But is this the fault of the buyers, or is the culprit those printers who have failed to realise that's what good for the goose can be good for the gander?

One company that couldn't be accused of ignoring the latter point is Nottingham-based Sherwood Press. The company was formed in the back room of a pub more than 30 years ago and at the time, one press was all that was needed to handle trade work - keeping a tight grip on purchasing, whether for paper or inks, probably wasn't high on the company's list of priorities.

Today, the firm, which specialises in greetings cards, packaging and commercial print, is reaping the rewards of keeping costs under control. Within the first 18 months of embarking on a new purchasing strategy, Sherwood saved over £400,000 - well over 5% of its turnover and an impressive amount in these tough economic times.

"It has been an interesting project to say the least," explains Richard Bacon, commercial director at The Sherwood Press Group. "I am extremely glad that we started it when we did. Now, more than ever, you have to control costs."

When the Sherwood Press Group decided to look at changing the way it bought its materials and consumables back in 2005, it knew that it needed to introduce wholesale changes. It began with a root and branch review of existing business processes, and created a list of goals, the largest of which was to secure the ‘buy-in' of the staff and suppliers. The process was difficult, but resulted in significant cost savings plus a dramatic change in culture.

Inspiration
The inspiration for the project was the Vision in Print (ViP) best practice study on purchasing, which according to Bacon, opened the firm's eyes to the benefits of a more structured approach to buying.

"We felt we were pretty good at purchasing," recalls Bacon. "But after reading the study, we realised that there was a lot more we should and could be doing. We needed to be more professional and regimented in how we handled our suppliers."

He believed that the way in which Sherwood was tackling its purchasing was not only uneconomical, but also failed to foster good working relationships with suppliers. In short, he realised that Sherwood was basing its buying decisions on friendships that had been built up over the years, rather than simply best value in terms of price and performance.

To change that, the firm used the ViP study (available to download from www.visioninprint.co.uk) for benchmarkarking purposes and went back to basics. It categorised its suppliers and then got together a group to form part of a ‘purchasing masterclass team' made up of staff who, in Bacon's opinion, could understand buying and came from all sides of the business: accounts, administration and production.

From there Sherwood analysed its existing supplier base and established how much the company was spending with them. The team then analysed each supplier and segment so that it could make an informed decision. There were two different options available: should they put the deals to tender or spot buy? The ViP guide was clear - most purchasing should be done through tendering.

Everything the company purchased was analysed, from paper and board through to ink and electricity. Once everything had been scrutinised a tender template was created. "It's important to realise that we weren't looking for the cheap option, but the one that offered the best value for money," adds Bacon.

Suppliers onside
Getting that point across to the suppliers proved to be tricky. When Sherwood sent a letter notifying them of the firm's intentions there was some understandable concern. "We had a mixed response and some of our larger suppliers panicked," explains Bacon. "They thought they would get beaten up on price, while those on the fringes thought it was a great opportunity."

Suppliers were invited to tender and the winners were judged on what they could offer. Retrospective rebate offers, discounts for early payments and additional levels of service agreements were all areas under consideration. Alongside that, Sherwood looked into health and safety and environmental accreditations and even went as far as to carry out due diligence on the selected suppliers.

The result was a sea change in the way Sherwood dealt with its suppliers and the way it organised the business. On the ink front, the number of deliveries was reduced. Previously, Sherwood had ordered ink based on each print job, which could sometimes result in two or three deliveries a day. Thanks to an agreement with its supplier, deliveries were reduced by one-third, resulting in savings on transport costs. The consumables supplier also proposed an easier way to store the ink.

"We asked why we needed to buy ink in plastic capsules," says Bacon. "They came back to us and were prepared to help fund an ink pumping system. It meant that we could pump the ink direct from the barrels to the press. It means that we only use the ink we need and by buying 200litre drums, the supplier is shipping out more in one unit. It has taken out the waste costs for us."

With paper and board, Sherwood consolidated its supplier base. Previously, the company had five suppliers for paper and six for board.

"We are now able to offer a bigger piece of the cake to the winning suppliers," says Bacon. "With paper, we consolidated to mainly one supplier and also selected a ‘house grade', something we had never done before. It was the same for board. In the end we consolidated into two suppliers - one for coated and one for uncoated."

