Cost Containment Spurs Profitability

Not so long ago, printing companies were like hotels. Some were elite printers, others meat-and-potatoes, and still others more down-and-dirty. More importantly, prices reflected these 5-Star, 3-Star, and 1-Star companies. In short, you could price your printing based on its quality and the market you served. That is as long gone as the halcyon days of Mike Tyson.

The price for most print jobs is set in the marketplace and you have to make a buck by producing it efficiently. It has moved our industry from a sales-driven to a more production-driven industry. Machines—computers and computer systems—have replaced craftspeople as companies attempt to drive down costs in the quest for profitability.

Driving down costs is another term for cost containment. You must contain your costs if you are going to survive in the musical chairs world of printing. So how do you do that?

Here are a few tips:

1. Begin with your biggest costs. Look at the spots on the P&L where the most money is expended and ask what you can do to cut right there. Eliminating the free coffee and the Friday pizza lunch will drive down morale, not costs. No business’s fiscal future turns on coffee and pizza.

2. Protect sales. Printing is about expanding sales and contracting costs. Do not do the latter at the expense of the former. If you pillage sales, you are giving up on market share. Too many companies do this and die (not live) to regret it.

Do look at sales carefully, however, and ask yourself where you can cut without any loss. If you give me your P&L, I am sure I can find some, or I’ll buy the drinks. But keep putting good money after good into your sales effort.

3. Watch efficiency. Doing jobs over is devastating. If you are busy it is not only costing you materials, it is costing you labor time (often in the form of overtime hours). Take a hard look at redos. If you look closely enough you will likely see a pattern by department or type of job. Hone in on this tightly. It is a major hidden cost. Why hidden? Because your material costs may not be due to gouging vendors, but rather additional production. If you have to put together a task force on this, do it. Increase efficiency.

4. Review vendors. Somebody is doing your buying—from the inks and the paper to the computers and the towels. Who is doing it and how well is he doing? Purchasing can be a lazy enterprise in many printing companies. Those purchasing for you become comfortable and friendly with vending reps and take their eyes off the ball as the vendors inch up the prices at your expense. Review your purchasing operation and pocket the difference. If you saved just two percent on all your purchases, you would see it at the bottom line.

5. Raise consciousness. Whatever your mode of communication with your people—newsletter, email, town meeting, whatever—start preaching cost containment. Raise consciousness. Do not refer to compensation; that only sets off a streak of paranoia. Talk about containment everywhere else so that people can keep their jobs and income as the company becomes more stable.

6. Consider speaking with a cost containment specialist like me. As much as I do in sales (www.MyPRINTResource.com/10746916) and helping owners buy and sell companies, cost containment is near and dear to me, and clearly a major needed direction in an industry not quite up to speed here.

A good cost containment expert should cost you zero net dollars, as you will be paying him out of the money he saves. That second set of eyes can be priceless. And it can go into personnel areas. For some companies, I made personnel cuts that the owner wanted to make but did not want to endure the fallout, as necessary as it was. Instead, he removed the people who really had to go and was able to blame it on me.

7. Time to go to work. A dollar saved may well be a dollar earned, but many dollars saved may mean a company saved—and even prospering.