In the UK, the National Association of Paper Merchants (NAPM) members are reporting a 25% decline in paper volumes between 2008-11 and while volumes are lower again this year, the rate of decline seems to be slowing. At the same time the printing industry is shrinking, in the numbers of printers, in the numbers employed in the industry and in sales. It is no surprise that both report that margins are under pressure.
The situation is exacerbated by the competition that printers face from electronic media and the choices that the timber companies are making with regard to what they do with their product. Construction, furniture and energy are all claiming a stake for trees, while packaging and hygiene products are bidding for pulp. If paper cannot produce a profit, the wooden assets will be diverted to other applications and paper supply will tighten and prices rise.
If there is an answer it will not be discovered by continuing the behavior that has led to this point. And it was to change this that the NAPM and BPIF have collaborated on a best practice guide:Optimizing Paper Supply Chain Management, which was launched at a conference in London at the end of last month with a call for joint action to set the industry on a new course. "This is a wake-up call for the industry" it states.
In the introduction the problem is summed up: "It has become vitally important that the printing industry better understands, acknowledges and appreciates these changes that the merchanting industry has necessarily had to make in the past few years and will continue to have to make in the years ahead."
In short the levels of service that grew up when the printing industry was booming, when merchants were competing to win market share, leading to same day deliveries, extended credit terms and so on, have to come to an end. For printers this is doubly difficult at a time when their margins are under pressure because of the intensive competitive pressures they are under. Different merchants are responding in different ways, with depot closures, expansion into packaging materials and wide format graphics the most obvious examples.
But at the same time there is increasing recognition that merchants and printers should be on the same side, that in order to achieve the sort of efficiencies that can restore some sanity and margins, there will have to be changes on both sides. The report, compiled from a survey of 90 commercial printers in the UK and by talking to NAPM members, is a manifesto for that sort of change.
Gareth Ward, Editor, The Print Business
More transparency needed
It lists a number of best practices that can ease some of the current difficulties that are identified as bones of contention and makes a series of recommendations that could change the way that the two bodies work together. There needs to be greater transparency in terms of cost, both of the paper and the logistics of storing and delivering it. The result would be that printers could elect to pay a premium for faster deliveries, or gain a discount through accepting less frequent deliveries or deliveries to suit the distribution routes that the merchant has.
There is a call also for transparency in terms of the paper itself. Merchant branded papers can be produced in mills that are making the same paper under a different name, or indeed that merchants switch the brand from one mill to another, as Paperlinx has done recently with Revive, with consequent changes in profile and on press behavior.
Along with the transparency on deliveries, the report calls for a greater clarity in service level agreements with each side understanding what the other can expect, where charges for extras are spelled out and supplier and customer can negotiate a more suitable deal for both.
Improved use of information technology can bring benefits for both sides, though printers have been reluctant to change the way they work, preferring the personal contact that they have traditionally enjoyed. Elsewhere the report identifies a trend for branch managers, sales or credit managers to form close relationships with customers that can more that from the sort of professional footing that is required.
In consequence, printers have been slow to accept electronic invoicing and slower still to move to online ordering even though data about paper to be used is captured in a Management Information System (MIS) and price lists are downloaded from the merchant's website. Merchants have also adopted IT systems, the example cited is the TOPS11 system developed for Denmaur Independent. This has streamlined its own purchasing operation, moving from a task taking 45 working days a month for a team of eight, to a one person working just two hours a week. It also provides reports on orders and stock for customers and will allow a printer to enter usage details into the system, this aspect being under test at present.
Adoption of electronic systems of ordering will shave large sums from the purchasing process, just as MIS has done for print orders and enabling printers to run with smaller jobs than with all details needing to be entered manually at significant costs per transaction.
Analysis of data held in the print company's MIS can be useful to predict paper volumes and grades that are commonly used.
Wise up or print will be priced out
Warming to this theme there is a call to make better use call off stocks, settling on a house sheet that can be used for many jobs. The report suggests that customers are responsible for choosing the paper used in 30% of cases, the remainder of the time the paper buyer or company director makes the selection.
There is a lack of professionalism in some of the purchasing habits displayed, with a call for training to rectify this, both in terms of professional purchasing habits and in knowledge about paper. The report recommends that some kind of joint training should be set up to improve this aspect of the supply chain. This would allow the printing industry to move on from adversarial negotiation that is the norm at present. There is plenty of evidence to show that open negotiations result in deeper more trusting relationships thanks to better understanding of each side's objectives in striking a deal.
Many printers have already adopted systems to segregate waste paper, and indeed to minimise the amount of waste generated. This is simply good practice as white paper secures a higher price than printed waste or packaging. Lean management systems are recommended to avoid over ordering and running with more waste than is necessary.
What is needed is a full cross industry review of what sort of changes can be implemented, adding up to improved communication, a greater understanding on both sides and a greater level of professionalism. The alternative of continuing as the industry has worked over recent decades will mean more decline. "Printers and merchants need to come together to work out ways to increase market size by enhancing the value of the printed product and streamlining supply side efficiency," the report says. "There really is a need to change the whole of the industry - otherwise print will become more expensive and less competitive with new alternative media."