TCO and Print
In our experience, very few companies consistently use TCO for purchases of printed materials. This is understandable, given that many individual print purchases are relatively small transactions. But without a TCO analysis, it’s impossible to have accurate visibility regarding the real costs of printed materials. And the “accuracy gap” can be substantial. Various analysts and research firms have estimated that for every $1 a company pays to external production vendors for printed materials, it will spend $6 to $14 on the other activities and processes relating to those materials.
While it’s not realistic to perform a comprehensive TCO analysis for every print purchase, it’s not that difficult or time-consuming to include some TCO elements in many purchases. In addition, it’s often useful to perform a more detailed TCO analysis for certain groups or categories of printed materials.
The first step in performing any TCO analysis is to describe the lifecycle of the product or service. The lifecycle of most printed materials will contain the six major stages shown in the following diagram:
Source: Real Sourcing Network (RSN)
Once the lifecycle has been described, the next step is to identify the types of costs that are typically associated with each lifecycle stage. It’s fairly easy to identify the major categories of costs that will be incurred to acquire and use most printed materials, and the following table contains the most common cost categories:
Source: Real Sourcing Network (RSN)
A Print TCO Example
As I indicated earlier, it’s not realistic to perform a complete TCO analysis for every print purchase. However, it’s not that difficult to include some TCO elements in most purchases. One component of TCO that can be easily included in most purchases is the cost of inbound fulfillment.
Inbound fulfillment refers to the cost of transporting printed materials from the printing company’s facilities to the buying company’s facilities. These costs usually take the form of delivery fees charged by the printing company or fees charged by third-party freight/delivery companies (e.g., UPS, FedEx, the Postal Service, etc.).
In our experience, most companies treat inbound fulfillment costs in one of two ways. Some companies simply have their print service providers include inbound delivery or freight costs in the quoted price of the printed materials. Other companies routinely pay inbound fulfillment costs using their company accounts with freight/delivery companies in the belief that the shipping rates they have negotiated are lower than those available to their print service providers.
Both of these approaches can result in a lack of visibility regarding inbound fulfillment costs and it’s easy to avoid this problem. With a capable print e-sourcing solution, a company can use RFQs that require prospective print service providers to itemize deliver/freight costs separately from other components of the quoted price. This enables buyers to evaluate the implications of sourcing printed materials from service providers in different geographic locations, as well as when it may be advantageous to pay inbound fulfillment costs directly.
It’s easy to view inbound fulfillment costs as a trivial expense. While these costs can be trivial for an individual print purchase, they add up over time, and can become substantial, given that many companies make hundreds or thousands of print purchases every year. A capable print e-sourcing solution provides greater visibility regarding inbound fulfillment costs and enables buyers to identify opportunities for cost savings.
This article first appeared in Future of Sourcing here.