Taking an ax to paper costs

If you’re struggling to find ways to cut costs, don’t overlook the paper on which your catalog is printed. After all, paper may be the most expensive component in the production and distribution of your catalog.

And while paper prices are down about 20% from a year ago, there are still ways catalogers can trim these costs. The only caveat is that you need to be buying and controlling your own paper to achieve the biggest cost savings.

Buying your paper eliminates printer mark-up, which is reason enough to switch. What’s more, you will gain additional savings in that you can use any leftover paper since you own it.

How big do you need to be to buy your own paper? Let’s use quantity as the threshold. If the printer requires fewer than 40,000 lbs. to print the job, then the printer should, in general, furnish the paper, as 40,000 to 44,000 lbs. constitutes a full truckload of paper.

If the catalog requires less than a truckload, then it will have excess freight charges. This would make it prohibitive for the cataloger to buy the paper.

Gaining control of a key component will always result in lower costs. Here are some examples with paper.

  • Establish long-term pricing now

    With paper market pricing now near the bottom, it’s a good time to begin discussions with your paper merchant about pricing for 2010. To be sure, the mills are now selling at near cash-cost and will want to capitalize on any future price increases that are warranted. But you now have the upper hand since pricing is still low.

    Only the largest mailers will be able to negotiate “no increase” for 2010, so working out pricing caps should be the goal. Talk to your merchant about quarterly increase caps for 2010. Prices will go up, but not at the rate they would if you were unprotected.

  • Challenge your printer to reduce waste

    When buying your own paper, you discover your printer’s waste factor. Waste is a natural by-product of a print job, but if you know what the numbers are, you can ask legitimate questions.

    The first step in the process is requesting a usage or consumption report from your printer. Providing your paper merchant access to this information will allow him to provide customizable reports for you.

    You may find that the amount of paper left over from your print jobs is larger than it should be. Even though you can use this paper on your next print job, you want to minimize the number. Catalogers that print just once or twice a year will especially want the printer to keep an eye on waste.

  • Use paper calculators

    Some of the more sophisticated paper merchants offer paper calculators, which can determine the amount of paper needed for a job. Providing this data to your printer before paper is ordered can avoid significant over-runs.

    Ultimately, your printer should have the final say in determining how much paper is needed. But the paper calculation helps you ascertain if the numbers are in line.

    Let’s say your merchant determines that, based on your catalog size, page count, circulation and basis weight, you need 200,000 lbs. of paper. If your printer requires 210,000 lbs., that’s enough of a difference to initiate a conversation.

    Be aware that your printer may have legitimate reasons for the higher amount, such as versioning, but at least you’ll have the tools and knowledge to ask the questions.

  • Benchmark your pricing

    Tying your pricing to a market barometer can help create long-term pricing without having to constantly monitor pricing movement. It can be tricky to set up, and you must be prepared to accept price increases as well as decreases. But for catalogers with a significant volume of paper, it’s worth examining.

    The key benchmarker for the paper industry is RISI, which issues monthly industry pricing. While it is general information, it’s usually effective in showing a trend.

    The first step is establishing a “strike price” or starting point by working with your paper merchant and the mill. Then you agree to the months that you will use to monitor the uptick or downward trend in pricing.

    One problem with this is that you’re operating with old data. Pricing reports come out after the fact, and adjustments must be made in the future, so you could be looking at an increase in price as the market is deteriorating.

    Say you agree to benchmark the December pricing trend. The report is not released until late January, but current paper orders are in the pipeline to ship into February. Any movement in the December trend, then, can’t take place until paper orders due to be shipped in March are in.

  • Reduce your cover weight

    If your catalog cover happens to be on 80-lb. text weight, the quickest way to save is to bring it down to 70 lb. This will immediately lead to a 12.5% savings. Why? As paper weight goes down, mill pricing structure dictates that the price goes up, e.g., a 50-lb. grade is a higher cost than a 60-lb. grade, and a 60-lb. is higher than a 70-lb.

    But 70 lb. and 80 lb. papers have the same pricing. So if you’re willing to accept a lighter cover, 70-lb. can provide 12.5% yield savings. If you required 50,000 lbs. of 80-lb. stock, you now only need 43,750 lbs.

  • Reduce your text weight

    While your paper costs may not go down significantly, reducing your body stock weight may enable you to capture sizable postage savings, depending on how you mail. Inquire with your printer to see if going down a few pounds in basis weight can save you even more in postage.

  • Use alternative paper for the order form

    If you’re currently using regular uncoated free sheet stock on your order form, consider using an “alternative uncoated,” which has groundwood content and is cheaper than the free sheet stock. Since the order form is only a page or two, the savings will not be sizable — but there will be savings just the same.

  • Ship rail

    Paper is typically purchased with the shipping costs built into the price, whether paper ships by truck or railcar. But the mills prefer to ship by rail, as it is cheaper.

    Talk to your paper merchant about negotiating a price to ship rail if you currently ship truck. The possible downside is that you will have to firm up your quantities sooner since it takes longer to ship via rail.

    If your printer is not able to receive rail cars, don’t be discouraged. Mills still prefer to ship by rail even if the paper needs to be unloaded in close proximity to your printer and shipped by truck from there — so look into this.

  • Meet the mill

    Have your paper merchant bring in the mill to meet you and your staff. It’s harder to quantify, but giving the mill rep some ownership will lead to a more harmonious relationship.

    If you think the mill is a good fit for your long-term needs, arrange a trip to tour the manufacturing site. This, too, can produce tangible results for your merchant when negotiating price.

Daniel T. Walsh (dwalsh@bradnersmith.com) is vice president, catalog papers for paper merchant Bradner Smith & Co.

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