Building a print spend supply chain

How would you like to cut 20% from your printing services spend? Hewlett-Packard hopes to turn this vision into reality by consolidating its North American supply base for printing services, managing strategic relationships with a few, key suppliers, and leveraging best practices in purchasing across the organization.

The ultimate goal of HP's indirect procurement professionals: reduce costs, contribute to earnings per share and generate profitable growth for HP.

The genesis for the effort began when Larry Welch, vice president of indirect procurement, approached Nick Gunn—about having Gunn's team look for new opportunities for indirect procurement to leverage best practices in purchasing marketing across the organization (PURCHASING: Sept. 2, 2004; p. 40).

Gunn, who is now director of marketing procurement with responsibility for the Horizontal Print Transformation, put together a team that broke out the print spend into three areas: office (printers, copiers, multifunction products and related service and supplies), commercial (flyers, brochures, marketing collateral, etc.) and production (manuals, product guides, packaging, etc.)

"We identified best practices surrounding the print buy occurring within various groups at HP, such as print on demand, digital printing and supply chain management," he says. "We also determined that we needed to take the time to develop an overarching strategy to bring them together and, with our size and unique position in the market, create an ultra effective print supply chain for HP."

Gunn and his team put together a three-year plan for the print spend, beginning with commercial and office, that they anticipate will reduce costs by 20% (Work on the second phase, the production print spend, will begin sometime next year.)

Workflow technology

For the commercial print spend, HP uses workflow technology (patent pending) it had developed internally called SmartPrint and had been using elsewhere in the company for about three years. "[It] may not be the answer to all our needs, it is a process that we can extend to different areas within the company," says Gunn.

Here's how it works: With conjunction with representatives of HP's businesses, indirect procurement determines requirements for print services and selects suppliers capable of filling these needs. "For example, we might select suppliers that can meet volume requirements," he says. "Others may be able to meet quick turnaround criteria. Still others can meet digital printing criteria." Once the agreements are in place, indirect procurement sets up the purchasing process.

After this point, indirect procurement is no longer involved in the process.

The print service providers on the approved supplier list—as well as HP's marketing agencies—have access to SmartPrint. When one of the agencies has a print job, they send an electronic Request For Proposal (RFP) through SmartPrint to the suppliers on the indirect procurement's approved list. This includes plans for the collateral they want to have printed, such as a folded sheet insert, which they've created, again using SmartPrint. They also add specifications for quality, paper stock, etc. The print service providers then electronically bid on the work. From the bids, the agency makes its selection.

All print services providers in the SmartPrint system use the company's Indigo digital color printing technology. HP purchased Indigo N.V. in 2002. The technology enables HP's marketing partners to custom design collateral. During a recent music awards program in Asia, the partners used the technology to print materials for journalists immediately after the show. Within six hours, they printed each piece of collateral that listed award winners with the names of individual journalists.

Tracking performance

Gunn and his team keep tab on supplier performance on a daily basis in terms of work output. They also conduct annual business reviews using a tool called TQRCDE. (TQRDCE stands for technology, quality, responsiveness, delivery, cost, and environment.) "We ask individuals within HP for their opinions of supplier performance," he says. "We evaluate the responses and score suppliers in each of the areas. We meet with suppliers to review the results and explore areas in which they may need to improve. We also may work with suppliers to further develop some of their capabilities to help us reach HP's objectives.

"We want to develop very strong, strategic relationships with our print service providers," says Gunn. "We don't want to send our printing requirements to x-number of suppliers for office printing, another x-number of suppliers for marketing printing and another x-number of suppliers for production printing. We want to develop strategic relationships with appropriate print service providers that can complete a range of work for HP, whether it's business cards, letterhead, posters, brochures or packaging."

In addition to the cost savings that HP derives from the print services strategy, it gives them the opportunity to showcase its technology such as Indigo digital printing for the company's external customers. And the strategy also helps improve internal process efficiency. "Before, not only were we not aggregating our spending but we'd also lose control of the process," says Gunn. "Now, it's very streamlined. We control the process, yet there's no need for intervention by purchasing."

The next steps

To attack office printing costs, Gunn and his team are conducting a complete assessment of the company's spend at its Houston office. They are looking at both the current state of the office print environment as well as end user requirements. "We are developing a strategy that will transform office printing in our Houston office across HP," he says. "It's a big area of opportunity for us."

Another big area of opportunity: paper. HP purchases paper for internal consumption (office, marketing and production printing) as well as for resale. It also buys packaging materials. As such, Gunn and his team are developing a purchasing strategy for the company's paper buy. To better leverage volume, they're looking to negotiate either one global agreement or several regional agreements.