Trends and Profile NEWS

New Procurement Methodology Saves Buyers 40% on Print Spend

By William Gindlesperger for CEOWORLD Magazine Updated:February 18, 2009

Reducing by 40% what an organization spends on commercial print, direct mail, marketing materials, labels and product packaging may sound like a dream to some. But to others, it is reality. They know about a method that saves them that 40% without compromising quality or service requirements. They know about The Gindlesperger Method.
This patented business method applies to all customized or specification-defined goods and services. Customized goods and services differ from pre-stocked or inventoried items in that they must be specifically manufactured or provided to meet particular buyer requirements. Consequently, specification-defined goods and services cannot simply be purchased off the shelf at fixed prices appearing on standard price lists. Instead, prices are established when the exact goods or services are actually specified. Only then can the manufacturer or service provider assess the precise quality and production specifications required to perform the project.

The key to obtaining low prices through The Gindlesperger Method is in the permitting of qualified suppliers to bid high, low, or not at all without having to consider buyer pricing expectations, without fear of setting either high or low precedent for future bid prices and without worrying about being denied future bid opportunities for which the supplier is qualified.

Freed from these concerns, bidders offer pricing based on their own level of open production capacity at the time each project is bid, knowing that if they bid low this week when they are hungry for work, they are not bound by the buyer’s demand for the same low price next week when they may be busy with other orders. It is the supplier’s performance record – not its bidding record – that determines whether it remains eligible for the next bid opportunity. The Gindlesperger Method allows pre-qualified suppliers with excess idle capacity to provide an extraordinary low price without risk of establishing future buyer price expectation.

A supplier of specification-defined goods and services willingly offers low prices to fill idle production capacity because the ongoing fixed costs associated with unsold capacity causes enormous profitability erosion. This strategy is called “contribution pricing”, because when a print supplier bids this work below normal rates, any income above out-of-pocket cost offsets its fixed overhead and thereby “contributes” 100% to its bottom line.
When contribution pricing is applied consistently and strategically, a print supplier can improve its bottom line profitability from an industry average of less than 3% to an impressive 17% or more by filling its otherwise unused capacity, even when these additional fill projects are sold at prices reduced by 25% to 50% or more. Using our patented methodology incentivizes the print supplier to reduce prices, while our print buyer clients benefit from improved quality and service while averaging 40% reduction in what they spend for direct mail, marketing materials, commercial print, labels and product packaging.

When compared to traditional procurement methods – including relationship dependent, negotiated or competitive – The Gindlesperger Method offers clear advantages.

Reduce Print Costs by About 40%

Look at this comparison of procurement methods.
Relationship Dependent – Here the buyer consistently awards work to the same set of trusted suppliers through open-ended specifications. Though buyers often achieve a high level of comfort and confidence in the quality and service realized through this arrangement, the cost-effectiveness is poor with a 5 X pricing factor typically being applied (resulting in end price comprised of 20% materials, 80% value add).

Negotiated Methods – Procurement organizations often seek, and gain, more cost-effective prices with suppliers by consolidating their supplier base, aggregating their demand and leveraging volume commitments in exchange for reduced price through a pre-determined “rate card” arrangement. These methods typically carry a 4 X pricing factor (resulting in end price comprised of 25% materials, 75% value add).

Competitive Techniques – The proliferation of e-procurement has presented improved competitive procurement techniques in recent years that have resulted in attractive pricing. Methods such as spot bidding and reverse auctions typically result in suppliers pricing work at the equivalent of a 3 X factor (resulting in end price comprised of 33% materials, 67% value add).
The Gindlesperger Method (listed in the chart below as the e-LYNXX Patented Business Method) – This computer-operated procurement method enables organizations to achieve a new level of cost-effectiveness. They benefit from pricing in the range of a 1.7 X pricing factor (resulting in end price comprised of 59% materials, 41% value add).

This illustrates how an organization can dramatically decrease its cost for commercial print, direct mail, marketing materials, labels and product packaging. There is no risk, and it is perfect win for buying organizations and their print suppliers, just by adopting this competitive procurement method.

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