How to Offset Postage and Paper Increases

Rex Ciavola, senior vice president of marketing operations at Office Depot and Viking Office Products, doesn’t let minor setbacks like postage and paper hikes dampen his spirit. Rather, he sets out to find other ways to attain the Utopian, “better, faster, cheaper” way to print.

Ciavola oversees the A-to-Zs of both of the organizations’ marketing initiatives, including all retail advertising, direct mail, inserts and catalogs. He leads a collaborative, global marketing and production organization that includes the Office Depot team in Delray Beach, Fla.; the Viking team in Torrance, Calif.; and teams based in Europe and Japan. The combined organizations have internal staffs that manage content creation, digital asset management, production and prepress.

Gretchen Peck, a Catalog Success contributing writer, asked Ciavola to share his insights and best practices for managing through these times of rising costs, technological innovation and economic instability.

Catalog Success: Catalogers often take reactionary measures when there’s talk of postal and paper pricing hikes. You haven’t resorted to the standard counter-attack measures, like downsizing basis weights, trim size, page count or frequency. You’ve found other ways to offset those increases. How so?
Ciavola: Postage is going up in the United States in 2006. It went up in Europe in 2005, and it’ll go up a little more there in 2006, too. Paper prices are going up, as well — about a quarter ahead of the price increases we’ll see in Europe. And so, what are we doing? Are we cutting circulation? Are we cutting page count? Are we chopping trim size? No.

We’re able to avoid these tactics because the printing companies — and they’ll kill me for saying this — have found ways to reduce their costs. And in turn, they’re handing over some of that cost reduction to customers — that is, if their customers are aware of this.

In the last two years, new technologies have come out for the pressroom, especially for web offset printing, that’s allowing printers to print more and faster. They’ve shortened their make-readies and total press time, because the presses are running so much faster. And where they used to run 32-page presses, more of them are running 48- and 64-page presses. These presses are so technologically advanced that they’re also able to reduce the amount of crew they have to run them.

There’s also a lot happening in the bindery. … Many printers are in the process of installing new bindery equipment for both stitching and patent binding (or perfect binding, depending on the term you use) that’s allowing printers to reduce staff and significantly speed up the process.

CS: Your organization has a lot of buying clout, no doubt, with your print supplier network. But what about a smaller catalog organization? How does it recoup some of the cost savings that its printers may be hoarding?
Ciavola: For that smaller cataloger, first, it needs to be aware that this is going on out there. Number two, it needs to know what to look for to make sure it’s getting some of those savings passed back. There are two things catalogers should expect. If the printer can get it done faster, you want a piece of that. And if the printer can do it at a lower cost, you should get a piece of that, too.

CS: How do you stay apprised of the technologies printers are implementing?
Ciavola: Fortunately, we get to be engaged in a lot of what’s going on with the manufacturers. So, I’m aware of what the major press and bindery manufacturers are doing. It’s not the printers who told me. … You can very easily find out what the printers are doing. Just look at their earnings releases and take note of the capital expenditures. Look at what they’re buying. Most printers are publicly traded, so you can get this information very easily.

You have to understand, there’s a reason for each of those investments. They’re buying it to reduce costs, and to improve productivity and throughput. And again, catalogers should get their fair share of that.

CS: How else can catalogers keep up to speed on what their catalog printers are doing, besides asking them, of course?
Ciavola: Many years ago, we began to ask our printers if we could meet with them and their equipment manufacturers, so we could be better educated about what was coming up. Some of the printers back then were hesitant to do that. So we started to attend trade shows and conferences the manufacturers held. Anybody can go to those, even the smallest catalogers, if they can afford the week away and the travel expenses.

We found it to be worthwhile, because we could see the equipment first-hand. And while we were at the events, we took note of who was buying what. We learned a ton. Trades shows were where we learned about personalization, new pressroom technologies and new ways to deliver our data to the printer. We learned much faster going that route than waiting for the printers to tell us.