The main advantage for Sherwood was that it had managed to tie down its suppliers to 12-month contracts, which according to Bacon, was a win-win situation: the supplier has guaranteed business for a year and Sherwood secures a fixed price.

While the big wins for Sherwood were identified in the early stages, Bacon points out that even after the foundation blocks of the purchasing policy were in place, it is an on-going process. Purchasing at the firm now requires near forensic attention to detail and Bacon admits that they were getting some slippage as staff were in danger of going back to old habits. Overall though, the new regime has brought about a change in culture. Staff are involved and are incentivised to find better and more cost effective ways of buying. For example, the team identified drinking water as another potential cost saving.

"Big bottles were being delivered every day," explains Bacon. "It was pointed out that we could supply filtered mains water: a relatively easy step that initially saved £3,000 a year. It's the little things that start adding up. But one of the biggest successes is that we have created a culture of getting the best value for the business by creating a system to beat the quoted price."

Sherwood might be pushing to beat the quoted price, but it isn't interested in beating up suppliers: Bacon stresses that it's a two-way street and negotiation is key. Suppliers have become effective business partners for the company, whose culture has been radically transformed as a result.

BPIF COMMENT
Welcome to the new monthly Buisness Inspection from PrintWeek, the BPIF and ViP - our joint initiative to help the print industry benefit from best practice in the sector. It will come as no surprise that the BPIF wants its members to succeed, but as the leading trade body we also want to help the wider print community adopt best practice.

To this end, this month's case study is Sherwood Press, which saved £416,000 in 18 months by applying good purchasing strategies, a subject very close to BPIF president Mike Taylor's heart as he believes purchasing is one of the most important and commonly overlooked areas of any print business.

As businesses grow more complex, inevitably so do their supply chains. More than ever, managers need the tools to generate knowledge and insight that lead to smarter decision making and greater efficiency. SME printers increasingly operate in demanding market conditions and it is essential that they utilise purchasing and monitoring techniques to survive and progress. As a company grows, there needs to be an increasing sophistication in purchasing development, from best practices towards strategic alliances.

With finances scarce and the recession taking its toll, the BPIF and ViP have developed wider solutions to cope with recessionary pressures, such as waste reduction (in all its forms), tight HR practices, proactive finance and credit management techniques to name but a few.

Nothing is more important in these turbulent times than handling workforce reductions, managing suppliers and customers, handling cashflow challenges, having a profit culture and capturing customer loyalty. All printers handle these challenges differently, but all should continue training programmes in order to keep staff effective and maintain morale.

Michael Johnson is chief executive of the BPIF

INSPECTION LESSONS
Better buying
To my mind, purchasing is as important as sales, and bad buying is no better than burning money.

One of the key things to remember, as illustrated by Sherwood's Bacon, is that purchasing is not just ordering - it is an activity that needs to be managed professionally.

An effective buying policy is vital whether your company is big or small. The amounts involved may be different, but at the end of the day the effect on your margins is the same.

The most common problem is that buying is handled by different people in a firm, without any one person taking overall responsibility.

To develop a joined-up approach, and thus reap the benefits, you need to itemise how much you spend, on what and with whom and split it into categories - trust me, it's an eye-opening experience. Once you've done this, one person must manage the buying function within your organisation, even if subsequent ordering is delegated. This makes it much more likely that the decisions will be based on good data, not just opinion or relationships, and will ensure that each market is thoroughly researched.

Remember to leave no cost line unexamined. Again, as Bacon points out, it will often be the small items that collectively offer the largest savings. And when looking at purchasing equipment, consider the total cost of ownership, including consumables, maintenance, finance costs, energy, installation, residual values, warranties, acceptance criteria and training.

As with many areas of business, measurement is key. Investigate approaches like ‘relationship buying', which can offer true win-wins, often through preferred-supplier status that reduce costs for buyers and suppliers and, importantly, remember to look for best value not just the cheapest product.

If you take one lesson from Sherwood, remember that ‘there is always a better deal'.

Mike Taylor is CPI UK's chief executive and president of the BPIF