Its a new year, and a whole bunch of new problems

[mattf]

Hey gang:

Thought I'd drop in and say hello. HELLO!

Anyhoo, whole set of new problems has popped up at me this year, so I need some potential advice that could help me out within this predicament.

Subject: house stock vs. customer-centric mindset

My print company has a small press department that deals with envelopes, business cards, letterheads and so on. The small things, and it needs to be reorganized as per my orders.

One of the biggest issues I see is the reorganization of paper selection within small press.

Sales has always given customers the widest selection of paper that they can get. With this, customers can get whatever paper they so choose that we have access too. We have 100+ types of envelopes, paper stock that we use for small press. Of course, we have now been using JIT procedures so we do not have to keep an inventory. Makes sense of course. However, as time has effortlessly moved the shop has accumulated a lot of extra stock. Why you might ask? Well those pesky A-10 envelopes that the customer only wanted 500 of and one carton was 1000 kind of screwed up that system. Multiply that by the A-2's, A-6's, A-7's, #10's, tons of others and you get the idea.

On top of the fact that management loves to hoard paper, world war 2 mindset I'm afraid, it becomes a never ending battle between everyone.

I have many divides on the subject:

1) Sales - They wish to give customers the widest selection to choose what the customer feels is best. Makes sense of course as I stated, but then we get issues with runaway inventory.

2) Management - If we paid for it, why chuck it if there are extras? Why not save it for another job? This would work if only the sales cared about selling the extra stock, which they are not.

3) My Solution - I've put this plan in the works, but getting a lot of backlash. Very few options of stock, if customers want custom they have to pay extra for it and we keep no inventory in order to incorporate JIT practices. On top of that it cleans up a large section of the plant.

Any advice on how to handle some of the viewpoints on this subject? JIT is lean, and making it happen actually isn't that hard, its just getting people on board that is the complication.

 

[Internal_R&D_Analyst]

I like your idea of charging the customer a stock price based on the carton/box/ream quantities no matter what odd quantity they order.

Several years ago I worked at a similar printing printing company. We kept standard inventories for envelopes say in white and a few sizes. Anything else was a custom order and the customer paid a mark up for that. Any extra stock was properly labeled and stored on a special order stock shelf every 4-6 weeks the inventory was reviewed. Things we knew had a high likelihood of being used were kept and other recycled or given away to schools or nonprofit organizations. Otherwise this stock was used for setups for other orders of odd sizes when it would allow use to eliminate an extra, box/ream/carton to be ordered for the job. You will need to make sure purchasing or the purchaser is aware of the items and quantities otherwise they won't get used and you might as well not save anything.

You could consider informing your customer of standard quantities for different stock items but I am sure there are those customers that also expect to go to the grocery store and buy half a loaf of bread and pay half the price. For those ones you'll just probably never win.

 

[mattf]

I like your idea of charging the customer a stock price based on the carton/box/ream quantities no matter what odd quantity they order.

Several years ago I worked at a similar printing printing company. We kept standard inventories for envelopes say in white and a few sizes. Anything else was a custom order and the customer paid a mark up for that. Any extra stock was properly labeled and stored on a special order stock shelf every 4-6 weeks the inventory was reviewed. Things we knew had a high likelihood of being used were kept and other recycled or given away to schools or nonprofit organizations. Otherwise this stock was used for setups for other orders of odd sizes when it would allow use to eliminate an extra, box/ream/carton to be ordered for the job. You will need to make sure purchasing or the purchaser is aware of the items and quantities otherwise they won't get used and you might as well not save anything.

You could consider informing your customer of standard quantities for different stock items but I am sure there are those customers that also expect to go to the grocery store and buy half a loaf of bread and pay half the price. For those ones you'll just probably never win.

Love the bread analogy.

Thanks for your input!

The bare bones idea of how to deal with sales is really simple once I get a system down and actually approved. There is this awesome divide that's convoluted in itself:

1) The sales team wish to be customer-centric, so at times if issues occur we blame ourselves, even if it is clearly the customer is at fault.
2) Sales always complain that they have no direction of selling and so they make the rules up as they go along. They "want" direction, but want to give the customer the bow and arrow to shoot, even though the target is behind them.

