of limited value over the "tried and true" practice of simply getting two to four quotes from qualified suppliers. First and foremost is the risk of going with unknown suppliers. Second is the cost of starting relationships with unknown suppliers. Third, suppliers’ apathy will likely grow as each supplier gets a very low percentage of the work they bid on. Fourth, I have seen no evidence that these "new" methods produce better results (prices) than the "tried and true" practice of simply getting two to four quotes from qualified suppliers. Fifth, assuming there is a slight price advantage, is the extra cost worth it? That is at what point does the cost of adding an extra supplier to the mix exceed the benefit?

This Q&A was answered by Caleb Tower, President, P3Software. Caleb is a veteran of the commercial printing, book publishing and eCommerce industries. P3Software makes the P3Expeditor eProcurement system for print buyers. P3Expeditor is a fast effective affordable solution that saves print buyers time, money and peace of mind. www.p3software.com