To me, the idea of being a Sherlock Holmes-style detective can be pretty alluring. While few people one could ever live up to Arthur Conan Doyle's supremely skilled sleuth, sometimes it can be fun and beneficial to do a little detective work in our own lives. In fact, I was presented with a logistics mystery that, in my mind, needed solving.
The Mysterious Delivery
It began simply. One Thursday morning, I opened my newspaper to an insertion from a large supermarket chain. As a logistics pro, I turned it over in my mind. “This got printed and delivered to me. But by whom? Who printed it, and did they ship it?" And being sales-minded as well, I had to ask: “Is there an opportunity here?”
I was going to track this down.
I got on the internet and used all of my resources to dig deeper into this opportunity. My first lead that turned up was an agency, apparently responsible for assisting in the sourcing of this project. I didn’t know anyone there, but a good detective has his sources and connections by degrees of separation. I got on the phone with a contact of mine, and she was able to connect me with her contacts at the agency influencing these key decisions for the supermarket. We started a conversation, and a trusting, consultative relationship began.
Investigating the Program
After connecting with the right contacts, I discovered that the insert in question was printed at a number of locations around country, of which four or five belonged to one very large printer. As frequently happens, printers that control a majority of a print project look to manage the logistics process, as well. That large printer had proposed to the client this way: "Allow us to manage your paper, printing and logistics, and we'll give you a sweetheart of a deal. Even if you buy your own paper, we can manage the print and logistics for a very competitive bundled price.”
Now, this supermarket chain thought this was great – appreciated the perceived cost savings. After all, they wanted to save money, and this seemed like it would do just that.
But I kept digging. Something just didn't seem quite right, so I laid it all out on the table for them. I asked my contact to share the program details and explained that, if they did, I would function in a consultative manner to come back with one of two responses (both of which would be good for them–one might even be good for me):
- “Wow, you’re in really good hands. Your paper, print and logistics pricing is very competitive. It looks like you’ve done your homework, and you’re in good hands. Good job.”
- “I think you may have an opportunity here. Have you ever considered doing X or Y instead? Your boss will think you’re a hero because you’ve helped your company better negotiate, improve efficiencies, and save a lot of money.
They liked their odds. The team gave me the details about their newspaper insert program, and I was able to continue my sleuthing. What I discovered surprised them, to say the least.
Clueing In: You May Be Overpaying for Logistics
The supermarket was purchasing “bundled” services from the aforementioned printer, combining the cost of paper, print and logistics into one price – at a perceived CPM (cost per thousand) savings. Often, on the surface, it looks like a deal. But is it? If something looks too good to be true, maybe it is.
The percentage cost of logistics for a newspaper insert should be relatively minimal in relation to the paper and print. The breakdown varies, but in this case, was approximately 40% paper, 44% printing and (only) 16% logistics. This percentage will obviously fluctuate due to numerous variables: frequency, piece weight, page counts, number of print origins, number of newspapers, etc. But, many insert vendors are printers by trade. They broker logistics, they broker the paper, but they’re ultimately a printer—and they want to win that print business, as it is their core competency and has the highest percent of the revenue.
So, in review of line item costing, print vendors, in order to assure they are competitive enough to win the print contract, tend to move print costs into logistics to be as competitive as possible in paper and print. The customer thinks they're getting a great deal, but they now recognize that they are actually overpaying for their logistics services.
By taking the time to investigate the supermarket's line item costs associated with paper, print, and logistics, I discovered that the logistics costs were actually inordinately high. They weren’t competitive at all with what a third-party logistics (3PL) provider could offer. Incidentally, 3PLs provide ONLY logistics services – unlike a printer who, in addition to printing, brokers paper and logistics.
It may be time for the buyer’s community to start requesting an “unbundling” of these services.
A Solution to the Mystery
My detective work had paid off. There was indeed an opportunity for both Harte Hanks and this large supermarket chain. By partnering with us to manage the logistics for their newspaper insert, the brand saved $200,000 in the first year alone.
The problem is that logistics providers tend to lose out on “bundled” business because the paper, print and logistics CPM is perceived as so competitive – AND the client all too frequently does not have the time to challenge the unbundled costs.
The lesson learned? Spend the time to do a little sleuthing of your own and dig beyond the apparent bundle deal. Ask your print vendor to unbundle the costs of paper, print, and logistics—or even just print and logistics alone. Your sweetheart deal might not be as sweet as it seems.