Master Manufacturer : How to Evaluate Distribution Savings

6 considerations to help you when negotiating your printer contract.

If you're in the midst of negotiating a printing contract, you've already noticed that printers increasingly distinguish themselves by their distribution offerings, not their printing technologies. Because most printing plants today have the ability to put ink on paper at a high level of quality, we tend to shrink manufacturing down to a price comparison. For the most part, distribution also is merely price, but you should consider a few service nuances. But first, let's look at costs.

A co-mailing program is the centerpiece of what printers typically brag about when they say they can save you postal costs. Sometimes, just as important is the printer's drop-shipping approach. Here's how both fit in with the current postal price structure.

In periodicals mail, there are three main cost structures—based on pounds, pieces and containers.

Pounds: One Rate Fits All
The pounds structure applies one rate to all editorial pounds, regardless of distance shipped, and a range of distance-based rates for the advertising pounds. (Ad pounds are calculated by multiplying the single-copy weight by the percentage of advertising; editorial pounds are the inverse.)

The post office can't change rates more often than once a year and already has foresworn any changes for 2010. Because it moves mail, fuel cost has a huge impact on its operation, yet it cannot tack on surcharges as other carriers do. It has tuned its pricing to reflect at least some of the cost of hauling mail various distances, but it still confines these distance-based charges to the ad component. This is in tribute to a principle most publishers forget: Postal rates still are designed to stimulate the exchange of ideas and information, so edit pounds are transported below their true cost.

Tiered ad-pound rates have several implications for publishers. First, the higher your ad percentage, the more vital it is to see if you can move your copies for rates lower than the USPS charges. Second, when fuel prices rise quickly, as they did last year, USPS rates can be lower than what you pay on the spot-freight market for certain mailings.

Printers can haul your mail to its many postal destinations. The biggest savings come from bringing mail to the various sectional center facilities (SCFs) that serve each geographical segment of recipients. Short of that, you can try to reduce the copies in the distant delivery zones by what's often called zone-skipping, or plant-verified drop-shipping. The cost/benefit math is simple, yet subtle. Your printer should evaluate the drop-shipping program dynamically, reviewing each issue's mail file against the current freight cost. You might optimize costs with 100 destinations one month and 120 the next, all depending on that issue's ad pounds and subscriber file.

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