All derived from years of mismanagement, but once the system is in place and they "get" the direction I believe it will change for the better. It will take some retooling which happens with any decent sized project.

 

[bphilippi]

I am ran through this same problem myself last year and I was pulling my hair out having to have employees move things around, count at stocktake etc.

My solution was to charge what it has cost us. Then any extras go onto a pallet for in-house use etc. every month we take the pallet of leftovers and donate it to a nonprofit around the corner. I know that in Australia at least, any donation to a registered charity is tax deductible so I make an invoice up and everyone wins.

Try explaining to management that having stock lying around for 2 years and moving it/Stocktake every couple of months is COSTING them more money than if they just recycled it.

 

[mattf]

I am ran through this same problem myself last year and I was pulling my hair out having to have employees move things around, count at stocktake etc.

My solution was to charge what it has cost us. Then any extras go onto a pallet for in-house use etc. every month we take the pallet of leftovers and donate it to a nonprofit around the corner. I know that in Australia at least, any donation to a registered charity is tax deductible so I make an invoice up and everyone wins.

Try explaining to management that having stock lying around for 2 years and moving it/Stocktake every couple of months is COSTING them more money than if they just recycled it.

Thanks for the reply, it seems like a great idea. I'm checking with another portion of the forums in order to figure out if there is a way within the U.S. to donate paper and get a tax write-off, but we shall see.

 

[rcreveli]

Any non house stock is billed with the job. If I have to order 1000 A-10's the customer is billed for them. We try to give them a very good price on that additional qty but if they don' t take we hold on to it for about 6 months and then recycle/donate.

 

[Morning Flight]

Any non house stock is billed with the job. If I have to order 1000 A-10's the customer is billed for them.

Absolutely, nothing else makes sense. And my background was in Sales, before I started up a printing company! One of the most frequent questions I get to this day is "Why does your estimating program charge for 1,000 sheets when the order calls for only 500 letterheads?" Simple answer: Because no vendor is going to sell you one ream and 100 sheets out of another ream for spoilage and setup. The only alternative is the old thumb-on-the-scale trick, buy a ream and close your eyes and box it up, then bill for 500. There's a question of ethics here but more to the point, if your customer ordered those letterheads for a mailing and comes up short you'll have some esplainin' to do.

Here is what we did back in 1975, mattf. We designated a small range of stocks, mostly white or off-white, with a few light colors sprinkled in for variety. We then promoted it as our Instant Paper Caper (see our original ad copy in the attachment). The key to making it work was to let Sales come up with the list, and to make customers aware of the savings. Just as some of the members here are doing, once or twice a year we cleaned out our odd lot room and donated the leftovers to a day care center (kids go through a lot of paper). We weren't smart enough to think about the tax write-off.

That was then. I now find myself having to sell the same "in-Stock versus Vendor Paper" concept to Morning Flight users on our forum, because they disagree with how the program estimates paper. The only question I get asked more often is "why shouldn't I charge more when I run a job on the Heidelberg today because the Ryobi is down and waiting for a part to come in and ... " - but that's a topic for another day.

Some ammunition to help convince your Sales people:

Too much stock! - The Morning Flight Lounge
Pricing Paper

Of course, you could always suggest that the next time they expect you to order an extra box of envelopes without the shop getting paid for it, why not go Dutch and split the cost.

Hal Heindel
www.morningflight.com

 

[mattf]

Absolutely, nothing else makes sense. And my background was in Sales, before I started up a printing company! One of the most frequent questions I get to this day is "Why does your estimating program charge for 1,000 sheets when the order calls for only 500 letterheads?" Simple answer: Because no vendor is going to sell you one ream and 100 sheets out of another ream for spoilage and setup. The only alternative is the old thumb-on-the-scale trick, buy a ream and close your eyes and box it up, then bill for 500. There's a question of ethics here but more to the point, if your customer ordered those letterheads for a mailing and comes up short you'll have some esplainin' to do.

