Last month, I wrote Part One of a Print Tip about directed buy programs. To read that Tip, please visit our Print Tips Archives page for 2010, where you’ll find it listed for May 10, 2010.

In the briefest of explanations, think of directed buy programs like so: Most of the time, printers purchase the paper for their customers. “Directed buy” or “directed to buy” paper programs are arrangements or initiatives made between a corporation (or other end-user organization) and a paper mill or paper merchant.

This is a tricky topic to research. Printers are customers of paper mills and merchants. With directed buy programs, printers’ customers become customers of mills and merchants as well. Whether such programs are good for the customer depends on who you ask.

So I asked print customers. Specifically, I posted a request on our PBI LinkedIn Group. Did any of them participate in these paper programs? I also asked whether they thought that printers get better paper pricing.

Today, I want to share some of these comments.

Here are some of the comments from print customers. I’ve edited them as needed.

“Generally, I agree with the premise that we can’t reach the volume levels of most printers and thus their price brackets. However, a flip side is that if I buy the paper, I might have more control over the printer’s mark-up on the paper cost. If I don’t know what they paid, how do I know how much they tacked on?

“But there’s a lot of difference between a $6,000 paper purchase and a $60,000 or $600,000 one. It can almost be boiled down to individual circumstances: what the paper is, your relationship with the printer and how much you understand the pricing equation… If you are really “paper-smart” and have a relationship with a paper vendor or mill that you trust, go ahead and run some numbers and analyze it. But remember that you are putting some of your own cash out there, well in advance of the run, and there may be pitfalls. The worst would be (in my mind) if the project gets scrapped or specs changed at last minute – now you have to sell some paper! Your printers run that risk – but often they can use it on for other customers or have a good network to re-sell it that you might not have. In most cases, I’d rather let the printer run some risk and pay a bit at the end for that risk – but there are times when I can make a few bucks if I really apply myself. Often, I can place enough commitment in front of printers that they can pre-buy in bulk amounts when the price is best. They then have to store the stuff until I use it up. If I had to do that, I’d be paying big storage fees. Might erase any benefit to me.

“Ask yourself this: am I as savvy at buying paper as my printers are? Not too many “general” rules here, since it’s based on lots of changeable circumstances, but I would say that unless it involves great volumes of paper, most print buyers should stay out of it and let their printers invest their money in the paper.”

“In my biz, we print from 10 to 300,000 units – or so many varying sizes and substrate types I can’t even begin to tell you. And our projects range from 24 hours to 15 days to complete – rarely longer than that. Purchasing paper in my environment vs. letting the printer do it is hardly ever a winning proposition like it would be if I were buying 2 million pounds of something relatively all at once. Each buyer and each project’s situation can be so different that there isn’t a right or wrong answer to the question.”

“By buying direct, you are responsible if something goes wrong with a shipment. It is taking on a whole new buying responsibility. If paper is delivered that is unusable, it is your responsibility to get the paper picked up and get a new delivery. It is your responsibility to file claims if there are issues. Do you really want to do that?

“I have done an RFI (Request for Information) from several paper merchants and compared their prices to the paper price I was being charged by the printers I use. (I had printers break down jobs between paper and manufacturing.) Even with mark ups, it paid to go with the printers.

“I do a “directed buy” – that is, I specify the merchant that I would like my printers to use. That is because I have worked with a paper mill to achieve a special price for specifying their paper. By using the merchant, he tracks my purchases and honors the agreed-upon price.

“Most printers will tell you, if you ask, that they will get a better price on the paper. I was also told by printers that customers who do buy their own paper tend to lose track of inventory. The printers have rolls of paper sitting on their floors that don’t get used. There may be overage on a job that can be applied to another job. The print buyers don’t manage that efficiently. There is a lot of waste. Another downside.

“An important variable is the length of the commitment with the printer. If you are in a large, multi-year contract, buying paper through the printer probably does not make sense. How would you be sure you were getting the best value for the money? Also, most mills would rather sell to end users, whether direct or through a merchant, than to printers. But for small quantities or relatively short-term work, it can definitely make sense to have the printer include the paper (carefully spec’ed, of course) in its bid.”

“I’ve worked in book publishing for many years and, until the last 12 months, always purchased paper from local merchants. Last time I calculated, I saved about $60,000 annually buying about 2 million lbs. of paper from a merchant rather than having it printer-provided. For most book publishing, I recommend buying paper from a merchant, not the printer.”

“Not all printers are as good at paper purchasing as they would like to think! I used to be involved in paper buying for a major UK publisher. My experience is that if you are buying standard web reels in large quantities then you are better off dealing with mills direct. If you’re buying a few tonnes of standard sheetfed, then you are better off dealing with a merchant, as long as you can forge the right level of relationship with them (which is not always easy).”

“As with everything in our industry, you just need to look at what makes sense for each situation. And work with trusted partners.”

“I participate in a Directed Buy paper program [through a merchant]. I have not found that there is a significant cost savings. However, I have found it to be a valuable tool in other ways.

“I’ve gained a bargaining chip because the paper prices have become more transparent.

It enables me to communicate to my printers in a more meaningful way that I am paying attention to the stock they are using for my projects, and that I care what stock they use.

I get a quarterly tracking sheet to see trends in my paper usage. I don’t use any other paper tracking system, so this saves time if I want a quick glimpse of our paper usage.

I have a direct line of communication with the mills, and I’ve found that the information that my merchant supplies me about my paper usage has made our conversations more productive.

“For now, the benefits outweigh the shortcomings. The paper is still purchased through the printer but is attributed to my “account.” This means that if I’m using printers in different geographic areas, or printers who are not in my paper rep’s existing portfolio, commission for the printer’s rep is redistributed to MY rep. This causes a strain on the relationship between my printer and their paper rep. …it makes my printers reluctant to attribute my paper to the program.”

“I started a program last summer as an experiment. We did research and blind surveys on paper grades. It was fairly easy to implement, the tracking is very good, but we won’t know if we saved anything until the end of the year. We are well below our projections with this economy, so I’m not sure we will make our minimums to reap a rebate from the distributor. Stay tuned . . .

“The printers do not necessarily save money. They have their own micro-economy pricing. They may be aligned with multiple distributors, but only buy a certain brand from one. So when I aligned with one distributor, I tried to pick the one that was aligned well with my printers and the papers I wanted. The other factor was how well their distribution network matched our company locations.”

“We are extremely happy with our paper relationship and see no reason to change in the near future.”

“This gave us some ammunition to take to the mills & merchants to get an idea of what our savings might be if we were to engage in a program. At the very least, we are going to start using software to track our usage, & we have limited our main use to 3-4 different stocks: a coated, uncoated, and specialty stocks. We will now be able to determine what kind of savings we can achieve by the amount of paper we use (i.e., if it looks like we will meet a certain quantity by year end we get a bigger discount/rebate at the end of the year or quarterly. I would imagine this rebate has gone directly to our printers previously, but now that we have a direct line to our mills & merchants it will come to us. We don’t expect our printers to take a loss in any way and while they may still get a discount they will still have a markup on their services as well. They will still have the same relationships with the merchants & mills as well, but they will have to purchase paper from our sources specifically. Schedules and delivery should not be affected at all.”