Likewise in the world of print procurement, an approach that is attracting attention is available for increasing efficiencies and reducing costs when buying direct mail, marketing materials, commercial print, labels and product packaging. Developed by William Gindlesperger, founder and chief executive officer of e-LYNXX Corporation, the competitive pricing methodology is based on the premise that the buyer can achieve enhanced quality and service while lowering prices substantially. This occurs when qualified suppliers are offered an opportunity to price projects based on their own production needs, rather on what the suppliers perceive as the amount that the buyer is willing to pay.
The procurement methodology is called The Gindlesperger Method and is protected by U.S. Business Method Patent No. 7,451,106. It consists of a number of steps.
Gindlesperger said the first step is for the buyer to create within a computer-operated system a preferred supplier database – one that includes suppliers that the buyer wants to do business with, perhaps based on already established working relationships. Attributes such as location, production capabilities, quality levels, etc. are entered for each supplier.
The second step is for the buyer to create within the same computer-operated system a set of project specifications including such requirements as quantity, quality, delivery date, etc.
The third step is for the computer-operated system to match each supplier's attributes to the project specifications for which the buyer seeks pricing. In this way the system identifies only those suppliers qualified to do the work, thus eliminating those that cannot meet the specifications for a particular project.
The fourth step is for the specifications, in a solicitation format, to be sent to selected suppliers, allowing them to submit price responses based upon their own available production capacities. Each supplier is permitted to bid high, low or not at all without setting a precedent for future pricing. Since a supplier continues to be automatically selected for each project based on qualification, and not based on prices submitted previously, the supplier is free to bid based on its own production needs. A supplier no longer has to bid based on what the supplier believes to be the price expectation of the buyer.
The final step is for the buyer to review the prices submitted by the supplier.
On average, suppliers of customized goods and services, like printers, have 30% idle production capacity and are constantly seeking projects to fill schedule gaps. Since these suppliers typically operate on thin margins, even a handful of unsold hours can cause their profitability to erode or evaporate. To obtain projects that fill idle production capacity, suppliers are willing to offer extremely low pricing – unless the low pricing erodes another piece of business that is already being sold at higher prices. It is only when suppliers realize that they are not going to be penalized on future projects for a low bid today that the lowest possible price can be obtained.
“Establishing a methodology that allows suppliers to fill their unsold production capacity is the best driver for reducing pricing,” Gindlesperger said. “What is certain is that unsold and idle capacity contributes nothing to the supplier. On the other hand, any revenue above out-of-pocket costs obtained during otherwise unused production time contributes 100% to the bottom line. Using this strategy, a print supplier can improve its profitability from 3% to 17% or more by filling unused capacity, even when these additional fill projects are sold at prices reduced by 25% to 50% or more".
Gindlesperger said that "the low pricing that results from this simple, yet efficient and effective, approach saves buyers about 40% on print spend compared to the prices they paid previously.”
Considering that 3% to 20% of a typical organization's annual operating budget is for print procurement, the overall savings can be substantial. "When executives and procurement managers look at all they print, from business cards to billboards, from direct mail to marketing materials and commercial print, and from labels to product packaging and more, the only thing to lose is excessive costs. There is just no excuse for not benefitting from this cost reducing method," according to Gindlesperger.
Behind the scenes making this a win-win for the buyer and the print supplier, Gindlesperger said e-LYNXX's proprietary computerized communications and workflow system and its American Print Management staff of print experts support each client with supplier qualification and on-going assessment, specification development, change order control, formal quality assurance and other procedures specifically designed for customized print.
"We developed a unique methodology, patented it, and now make it available to organizations that want to trim their costs. Organizations are looking for significant savings wherever they can find them to survive in today's troubled economy," Gindlesperger concluded.
