Purchasing paper direct: want to buy your own paper? First learn how to analyze your paper needs and forecast your true savings

Folio: The Magazine for Magazine Management, August 1, 1990 by Alex Brown

For some publishers, supplying paper stock to a printer is as strange an idea as bringing your own potatoes and salad to a restaurant. For others, it makes the same powerful economic sense as buying floppy disks from a discount house instead of from the retailer who sold you the computer.

This article will explore the benefits of buying paper directly, through merchants or mills, and advise yOu on the efforts you'll have to make to reap the rewards. Even if you have no immediate interest in supplying your own stock, you should be familiar with the underlying economics of printer-supplied paper, the better to understand its contribution to the printer's profit margin.

Most printers want to sell you paper, and every one of them has to be able to do so if asked. The volume of paper a printer buys in the paper market exceeds your own by about the same margin a pension fund's stock transactions eclipse those of your Uncle Ed. And the analogy continues: Both pay the same price for GM stock, but only one can pay constant attention to the market's activity.

Here the comparison ends, however since printers can achieve volume discounts on some orders. They tend not to pass these savings on to you, however, and on some orders they don't even attain them. In fact, then, the notion that printers can provide a better deal on paper than you might secure for yourself is very much worth scrutinizing, To begin, You'll want to speak with a merchant to learn what your basic options might be.

The paper industry is in near total agreement about one proposition: It makes more sense to have independent merchants selling paper than to maintain a mill sales force. Most mills have relationships with one or more merchants. A few, like Westvaco, sell only direct to printers or publishers, and some, like S.D. Warren, will only supply merchants-never end users.

If you've been assuming that the real deals in the paper market can only be made mill-direct, you're in for a surprise. Merchants tend to be a bit more effective for buyers who need access to the whole market, and who will pursue savings by changing mills. Although the merchants do have to carve out a commission for themselves, they generally supply more support and market insight in return for their fees.

Then too, it's tough to qualify as a mill-direct customer. Only very large volume publishers can rouse mill interest-and by large I mean large page counts and pressruns that are over, say, two million. (There are exceptions, such as publishers with unique paper requirements who will develop a mill relationship in order to have a private label paper manufactured.) Mill-direct customers tend to Publish multiple titles and produce them on a common basis weight and grade. Publishers like Time Warner and Sears have a powerful need to put their business under one roof in order to slice out the best price, and they pay for this by keeping their requirements very consistent.

However, since some grades are available only through merchants, heavy hitters like Conde Nast use merchants for at least some of their paper supply. Even titans like L.L. Bean use merchants, so don't feel a merchant consigns you to the minor leagues.

In essence, the paper mills themselves have created the merchant system, and they're pleased with it. Customers can benefit as well. The mills are spared a sales force, and they remain committed to supporting merchants who, in turn, support buyers. Because mills supply through several merchants, you can choose your salesman based on his market insight, service, taste in haberdashery, or any other criterion you prefer. Some will work very hard for you, and good merchants are much more than order takers. The only dark cloud is the need to get these merchants paid. It's as if you were paying your manufacturer to sell his product to you.

Healthy competition will allow you to seek out deals, pitting merchant against merchant, but on most orders, you won't find price variations, particularly in tight markets.

When a merchant places your business, he sets up an allocation for you at the mill involved. You're visible to the mill as a customer, and your business is not part of an amorphous pool that the merchant can manipulate to carve out space for a new customer. Unfortunately, this relationship often means that you can't use the merchant to move your inventory for you. Once the paper is delivered to the printer, it's out of the market the merchant wants to serve.

Whether you buy from a merchant or a mill, you are supplying paper directly to the printer. You may have a sales relationship with either a merchant or a mill, but to the printer, you are buying direct.

In general, publishers will find the merchant system highly appropriate. Printers do too, and you might ask yours for a merchant recommendation when you begin discussing your interest in supplying your own paper. If you want to supply your stock, you'll need to involve your printer early, since you won't even be able to calculate your potential savings until you learn about the printer's specific supply requirements. Let's get a taste of what those savings might be.