The Art of Negotiation
The consolidation of some magazine printers, coupled with the growing complexity of production processes makes it even more critical for the magazine production director to follow a structured outline when it comes time to review and negotiate the next print contract. Developing a comprehensive Request for Proposal (RFP) and analyzing the resulting print bids can be a complex task. However, the following reminders will be helpful in making the process easier and keeping costs under control.
Define general parameters
Your RFP should clearly define your intentions as to when the new contract package begins, length of term, volume entitlement, project timetable, criteria for printer selection and pertinent contacts.
In addition to the obvious physical specs—trim size, quantity, page count, color, paper, binding style, etc.—your RFP should also clearly define your schedule requirements and quality expectations. While you and your current supplier may understand your specs, competing printers will require these details in order to provide a valid and competitive proposal.
Consolidation: Titles and contacts
With the many mergers and acquisitions in the publication community, a number of publishers now have the opportunity to consolidate multiple titles into a single, large-scale package—even if the titles have varying specs—that may be more attractive to potential suppliers. All negotiations on the publishers behalf should be conducted by a single, high-level corporate authority, not fractured at the various division levels. This step may be key in keeping the balance of nego-tiating power more equitable, as the major printers begin looking more like an oligopoly.
Once the word is out that you're reviewing your print options, you will be approached by a number of interested printers. Your RFP should be sent to only the four-to-six players most likely to meet your capability, pricing and scheduling requirements. A list broader than six will waste time—yours and theirs. Certainly, choosing a printer with the right equipment and capabilities is paramount to getting competitive pricing. Discussions with your peers, as well as qualified industry consultants, will provide the direction you need to narrow your choices.
It is critical to establish a consistent format for receiving and analyzing price lists, paper requirements, proforma invoices, annual billing comparisons and schedule commitments. Nothing is more frustrating than trying to compare print bids if they are allowed to provide different price and invoice formats.
Printers should be asked to identify its manufacturing plant, equipment to be used and key management's experience level. You should insist that your work be consistently scheduled on optimal equipment to assure on-time delivery. Predetermined proforma specifications and formats that itemize prepress, press work, ink, binding, distribution and paper into the appropriate makeready and run components help clarify the printers prices and give a quick overview of bottom-line comparisons.
You should ask courting printers to provide alternative proposals based on either printer-purchased or publisher-purchased paper. The contract should allow flexibility if you wish to change your paper purchasing structure at a later date. While somewhat linked to the manufacturing decisions, the paper purchasing strategy decisions are important enough to warrant their own thorough analysis. Magazine publishers should also give consideration to the alternative approach of publisher-specified/printer-purchased paper, explained in PrintMedia's January issue. In cases in which the printer will be buying the paper, the action to be taken, in light of future price increases or decreases, needs to be clearly defined. Ask how the printer intends to share spot purchasing savings with the publisher during soft markets.
In addition to the obvious per-unit price comparisons among the printer proposals, you should also focus on each printer's poundage requirements for each press form. By knowing the press circumference and web widths, you can calculate the inherent waste allowances and see how reasonably the allowances were quoted. If your titles have a trim size of 10.5˝, it is extremely important that the quoted allowances are based on short, cutoff presses. The printer should clearly identify paper mark-ups or handling charges, if any.
Annual cost comparisons
Overall competitiveness is best determined by calculating the anticipated total annual cost of each proposal, not just by looking at one or two proforma invoices. The various proforma models need to be weighed with a reasonable estimate of how many issues (of each type) make up your annual volume. Inevitably, senior publishing management will want to know the annual savings impact of selecting Printer A versus Printer B and how the proposals compare to current manufacturing costs.
You should base your supplier selection on capability, quality, service, price and relationships. Price consideration is irrelevant if a prospective printer cannot fulfill your magazine's requirements. After careful analysis of the first four considerations, you may well have a tie. That's when relationships come into play. Relationships can win ties, particularly if you feel comfortable with a printer's culture and staff.
Current supplier considerations
If your current supplier consistently provided excellent quality and service—and remained price-competitive—you may consider an early renewal proposal from the incumbent and bypass the full-blown RFP process. This presumes that your current supplier offers appropriate pricing incentives linked to reductions for the last six months to a year left on the existing contract. However, renewals without consideration of competitive proposals should only be done once, never two cycles in a row.
In some cases, proposals may be very close in all the aforementioned areas. How long the prices are effective or when they are subject to escalation may distinguish one from another. Payment terms is another area where one printer may be more flexible than another. The contract should allow for equipment and specification flexibility.
Close the deal
Rarely will one round of bids bring you closure. A second and (hopefully) final round will enable you to fine tune the many basic and subtle issues with two finalists. Going beyond two rounds is usually not necessary, nor is it recommended. If you are changing printers, three-to-six-months notice to the incumbent is appropriate to ensure a smooth transition.
William Lufkin (909-687-8134) is president of Lufkin Strategic Procurement, a print and paper purchasing consulting practice based in Riverside, CA.