Purchasing Paper – A Growing Challenge or
Business as Usual for Many Printing Firms?
The National Printing Research Council recently conducted a survey dealing with some of the classic issues confronting printers when it comes to purchasing paper, and while there were no “real surprises” uncovered, we did get a better feel regarding how printers deal with the second largest expense item confronting them in this industry – Paper!
First, let’s take a look at some of the basic statistics derived from our survey data. Approximately 158 printers from around the country participated in our survey. They came from small towns and cities such as Monticello, KY and Pickney, MI to much larger cities such as Houston, TX and Pittsburgh, PA.
Second, while our survey did not directly ask for annual sales, we know that the average annual sales of our participants was in the $800,000 range while the median sales was closer to $520,000. We were able to extrapolate our annual data sales based upon other data provided by our participants – specifically monthly paper sales and the percent of paper purchases as a percent of total sales.
• Average annual sales of survey participants: $822,300
• Average paper purchases as a percent of total sales: 12.55%
• Median annual sales of survey participants: $521,739
• Median paper purchases as a percent of total sales: 11.50%
As for purchases of paper reported as a percent of total sales, the average 12.55% reported above, is extremely close to the 10.5% reported in the 2017-2018 Financial Benchmarking Study. According to the Benchmarking Study, the top quartile based upon profitability reported average paper expenditures of 10.5% while the bottom quartile reported 12.7% for paper purchases.
Survey participants also reported the following:
• Average Paper Order… $584
• Median Paper Order… $400
Approximately 44% of our participants reported purchasing paper every day, while another 35% told us they placed an order every 2-3 days. The reasons for paper frequency have as much to do with general sales volume as they do with minimum order requirements imposed by paper vendors.
Firms located in isolated, rural or small town environments tend to be, by their very geographic location, smaller firms and as a consequence they tend to also order smaller $$$ amounts of paper than printers located in suburban or major markets.
Minimum Paper Orders & Paper Stores
Approximately 32% of survey participants reported their local paper vendor (primary or secondary) imposes a minimum paper purchase order before they will deliver. The rest of our participants indicted they faced little if any imposed paper purchase minimums.
While 44% of our respondents indicated they place paper orders every day, another 21% indicate they place orders once a week or less.
In fact, a few printers told us they could order as little as $25-50 and their paper company would deliver, often at no extra charge.
Other printers, however, reported having to order $400 or more to avoid paying a delivery fees of $50 or more.
Approximately one-third of paper vendors have established a “Minimum Purchase” requirement before they will deliver paper.
The average minimum paper purchase required by vendors imposing such an amount is $273. The median amount is $300.
For printers unable to meet these “minimum purchase amounts” they are typically faced with an average or special delivery fee of $80. The median delivery fee, when imposed, is $25.
Although we have no hard data to support this, we believe there is a decline in the number of paper stores available and serving the printing industry.
What about “paper stores”? The industry is pretty much split when it comes to having access to such a convenient alternative to relying on paper deliveries, especially for small amounts of paper. Approximately 55% of our respondents told us they have access to such stores, while 45% told us they have no access.
Paper Vendors & Delivery Frequency
Once again, larger printing firms in larger markets have the benefit of more frequent paper deliveries. Approximately 79% of our survey respondents told us their paper companies deliver to their markets every single day.
A small percent of our respondents indicated they could only count on scheduled paper deliveries twice a week. Fortunately, most printers can count on paper deliveries 5 days per week.
At the other end of the spectrum are about 13% of printers who either get paper deliveries once or twice each week, or must rely on freight companies or services such as UPS and FedEx.
Approximately 66% of our survey participants told us that their primary paper vendor does offer alternative shipping and were more than willing to ship paper orders via UPS, FedEx and couriers if their paper order was too small to process internally.
Discounts for Prompt Payment?
Regardless of whether the paper vendor is a primary or a secondary supplier, a significant percent offer discounts for prompt payment of invoices.
• 67% of Primary Vendor Offer a Discount
• 62% of Secondary Vendors Offer a Discount
Location, Location, Location
It should come as no surprise that paper vendors tend to be located where the action is, and where the action is also means where large numbers of printers are located as well – where else but in larger metropolitan areas.
Almost 12% of the printers we surveyed indicated their primary paper vendor was at least 100 miles away!
Our survey also asked printers to tell us the approximate distance between their primary and secondary paper vendors and their own location. Approximately 67% of printers told us their paper vendors were located 50 miles or less from their own location, with a majority of them telling us their paper vendor was less than 25 miles away!
“Many printers around the country don’t know how lucky they are. Our one and only paper supplier, Mac Paper, is approximately 75 miles away and they have made it almost impossible for smaller printers to deal with them…”
On the other hand, approximately 8% of our participants told us their primary vendor was located between 100-200 miles away. Another 2% told us their primary vendor was more than 200 miles away!
When it comes to secondary vendors, it gets even worse, 15% of our participants telling us that their secondary vendor was 100-200 miles away.
One printer complained and told us, “Many printers around the country don’t know how lucky they are. Our one and only paper supplier, Mac Paper, is approximately 75 miles away and they have made it almost impossible for smaller printers to deal with them. They won’t even deliver a paper order worth less than $200. If the order is between $200 and $400 they charge a $50 delivery fee. Between $400 and $500 they charge a $25 fee. Plus, on top of that they also hit us with a $6 fuel charge.”