Keeping Production Costs Down
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Thomas Woll, the president of Cross River Publishing Consultants, Inc., has been a vice president and general manager at John Wiley & Sons, vice president and publisher at Storey Communications/Garden Way, and vice president and publisher of the Rodale Press book division. This article is derived from the new, fifth edition of his book Publishing for Profit: Successful Bottom-Line Management for Book Publishers (April 2014). To learn more: chicagoreviewpress.com.
The production function can be significant in terms of both incurring costs and saving money for your company. With paper, printing, and binding (PPB) averaging approximately 50 percent of the total cost of goods, a 5,000-copy print run with a PPB of approximately $2.50 costs about $12,500. So if you can save 10 cents per copy, you can save $500—a meaningful amount of money, especially when it adds up title by title.
How can you get the most advantageous manufacturing costs? The simple answer is to use a costing form—also known as an estimating form, a Request for Quote form, and an RFQ—that you send to at least five manufacturers per job.
As shown, the form should state the specifications for the job. It doesn’t have to be fancy, but the specifications it provides must be in accord with the final specifications of the product you’ll be sending for production. If you solicit bids from printers and then change the specifications on the final product, you will cause confusion for yourself and the vendor; you will waste time and effort, and you may be in for some unpleasant surprises.
A Sample RFQ
The Request for Quote begins with the title of the book, for obvious reasons, and with the month the files will arrive at the manufacturer because a particular time may be slow for one or more printers, and that would affect the price quoted to you.
Next, the form provides for pertinent specifications. Fill in what you can and ask the printer to fill in what it controls, such as freight costs, payment terms, and so on.
- size of print run
- trim size
- number of pages
- format: hardcover and/or paperback and/or e-book
- type, weight, and bulk of paper required for text, endpapers, and jacket/cover (uncoated, coated, matte; white, blue, blue-white). Because paper accounts for about 50 percent of the PPB cost, the weight you specify can have a major impact on the estimates you get.
- color of ink (just black; four-color)
- type of lamination on a paper cover or paper-over-board
- preparation — proofs desired (blues, matchprints, hard, soft, other)
- type of press to be used
- type of binding (perfect, adhesive-notch, Smyth-sewn, flexible, etc.)
- packing requirements (including carton specifications, labeling, pallet size, banding, etc.)
- shipping and freight costs
- special requirements (head and/or footbands; shrink wrapping; thumb-notched index tabs; etc.)
- conversion costs
- payment terms
Differences Make a Difference
Because different printers and binders have different printing and binding equipment, some will be better suited than others for producing a particular book at a lower price. For instance, some may have only sheet-fed presses, which are typically more cost-effective on print runs of 10,000 or less. Some may have web presses, which are more cost-effective on runs of 15,000 and up. And some may be equipped for print on demand.
Different companies also have different work flows, with some being busy at times when others have less work. For example, one printer might offer a 5 percent discount for work done in the first quarter of the new year because that period is traditionally slow for that printer, and printers want to keep their staffs working and their presses busy.
On our hypothetical book costing $12,500, scheduling within the first quarter can save $625, or 12.5 cents per book. And because every dollar saved at the unit cost level translates to $6 or more at the retail level, this 12.5 cents translates to about 75 cents. In other words, if you had priced your book at $12.95, the manufacturing saving would allow you to lower the price, if you chose to do so, to $12.20, which might make that book more appealing to buyers.
If your product is to be produced at the lowest price, you have to find the vendor whose equipment is best suited to your job, who has the time to do it, and who offers you the most attractive payment terms. Comparing responses to your RFQ will help you zero in on that vendor.
Criteria to Consider
Once you get responses from vendors, make sure you can compare apples to apples. Vendors typically send RFQs on their own forms, which may or may not coincide with the way you’ve asked for them, and each vendor’s form will undoubtedly differ from its competitors’ forms.
Look carefully at paper specs. One manufacturer may provide bids using its 50# stock paper (in the trade jargon, # is the symbol for pounds). Another might quote using 60# stock, which is heavier and therefore not only generally more expensive but also more likely to make your book costlier to ship.
In addition, look carefully at the kind and weight of items such as binder’s board, used in hardcover manufacturing to provide the base for cloth or paper cover material. Often, different binders use different thicknesses and weights—which cost different amounts.
Similarly, check the type of cover material for paperbacks. Is your manufacturer quoting on 12-point (pt.) cover stock, 10-point cover stock, or some other weight? (Pt. stands for the paper measurement term point, which is equal to 0.001 inch, or one thousandth of an inch. A 12-point cover is 0.012 inch or 12-thousandths of an inch thick.)
And look carefully at implications for your cash flow. Since cash flow is a critical element for most small and medium-sized publishers, the way payment terms with manufacturers are structured must play a critical role in your analysis of which printer to use.
Several printers I recently approached with an RFQ for a client were interested in bidding, but all bid on their own terms, which were very harsh because the client was a smaller, relatively new publisher who hadn’t established credit with any vendor.
One of the larger bidders, a printer that spends hundreds of thousands of dollars courting smaller publishers’ business, asked for 120 percent up front. That’s right, 120 percent. Why? To cover the risk it was taking by working with a new publisher who might default on payment or have unrealistic expectations and to cover any overage that might occur and any changes from what was in the original bid.
A second vendor quoted the same price, but worked with the client and requested much more reasonable terms—50 percent up front and 50 percent 30 days from delivery.
Which manufacturer do you think we selected?
In short, therefore, my advice is: Take nothing for granted. If you are unclear about any part of a bid, ask for clarification. And if a vendor’s terms quoted aren’t what you asked for and don’t let you compare its bid with others, don’t hesitate to ask the vendor to re-specify the bid in your format or to your specifications.
