Outsourcing: The Rest of the Story

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.