American Printer's mission is to be the most reliable and authoritative source of information on integrating tomorrow's technology with today's management.

STRATEGIES FOR SMART PAPER BUYING

Feb 1, 2002 12:00 AM


         Subscribe in NewsGator Online   Subscribe in Bloglines

If there's a trick to smart paper buying, it's getting to know your supplier. Admittedly, this tip is common sense. But a good relationship with your paper supplier can ensure your order goes through when supply is tight, help you lock in competitive paper prices and keep you tuned in to market development.

Currently, the market is doing poorly. “Supply and demand have been out of balance for quite some time,” says Kelly Ferguson, vice president of editorial for paper-industry resource Paperloop (Marietta, GA).

Ferguson attributes the situation in part to general worldwide overcapacity, coupled with the 2001 recession. A 2002 market outlook article in the January issue of Paperloop's Pulp & Paper magazine adds: “Along with declining industry shipments and weak product prices, high energy costs early in [2001] and a flood of cheap paper imports from Europe pushed many companies into a severe financial crisis.” To limit overcapacity and keep prices stable, mills merged, cut back on production and, in some cases, shut down permanently.

GOOD POSITION

All of which puts printers in the catbird seat. “We are buying paper cheaper now than we ever have,” confides Matt Riordan, estimating and purchasing manager for Scholin Brothers Printing (Webster Groves, MO), a $15 million commercial sheetfed printer that does multicolor digital and conventional printing. Riordan typically orders paper 1,200 lbs. to 1,500 lbs. at a time. He takes delivery the same evening the order is placed or the following morning.

“In this current market, we could pit mill against mill, and probably come up with a lower price each time,” surmises Steve Mead, paper buyer for Dartmouth Printing (Hanover, NH), a short-run publication printer that operates two Heidelberg Harris web presses and recently installed an eight-unit Heidelberg Sunday 2000 web press in a duplexed configuration. Dartmouth also does some sheetfed printing of covers and reader-service cards. “There's always a better deal around the corner,” says Mead.

Given that paper typically is the biggest cost of any job, making mills bid for your business is no doubt a tempting practice. Dartmouth, however, maintains loyal partnerships with its mills. “Mills are an extension of our business,” Mead explains. He acknowledges that jumping from vendor to vendor may save Dartmouth “a penny a pound here and there — but in the long term, that comes back to bite you.”

Because the printer is expanding into medical-journal printing, Mead says his job, which included responsibility for all purchasing at Dartmouth, is now focused solely on buying paper.

The printer has aligned itself with four nearby mills, for inventory and cost reasons (although Mead acknowledges these priorities diminish during a weak paper market). One mill supplies Dartmouth with free sheet; another, with high-end groundwood. Two other mills provide low-end groundwood. Mead orders six weeks in advance so mills have ample notification of what's needed; March orders are thus placed in the middle of January. The mills give Mead an LDC — a last date of change — by which time he must fine-tune his order. By the middle of the following month, Mead has a more accurate forecast of the coming month, and can add or deduct pounds as necessary.

CYCLICAL MARKET

“One of the reasons we remain loyal to our mills is because we know it's a cyclical market,” Mead explains. He notes that people new to the industry have never experienced what he calls a pipe, or allocated, market, where demand outweighs supply. When supply is tight, he says mills look into clients' order histories and give preferential treatment to repeat customers. The loyal printers tend to have access to more paper than other printers.

“Pipe markets can get nasty,” Mead says. “I don't know when the next one will be, but there will be one sometime.”

Positive relationships (along with being able to adequately forecast your paper requirements) will also help in gaining competitive paper prices, says Lawrence A. Wilson, president of Wilson's Consulting Service (Arrowsic, ME) and author of GATFPress' (Sewickley, PA) “Paper Buying Primer.” Wilson is a former printing-plant superintendent and 30-year veteran of paper manufacturer S.D. Warren Co. (now Sappi Fine Paper North America, Boston).

Scholin Brothers, for example, usually purchases its paper from one of three houses: two nationwide distributors and one independent paper company. While the printer does have its suppliers compete against one another on its orders of opaque sheets, board stock and coated sheets, Riordan explains that all three merchants still consider Scholin Brothers a prime account and give it discounts on its bills. Scholin spreads its purchasing between the three houses.

“We're not blind to pricing, and we keep an eye on it,” agrees Mead. Dartmouth ensures that it remains competitive in the marketplace with similar-sized printers. Participation in an established program with the mills provides quarterly price protection on paper, and price hikes don't get passed on to Dartmouth customers until 30 days later.

