Reducing expenditure by determining and minimising print obsolescence
March 3, 2013
This post is by Shirley Kirkwood, a Senior Consultant with TrinityP3. Shirley has a unique and diverse career background spanning over 30 years, with proven experience in the print, advertising, publishing, graphics arts, marketing, and corporate arena.
In the past we’ve outlined why low advertising print cost does not necessarily mean great value and one of the factors highlighted that accounts for a great deal of wasted expenditure is the problem of obsolescence.
Whether you are a large multi-national or small to medium business, you’ve most certainly got boxes of now obsolete and excess printed collateral material (not to mention promotional items) stored collecting dust, incurring warehouse storage fees or simply taking up valuable real estate somewhere.
I’ve seen an on obscene amount of obsolete print (and promotional items) sentenced to destruction and equating to hundreds, thousands even millions of advertising and marketing budgeted dollars.
Here are a few steps to spring cleaning out what’s lurking in your cupboards, setting up responsibilities and ordering sensibly:
STEP 1. Perform an Audit
Be aware and informed.
Identify what you own, where it’s located and how much it’s worth.
While you may think you know exactly what you own and where they are located you may be surprised by what you discover once your investigation is complete. Here is what you need to do:
- Involve your suppliers and key stakeholders. Find out where your stock items are located – this includes warehouses, retail stores, branches, head office storerooms and third party suppliers.
- Obtain stock reports from all stockholders. At a minimum this report should include stock item codes, title, version date, quantity on hand (in unit of measure), last order date activity, any backorder requests.
- Establish if the stock has been paid for. In some situations the supplier (particularly in the case of some generic items such as stationery and promotional elements) may be in a contractual arrangement where the stock is owned by them until the marketer draws down on the item. This may mean any obsolete stock that is identified may need firstly to be paid for by the marketer (and accrued against someone’s expenditure budget) before it is made obsolete.
Once you have compiled this information someone needs to review the item and make a decision on whether it should be retained or made obsolete.
STEP 2. Ownership and Accountability
Every item produced, ordered and stored for your company should have an owner. The major stakeholder or requester of the item, a person who is responsible for it’s lifecycle and the budget it is allocated to. If you already have good stock item husbandry measures in place – congratulations you should already know who the stock owner is, if you don’t you may need to go to step 3 and then come back to this step.
While stock ownership is easy at the commencement of the items generation, as staff (owners) move on within a company or leave, the stock item quickly becomes like a temper throwing child in a shopping centre – no one wants to take responsibility for it, which is why it is advisable to allocate the division’s cost centre to the item, ensuring the item doesn’t become a hot potato that just keeps being passed around with no actions or decisions made on its fate.
Even with ownership allocated, the decision to obsolete an item is difficult for a lot of people for various reason such as:
- Fear of retribution whether legitimately (ie they have been negligently forecasting or deciding on quantities) or
- Because they think it might be useful later, but very rarely is, or
- They are one of the 2- 5% of Australians who Swinburne University estimate are hoarders, in which case you will need to fess up and delegate this accountability to someone else.
Ok – so you’ve determined what you have and who is taking responsibility for it,
STEP 3. Review stock report and samples
Obtain samples of all stock items (and each version) – start by requesting these from your main warehouse supplier/s.
You can use this batch of items to cross reference to other stock holders’ stock reports without making them provide samples. However, anything any stock holder has that does not have a stock code/version date identified you will also need a physical sample, just to ensure you are not making a decision on something you think it might be.
Sometimes a digital photo can suffice if there is any doubt rather than incurring logistics and courier fees.
Now the identified stock owner needs to physically review the element and determine if it is still relevant, up to date and if it will be required for the future (and if so, by whom). This process can take a while and includes engaging with other existing and potential stakeholders.
A word on stock codes and version control
It’s simple, but you’d be surprised how some businesses still don’t include (or it has been forgotten ) a stock item code (or key number) and version date on an item.
Having this provides a quick and simple way of identifying an item (from concept to obsolescence) and determining if the item is valid, without having to trawl through the content to then decide if the item is still relevant or superseded and therefore now obsolete. Smart operators include an expiry date for the item if known, i.e. end of a promotion/offer and log this in their inventory system, which will then appear on stock reports, making for easy obsolescence decisions.
STEP 4. Make a decision
Be honest and brave.
Now, you’ve made a decision to obsolete an item, calculate the value of the obsolescence (value of stock x quantity on hand).
Inevitably, the value of this stock obsolescence will be confronting to many owners and a possible revelation to business unit managers. For whatever reason the item which was made obsolete along with the value of obsolescence should be tracked and managed for future financial accountability, KPI reporting and monitoring.