Getting Better Bids
Every penny you know about in advance is a penny you can use to negotiate with vendors and factor into your Title P&Ls to ensure their accuracy.
Once the information in your cost sheets is comparable, you can usually eliminate one or two of your five bidders fairly quickly. The other three may be competitive. If this is the case, I suggest you go back for another round of bids. It’s remarkable how often manufacturers will be able to reduce their original estimates when they get into competitive situations—especially if you’ve used the manufacturer before and have established good credit with the company.
How do you rebid? By being honest with each vendor, explaining that you have an equal or lower bid and asking if they’d like the chance to rebid the job. In most cases, you’ll get a reduced estimate.
If lowering the bid would truly mean that a vendor couldn’t make the profit it needs or wants, that vendor will tell you point-blank that this is the lowest it can go and probably make suggestions for modifying your requirements to reduce the price.
Don’t get me wrong. The lowest price is not always the best. Some circumstances may warrant paying a bit more. For instance, you may want to ensure better quality by using a printer known for quality; you may have a rush job that mandates paying more for faster service; you may want to use a manufacturer with slightly higher prices that provides more favorable payment terms; and you may want to use a printer you’ve done business with before because you know that printer is reliable and easy to work with.
All these are legitimate reasons to pay more if you have to. But if you don’t have to, then there’s no reason whatsoever to pay more.
If you don’t get a variety of bids, and ask specifically for the payment terms, you may not find the best manufacturer with the best price and terms. So rebid, rebid, rebid. Don’t worry about offending printers—they’ll tell you when they can’t go any lower. It’s only then that you’ll have to make a decision. And then you’ll be looking at the project from the best possible vantage point.
More Money-Saving Tips
Because production expense is so large, every publisher should use every trick in the book to save money on this expense. Here are a few suggestions to use to get bids and rebids with your RFQs.
- Obviously, sell as many e-books as possible.
- Use print-on-demand if it makes sense.
- Use a book manufacturer to print your books, not a commercial printer that prints only a few books a year. Because book manufacturers print hundreds or even thousands of titles every year, they are specially equipped to manufacture books. As a result, you will get a better and perhaps even a more professional job, and usually at a much lower cost.
- Use the book manufacturer’s paper. Don’t even think about buying and inventorying your own. Printers buy from paper mills in vast quantities, which results in extremely favorable prices for them. It is virtually certain that you won’t be able to buy paper from the mills at anything like the same low price, so don’t waste your time trying. In addition, when you buy from the printer rather than the mill, you pay only for the paper used—and no more. Thus, you won’t have to pay for any paper that remains unused, and then pay again for storing it, and then pay when you write it off because it spoiled in the printer’s warehouse. And you won’t have to worry about managing your paper inventory, which can be a full-time job in itself.
- Standardize your book sizes. Most manufacturers have presses that create fairly standard-size books: 5 3⁄8″ × 8″; 6″ × 9″; 8 1⁄2″ × 11″; and so on. Thus, it’s most cost-effective to produce books in these sizes. If you create a book in an odd size for any reason, you’ll almost always pay more for that book.
- Use notch or perfect binding rather than Smyth sewing. Glue is almost as strong as Smyth-sewing and significantly less expensive, and today’s glues don’t dry out quickly, so in most cases glued bindings will remain strong for decades. (Note, though, that Smyth-sewing may still be competitively priced if you manufacture your books abroad, especially in Europe and Asia, and you should factor that into your RFQs if you are sending them to manufacturers overseas.)
- Avoid spiral or plastic comb bindings. These interfere with identification of the book when it is shelved spine-out, which it usually will be if it gets into bookstores.
- Reduce the paper weight. In most cases, the lower the weight, the lower the cost. But keep in mind that your price still has to generate good perceived value at the retail level. Using lower-weight paper usually decreases the bulk (i.e., thickness) of the book, which could result in lower perceived value. Look for the point at which the tradeoff does not diminish the perceived value. Also be careful about opacity of the paper—that is, the amount of see-through you will get if you use lower-weight stock. Ask for samples if you are unsure.
- Use ultraviolet (UV) coating for book covers. It won’t provide the same gloss as film lamination, and it doesn’t have the same resistance to abrasion damage, but it will still protect the books from fingerprints and minor damage while saving a few cents per copy. Matte lamination costs more than glossy lamination. “Lay-flat” lamination, which is slightly more costly, tends to eliminate the curling that occurs with UV coating or plain lamination in humid surroundings, and it is available in both glossy and matte finishes. (Note that lay-flat lamination is not the same as lay-flat binding.)
- Use “permeated” paper covers instead of cloth on hardcover books. While cloth used to be the norm, in today’s cost-conscious world, strengthened paper covers have generally replaced it. They don’t have the wonderful tactile feel and strength of cloth, but they cost less. And with dust jackets over them, the public doesn’t notice.
- Consider a three-piece case instead of full-cloth binding or permeated paper covers. It provides a bit more strength on the spine and hinges than a straight permeated paper, and it looks more luxurious. The extra cost is minimal, perhaps 2 to 3 cents per book.
- Don’t overweight your cartons. Remember, shipping personnel, warehouse personnel, store clerks, and others have to carry cartons. Packing too many books into a carton increases the chance that the carton will be dropped and the books inside will be damaged. In general, keep cartons under 40 pounds; 30 pounds is even better.
- Pack your books in standard carton counts with each carton containing the same number of copies. Some customers—including wholesalers, distributors, and nontraditional accounts—prefer to order in carton quantities. Packing in standard counts allows you to ship and invoice quickly and accurately.
- Standardize your pallet counts. That lets larger distribution centers order pallet quantities rather than multiple cartons, which saves you money because handling costs are dramatically reduced.
- Make sure your barcodes and your product and shipping labels conform to industry standards. Check bisg.org for details.
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