Outsourcing: The Rest of the Story

The term brokering covers a lot of territory in the printing industry. For printers, it refers to jobs sent out for production or services outsourced. For industry vendors, it means providing “to the trade” products or services. And then there is the large and often overlooked group of pure brokers who sell print products and services to the end user and source those products and services to the “to the trade” suppliers.

The next thing to consider is just what products and services lend themselves to being outsourced or brokered. The short answer is “anything”. If you need agency-quality color printing, embossed pencils, promotional mailing lists, wooden business cards, bindery services, mailing and fulfillment services, metallic labels, or imprinted tortillas, you can find a source somewhere.

 

To the Trade

Buyers Guide listings at MyPrintResource.com show some 1,200 companies in the trade services category. Of those, nearly 500 are listed as trade printers, 200 as trade binders and finishers, 160 as prepress design service providers, and 19 as mailing and fulfillment service providers.

Thumb through any copy of QP and you will find trade vendors for color printing, labels, tickets/tags, presentation folders, business forms, wholesale copies, envelopes, magnets, Post-It notes, rubber stamps, and a plethora of other things.

Companies that provide printing, promotional, or other services are roughly divided into those which cater to the end user or consumer and those which cater to the trade. Some do both and make no secret of it. Some do both, but downplay the consumer angle. Some do cater only to the trade, but define “trade” somewhat broadly. These latter companies might seek business from commercial printers as well as in-plants, big box stores, office supply stores, FedEx Office, the UPS Store, etc. They also service the many pure print service brokers.

Quick and small commercial printers often see some of these trade printers as competition due to their courting of end users. Others shrug off the consumer emphasis of such companies as VistaPrint and take advantage of the lower prices to broker out certain gang-run and color jobs.

 

Pure Brokers

The Print Brokers/Buyers Association International is a “worldwide membership trade organization of printing intermediaries: group buying/outsourcing services, independent manufacturers’ representatives, and value-added resellers.” It boasts a source listing of some 26,000 print brokers, buyers, and suppliers. However, print is not the only thing brokers handle. In fact, many brokers do more in the area of promotional products than in printing.

There are two main organizations involved in the promotional product and ad specialty arena, PPAI (Promotional Products Association International) and ASI (Ad Specialty Institute). ASI membership consists of 22,000 distributors and 3,500 suppliers of promotional products and ad specialties. These two organizations do cater mainly to brokers, but some commercial printers also become members in order to take advantage of the pricing and other benefits membership provides.

For quick and small commercial printers, probably the most familiar name in the pure brokering arena is Proforma, which boasts some 650 “marketing consultant” franchisee offices, 50,000 clients worldwide, and system-wide sales of $359 million. These Proforma print brokering franchisees provide “promotional products, printing services, business documents, and eCommerce solutions” which they source through an approved vendor list of some 15,000 suppliers—many of which also serve the quick and small commercial printing industry.

 

The Rest of the Story

I said earlier that almost anything can be outsourced and noted how many different product and service providers can be found. The question now is how much of what should be outsourced to whom. Changing technology or emerging new profit centers can have an influence.

For example, QP columnist John Giles sees an upswing in envelopes being brokered out. “With so many printers going completely digital, they need a source for envelopes. A number of trade printers are providing envelopes at a really good price with fast turnaround.”

Printers are also expanding into mailing services, which opens up a whole new avenue for outsourcing. According to QP columnist Nancy DeDiemar, the most typical brokered service here involves the acquisition of a mail list. “Mail list/database services could be either brokered entirely (including analyzing the mail list to be sure it is set up properly for addressing and taking care of USPS requirements) or some work could be sent out and some done in-house,” she says.

No matter what is outsourced, there is the question of profit. QP columnist John Stewart notes: “Even the largest markups used in the industry (100 percent) only produce a gross profit of 50 percent and many printers markup much less,” he says. “The average gross profit in this industry on jobs produced in-house is approximately 70 to 72 percent.”

Along with what he sees as a higher risk and lower gross profit is the issue of proper staffing. “Ninety-five percent of the shops that do a lot of brokering have the same number of employees as shops that do very little brokering. The average company in this industry ends up brokering about 12 to14 percent of total sales. The worst companies in the industry end up brokering about 17 to 18 percent.””

 

Pros and Cons

Along with the cautions above, Stewart says there is more to the issue than thinking all you have to do is write up the order, send it in, and make lots of money. “There are a lot of costs associated with brokering that haven’t been factored or considered after producing that gross profit,” he says.

QP columnist Dave Fellman also sees benefits in outsourcing, as long as it is done properly. “Brokering or outsourcing increases both capability and capacity,” he says. “Although it is a common complaint, the ‘control’ issue doesn’t have any real basis in fact. On the one hand, there’s a whole network of pure brokers who sell a lot of printing, make a lot of money, and happily yield control of production to a network of very capable and trustworthy trade suppliers. On the other hand, sending an order ‘out back’ in many print shops is even more of an adventure.”

In the end, brokering is just like anything else in the quick and small commercial printing industry—risky if done wrong but rewarding if done right.

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