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By Paula Fargo
Other than labor, rent and possibly equipment payments and charges, the line item Paper Cost is most likely a printing company’s largest expense. Monitoring paper usage and pricing can run the gamut from totally dialed in via barcoding and live inventory tracking to haphazardly and reactively ordering stock for every new job coming in.
In my world, I land somewhere in between the two poles of utter, obsessive perfection and sloppy neglect. Here are some of my thoughts on improving your paper management as well as your entire paper philosophy.
People tend to think of paper as a “commodity” and in the most basic sense, it probably is. However, there are many processes done to paper to change it from a simple and easily comparable commodity to a unique variable in the printing process, and thus a higher price tag. “Commodities” earn lower prices than “differentiated” products. As printers and printing company owners, our goal is to maximize our revenue and profits; therefore, the ability to charge more for our goods and services should be a driver of our pricing and management decisions.
How can we magically transform the commodity of “paper” into a differentiated and more expensive “feature?” We all know how to do it... “Would you like fries with that burger?” Upsell the paper on a particular job, making the end product more attractive and garnering additional marginal revenue for yourself. Upselling paper gives you multiple ways to earn additional profit. If your print management software works like mine, you enter your paper cost per thousand and the software computes a preprogrammed markup. In the most basic example, if paper costs you $100 per-thousand and you get a 50 percent markup, then you make $50 per-thousand “profit” on that paper. Conversely for a $10 per-thousand paper, you only make $5 per-thousand profit. So, upselling paper provides additional marginal revenue.
There are other ways you can protect yourself in the arena of properly charging for, and making money on, paper. Depending on the process you are using to print (offset vs digital), print management software wants to add in “overs” for set up, etc. How you account for this and order special-order stock for jobs can either make you additional profit or cost you all of your profit and then some.
Let’s say a client asks for 1,000 sheets of offset printed letterhead. You upsell to a special-order writing paper. Do you order 1,000 sheets? Maybe, if you have some of that same stock sitting on your shelf leftover from another job to use as setup and overs for any quality issues throughout the run. Or maybe you have the world’s most perfect pressman who can immediately get up to color using other stock and then has no issues during the press run. However, your prudent course is to order more sheets than you need to run the job, having the extra sheets for any press issues, or better yet, not needing them and having them on your shelf for future reorders from this client.
In our print management software, we preprogram a waste factor for certain stock and then add in a “round up to” amount for non-stocking papers. In plain English, this means that for all papers we don’t normally keep on our floor, we round up to the next smallest amount the paper house requires us to order of that stock. In the example above, if we buy ream-wrapped sheets, 500 per-ream, and the press waste factor says we should have 1,100 sheets for a 1,000 run, then my print management program will “charge” the client for 1,500 sheets.
Now, if I’m in a competitive situation, I can simply check to see if I have any “overs” of the stock in question (or better yet, upsell to a stock I already have on my shelf!) and then override the quantity my software is charging. If you can charge for the “overs,” you should; think of it like insurance that your client pays for!
In the building of a price within your print management software, paper is only one of many variables (graphics time, plates, ink, bindery, delivery, etc.) so the “commodity” factor has all but vanished.
Has everyone noticed frequent and precipitous paper price increases over the past year? While never pleasant to receive, and then pass along to our clients, paper price increases do allow us to earn even more marginal revenue if our pricing uses a markup method.
In my shop, I round my per-thousand pricing up so that I do not have to raise my client prices every other day that Veritiv sticks me with another increase. If a paper costs me $42 per-thousand, I will enter it as $50 per-thousand, giving me a little wiggle room in the case of frequent increases, paper waste, overs for bindery, etc. In the “notes” section of the paper, I will list the actual cost so when I get my paper invoices, I can make sure all prices are updated.
I know there are fancier ways of doing that, and that some print management programs can tie into your paper house’s pricing on its website. That’s not for me – I like to see and input the paper prices for myself – this is too big an expense to put on autopilot in my opinion.
Having a shop in a downtown metropolitan area, I do not have tons of room to stock oodles of varieties of paper. We have to run lean and often rely on next day paper delivery. The trade off to being in a large enough area that offers next day paper delivery is being in a more rural area with less frequent delivery but more affordable space to store a larger variety and quantity of paper. I can see the benefits and costs of both; however, we play the hand we are dealt, do we not?
With more space, you can really dig into figuring out what stocks you need to keep on hand and how much you need to handle a potential large job to tide you over until your next paper delivery.
With less space, you need to be more judicious in the stocks you carry and the special orders you make. At my shop, we keep a respectable amount of the popular sizes of bond, offset, opaque, colors, writing, coated, and cover for rush jobs; we always steer our clients toward those “house” stocks. For super-duper special-order stock (the stock which only that one client will conceivably use again in ten lifetimes), we have a special shelf for “overs.” After a job is run, we shrink wrap any leftover stock, mark it with the client’s name and job number and place it on the “orphan stock” shelf. If, at the end of the year the stock is still there, we take a good look and decide if we think the client will reorder (we even go a step further and reach out to that client to ask about a reorder). If there is little chance the client will use it, we might use it ourselves for note pads, or we might donate it to a school or nonprofit client. That way, our limited area is not completely cluttered with random leftover paper no one will ever use.
Paper is vital to our operations, and should be managed with the appropriate amount of seriousness and care to make you the most amount of profit.
Paula Fargo is the owner of Curry Printing & Copy Center in Baltimore, Maryland. Raised in Baltimore, she got her bachelor’s degree in economics and her MBA in economics from Loyola University Maryland. In addition to successfully operating her printing company, she enjoys reading, going to live music concerts and being a Sherpa for her triathlete husband, Lance Fargo. Feel free to contact her at paula@curryprint.com.
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