Here is what we did back in 1975, mattf. We designated a small range of stocks, mostly white or off-white, with a few light colors sprinkled in for variety. We then promoted it as our Instant Paper Caper (see our original ad copy in the attachment). The key to making it work was to let Sales come up with the list, and to make customers aware of the savings. Just as some of the members here are doing, once or twice a year we cleaned out our odd lot room and donated the leftovers to a day care center (kids go through a lot of paper). We weren't smart enough to think about the tax write-off.

That was then. I now find myself having to sell the same "in-Stock versus Vendor Paper" concept to Morning Flight users on our forum, because they disagree with how the program estimates paper. The only question I get asked more often is "why shouldn't I charge more when I run a job on the Heidelberg today because the Ryobi is down and waiting for a part to come in and ... " - but that's a topic for another day.

Some ammunition to help convince your Sales people:

Too much stock! - The Morning Flight Lounge
Pricing Paper

Of course, you could always suggest that the next time they expect you to order an extra box of envelopes without the shop getting paid for it, why not go Dutch and split the cost.

Hal Heindel
www.morningflight.com

Love the dutch principle, I know customers would love it!

I have already started that concept where I've selected which stock we will use as our "house" stock. I've determined that by seeing which stocks sold the most or the most frequently over the past 2 years. Was tedious, but I got a short list and should be presenting the plan this week.

The only issue with sales is going to be their concept of "customer centric". We should give what the customer wants, why should we limit their ability to choose what they wish?

And regarding press changes, well I've seen that happen for the worst. Try plating a job, press breaking down, re-plate and then the job looks different on the press compared to the proofs. And not because of the plate, but because of the differences of the press. 20+ year old press vs. brand spanking new one can be a huge difference

 

[Morning Flight]

The only issue with sales is going to be their concept of "customer centric". We should give what the customer wants, why should we limit their ability to choose what they wish?

True, mattf, true. But is that before or after we find out what our customers really want, not what Sales think they do? I'll bet when given a choice between paying $800 for coated stock spec'd by their ad agency, or $500 for an equivalent stock from your inventory, most will opt for your house stock. Your sales rep assumes the customer is dead set on the ad agency paper, when in reality what customers really want is value. A good product, exceptional service, at the best possible price. Yes, I know, pick any two.

Then there is the exotic paper discovered by the customer's graphic artist (bless their little black hearts). The artist says it will give the customer's stationery that regal look which adds prestige. You print the job and six months later the customer reaches for the last box of those specially made envelopes and there's only a handful left in the box and you have to explain why you can't get more before maybe Thursday this coming August! Chances are, the question now will be "Why didn't you warn me and recommend something off the shelf?" Here, too, what the customer really wanted, needed actually, was availability. Along with Quality and Price.

Many years ago, American Printer ran a survey and found out that 91% of all printing paper is specified by the printer. That being the case, mattf, you have a winning proposition.

Amazon.com: What Customers Really Want: Bridging the Gap Between What Your Company Offers and What Your Clients Crave: Scott McKain: Books

Hal Heindel
www.morningflight.com

 

[Lammy]

a neat little marketing deal if your the right shop to do it is to take old odd lot stock and offer a "monthly special" on it.

Most shops I've been at have had 2-4 house stocks for every item, coated, uncoated, letterhead, envelope, business card etc. They bought in bulk and knew what it cost. Anything other than that was quoted, and the customer always paid for extra for spoilage.

 

[mattf]

a neat little marketing deal if your the right shop to do it is to take old odd lot stock and offer a "monthly special" on it.

Most shops I've been at have had 2-4 house stocks for every item, coated, uncoated, letterhead, envelope, business card etc. They bought in bulk and knew what it cost. Anything other than that was quoted, and the customer always paid for extra for spoilage.

Again, sales seems to not like that side of it. We've tried that before, and somehow they never were able to sell any of it. Why you might ask? They didn't want to. The money wasn't there. Why get a job for a "special" when you can order new stock and get more commission? Its a vicious cycle.

I've drafted a proposition to basically create 2 choices for each item. Envelope, business card, letterhead and commodity envelope. This creates a up front price and gives customers an easy and "economic" choice that helps them out in the end as well as us. And of course, custom jobs are quoted and they are paying extra for the whole carton/ream of paper, and not just what was given to them.

Hopefully it works out. Again, this is a battle with sales for me really. Whether they wish to draft it or not is up to them.