CS: Besides the advancements you’ve seen on the print supplier side, what technologies do you accredit as having streamlined your internal creative, production and prepress workflows?
Ciavola: We have bought Documentum to store all our digital assets. We’ve implemented Agility to store all of our text assets. … We haven’t yet used [graphic design software] Adobe InDesign. We’re currently flowing all documents from Quark into our internal prepress organization, which is using the Creo Prinergy workflow. That technology, in particular, has allowed us to process files through prepress in half the time as we used to, at half the cost that we used to incur. … We’ve also completely converted our file formats away from TIFF/IT and are outputting only PDF/X files.

CS: Are you planning to use InDesign in the future or transition to Adobe’s Creative Suite for your document creation platform?
Ciavola: We’re happy with Quark, at least at the moment. But we’re always looking for the next big move. And for us it’ll be auto page building.

One other tool that’s been terrific for us has been auto pricing. We no longer key prices into the page. We have a step in the process between creative services and prepress where we use a metadata system to auto price our pages. That’s been awesome. … It’s a home grown auto-page building technology. We had purchased some of the system’s components many years ago, but that developer isn’t around anymore. So we amended it to do what we needed. There are tools out there today, though, that offer the same functionality.

I’m often shocked by how many catalogers — companies that are producing fairly significant volumes of pages — don’t have an auto-pricing tool. All you need to do is put in a wrong price once, and you’ll pay for it in spades.

CS: Is your company participating in, or does it have plans to participate in, any commingling opportunities or pool shipping to help further offset rising costs in paper and postage?
Ciavola: To get the product from printer to post office, we do several things. Depending on the job, and depending on the supplier, sometimes the printer hauls the freight for us, and in some cases it doesn’t. We use third-party freight companies. So we both ‘direct-truck’ and use consolidated trucking.

Now, do I combine mail at the printing company? No, and there are a couple of reasons. One, my response rate is critical to me. If I combine pieces — and we’ve tested this theory, combining two of our own pieces — they cannibalize each other. We may save a little on postage, but we ultimately lose sales. You simply lose impact when two pieces arrive on the same day — whether it’s two of your own pieces, or one that’s yours mailed with someone else’s catalog.

We’ve also tested it by mailing with other companies, but we never found the right recipe [to make] it a win-win for both companies — from the standpoint of either timing, savings or sales impact. And we tested it with some fairly good partners. But we saw a significant reduction in response rate versus what we would’ve gotten had we mailed alone.

That’s not to say we won’t test it again. But so far, I haven’t found the right formula that makes sense.

CS: You’re sourcing your own paper. You say that only 10 percent of the paper you buy — and that’s mostly cover stocks — is sourced through the printer. It’s a big job managing paper internally. Why bring the job in house, and how has it worked for you?
Ciavola: We buy direct from the mills, as well as merchants. For me, there are two considerations. First, you have to be able to buy direct for enough less to justify the internal staff. … Maybe 15 years ago we did some analysis, talked to printers, merchants and directly to mills. Our goal was to find out what we could save on paper by not buying it through our print suppliers. It turned out we could buy it direct for less, enough less that we were able to put a staff in place to manage not only the purchase of paper, but to also manage the inventory.

You can lose every penny you save by having excess inventory. If you don’t manage both the front and back end of paper consumption, you’ll lose your shirt. You’ve got to do both. …

We buy well over 100,000 tons of paper a year, and even though we’ve saved money buying direct, one good hiccup on the inventory side where we don’t utilize some leftover stock, and we lose that savings pretty quickly.

There are perks to buying through a printer. If you do it correctly, you only pay for what you consume. I’ve been very surprised by the number of catalogers — smaller catalogers, especially — that are billed for the whole paper order, rather than what actually was consumed. They’re missing one of the biggest values of buying through a printer: You don’t have the initial cash outlay for the paper order, and you don’t have to manage the inventory.