Formalise your decision in writing using a standardised template and circulate to all parties requesting that the item be obsoleted and removed from their inventory.
STEP 5 – Obsoleting an item
Don’t just ask your stock holder to “bin the items”. Ensure you know what is actually going to happen with the unwanted items and that they are being destroyed, recycled responsibly. Paper and cardboard is easily recycled but consider the options for some of the other items you might be wanting to make obsolete.
I’ve seen (and recycled, repurposed) lots of promotional type items, everything from branded t-shirts, plastic drink bottles (which leaked and goes to show the importance of quality control particularly in offshore supply, but that’s another story) to large scale acrylic/metal point of sale material destined for landfill which is not only environmentally unsound but also corporately irresponsible. Seek advice (the original supplier or your warehouse are usually good places to start) as there are many simple ways of being responsible and in some cases even making back some money , although I wouldn’t go factoring profit into any budget. Request your stockholder to report on how they destroy or recycle the item and capture this information in a central system such as the logistics system.
Don’t forget to ensure a few hard copies are retained in an appropriate place for posterity, nostalgia and those award entries, particularly on the more creative and technically diverse pieces.
One expects by this stage - the electronic files which where created for the items production have been archived off. Add to this a digital image of the final item in various poses. These can be filed by item code, date, title etc and can be useful for referencing at a glance using a content management system.
It’s funny, often through pure coincidence, how concepts and creative ideas often emulate something that may have been executed months or even years ago. This doesn’t mean that it’s not still a great concept because it has been done before but it is prudent as a marketer to be able to refer back to a previous piece and see how it was executed, how effective it was and it’s ROI before leaping down that path again.
STEP 6. Sensible quantity ordering of existing and new stock items
The best way to avoid obsolescence and reduce waste is to be more accurate with your stock ordering.
Engage with other key stakeholders (ie sales, marketing, production) regularly to determine up to date quantity requirements. Don’t just assume past quantities are still valid on existing stock items.
Sure, unit cost and quantity are linked but unless the stock item you are printing is a generic piece, which is likely to have longevity and not require any amendments (due to changes in your business, product or even errors), it is not advisable to print more than 12 months stock, maximum! Six months stock of such an item is standard however each item should be reviewed on a case by case basis taking into account production lead times, unit cost, projected quantity usage.
Ideally the value of each item created should have a unit cost associated and this should be captured not only against your budget but also in your warehouse logistics system and reports along with at least:
- Version date (i.e. the date the item was produced or amended)
- Expiry date of item (this may be actual or expected and monitored regularly).
- Unit cost, unit of measure (single, bundle of 25 etc), quantity on hand, value of stock
- Reorder trigger quantity (based on leadtime and projected usage and monitored regularly).
In the case of promotional items and complex printed pieces (books, point of sale items) resist the urge to look just at unit cost of an item and think you might need 2,000 items when you only need 1500, because sometimes making these items obsolete responsibly can be cost ineffective.
If using a database to determine print quantity (ie for a direct mail piece) – ensure you have cleaned your data and have your mailhouse dedupe and run it against the various Australia Post AMAS programs to determine valid and accurate addresses before determining the final quantity for your print run. This means you need to do your data preparation before you order any preprinted base stock.
Of course, always allow “overs” which is usually 5- 10% of the total print quantity depending on complexity and number of processes required to produce and despatch the piece (embellishments, hand work, fulfilment etc). Check with your suppliers what overs they require or recommend.
Don’t forget samples – check with all the principle stakeholders (agency, supplier, marketer, customers) if they require samples, but be cautious as on high cost complex items this can add up. Make sure you allocate a couple of extra samples on items that you may wish to enter for that award later.
Your proposed usage quantity plus overs, plus samples will give you a final quantity on which to base your estimate request and eventual order.
STEP 7. Set up and Repeat
Be vigilant with your spring cleaning.
Set up an obsolescence process and action this every 3, 6 or at a maximum, 12 months, depending on your inventory holding. The more regularly you do it the easier and less time consuming it gets.
Now, simply repeat Steps 1 to 6 (or Steps 3 to 5 if you’ve set up your stock items well) and watch your logistics costs reduce because you are not paying for unnecessary space and your print costs reduce because ordering has become more responsible and accountable.
So, put on that apron, don your rubber gloves, get out that broom and bucket and get to it!
If you would like to know more about setting up an Obsolesence Process please contact us and if you would like to know more about preparing data for variable digital printing contact your supplier or leave a comment here and I’ll write an article providing tips and pitfalls.
The author acknowledges that no actual cleaning products have been used or housework performed during the creation of this blog. Furthermore, she acknowledges that she has never been responsible (or will be) for any tantrum throwing child being subjected upon shopping centre patrons.