Why Dependance on a Single Print Supplier can put Core Operations in Jeopardy
In a healthy general economy a single print supplier relationship can yield benefits in the form of reduced costs, high brand consistency, print quality, and time to market and so on, so it is a low-risk proposition.
However, when the economy is less healthy, and with the increasing move towards digital marketing, various inherent aspects of the print industry conspire to magnify the risks associated with this strategy.
Print suppliers, working on a low gross margin, must accommodate considerable investment in large equipment, have significant material and resource costs, typically operate 90+ days credit terms, rely on loan facilities for operating capital and have low credit ratings. This gearing means that they are highly susceptible to recession in the general economy.
Though print has been commoditised over recent years, it remains a critical operational component for many businesses. Without print you cannot effectively drive marketing, billing, point-of-sale and many internal operations.
The failure of a print supplier can therefore be a critical business issue. But because of some of its specialist considerations, sourcing a new supplier may not be very easily or quickly achieved.
How then to insure against these risks? In this climate, it is absolutely crucial to adopt a multiple overlapping supplier strategy, never allowing yourself to represent more than 25% of the suppliers’ turnover, and to use an e-commerce purchasing management system to route requirements and orders to suppliers. In this way, if a print supply business fails, the print requirements usually routed to that failed business can be routed to another with little disruption to your core business activities.
In terms of e-commerce systems, businesses should particularly be wary of reliance on a system that has been developed internally and provided by a print supplier, for the following reasons: firstly, because the implementation of such systems across your business is a significant disruption to day-to-day operations and to have to repeat it would be costly; and, secondly, the failing print supplier will usually take the system down with them, resulting in the loss of important operational and analytical information that will be very costly and time-consuming to replace.
A best practice approach is to review print supplier relationships, identify reliance on single suppliers, implement an e-commerce print procurement system and expand the print supplier base to ensure overlap in identified critical areas. A business case for the investment in the e-commerce system would also include a host of benefits – beyond the offsetting of the risk of single-supplier failure.
James Evason is Business Development Director at MarketingUnity, a software company specialising in B2B ecommerce systems for marketing collateral development, production, procurement, fulfilment and supply chain management.