Mead notes that some printers negotiate price-increase windows with their paper suppliers, where an increase will not exceed a certain percentage during a particular period. The downside is that price decreases may be capped as well.

STANDARDIZATION

For Dartmouth, fostering a good printer-mill relationship is simply part of its strategy of standardization, which extends to buying and running paper. “We're a short-run publication printer. We live and die by our makereadies and setups,” explains Mead. “We want to know the product we purchase month after month — we buy our No. 3 paper from the same mill, for example, and have for many years. The mills know us, and we know them. If we have a problem with the paper, they know we really do have a problem. Or if we need a favor in terms of extra paper or fast order fulfillment, we can get it.”

Standardization is also why Dartmouth inventories only certain types of paper and orders the same size roll (34-inch) each time, according to Mead. Ninety percent of the publications that Dartmouth prints have the same trim size; the 34-inch rolls, rather than the 35-inch rolls that are usually kept in stock at mills, accommodate the trim size best.

“Standardizing our order allows our presses and binding equipment to be set up for those roll sizes,” Mead explains. “Again, as a short-run printer, we can't afford to spend a lot of time changing machinery to adapt to different sizes.”

Wilson, too, suggests standardizing on a few common paper grades and weights. And do keep track of the industry trends through merchants and trade association meetings, he says. “It's difficult for printers not to be affected by the ups and downs of the paper industry, as the paper industry is also affected by the ups and downs of the printing industry,” he observes.

Riordan says he has become friends with mill reps over the years; he keeps tabs on the paper industry simply by spending time with them when they visit St. Louis. According to Wilson, maintaining such good long-term relationships with suppliers and merchants can help reduce the impact of market highs and lows.

So where is the market slated to go in 2002? Paperloop's Ferguson predicts prices will remain low at least through the first quarter. “Hopefully, as the general economy begins to recover, so will the paper industry,” he says. “Prices might begin to rise slightly, but I don't think anyone expects a dramatic jump.”

Not-so-fringe benefits

The most important documents in our lives are, ironically, sometimes the most likely to end up in the garbage. Some marketers are enhancing the look and feel of documents to combat the circular file reflex.

Fringe Benefits Management Co. (FBMC) (Tallahassee, FL) is an employee-benefits management company serving midsize and large organizations. Clients include the State of Wisconsin and Miami-Dade County public schools. A core part of FBMC's services are the booklets it publishes, outlining benefit plans, 401(k) programs, disability options and retirement packages. It produces up to 90,000 of these saddlestitched booklets per client per year.

“We live in a document-glutted society,” says Diane Thompson, communications team manager at FBMC. “People are bombarded with everything from direct mail to memos to menus. The information we publish, however, is vital to the health and well-being of our customers and their families — the documents must convey importance and value before anyone reads a word.”

LIGHT READING

According to Thompson, improving document quality through paper was a cost-effective way for FBMC to boost its image in the hands of its customers. FBMC chose to produce its booklets on a premium-grade, No. 1 paper from Domtar (Montreal). Titanium Opaque achieved best-in-class marks for dot gain, minimal print mottling numbers and opacity when tested at RIT (Rochester, NY).

“We fell in love with the feel of the paper,” says Thompson. “The booklets have impact from the moment you pick them up.”

Enhancing readability — which can be affected by everything from a paper's ink holdout to show-through on duplex-printed pages — is also vitally important. “Reading the details of benefits packages can be perceived as a chore,” says Thompson. “Anything we can do to make that task easier is going to benefit our customers. Titanium has the opacity and ink holdout that makes documents more pleasant to look at and easier to read.”

Paper with high opacity also reduces the overall bulk of documents because a thinner paper can be used without altering quality perception. In some cases, postage costs can be reduced by as much as 25 percent. From FBMC's perspective, a thinner document is also more reader-friendly.

“Today, everyone is a desktop publisher,” the exec observes. “You need to impress customers with quality that's above that of the average home office. Although the volumes of documents we produce don't call for high-end design, using a premium No. 1 opaque paper is a way for us to instantly alter the perception of one of our key products.”

For more on paper…

  • See AMERICAN PRINTER'S “Paper & Ink” supplements: July, September and November 2001.
  • The January 2002 issue of Paperloop's (Marietta, GA) Pulp & Paper magazine includes a paper market outlook for 2002.
  • The “Paper Buying Primer,” by consultant Lawrence A. Wilson, is a 112-page book on the procedures and terminology of buying paper. It costs $25 ($20 for GATF/PIA members), not including shipping. To order, call (800) 662-3916. Indicate order No. 1711.