I have had the chance to participate in a recent “vendor” review with a long term client as they have been put in the uncomfortable situation of having multiple print vendors close their doors.
In an effort to continue the transparency aspect of this blog – my client felt that I was “uniquely” qualified to help them, as I was at the helm of one of the shops that closed and was employed by yet another as a sales manager. They reached out to me to help them establish some “criteria” by which to judge current and future print relationships (and yes, my current employer remains on their active vendor list after undergoing the vetting process).
Over a series of posts, I am going to share some of the ideas and suggestions that they implemented.
Fiscal Stability (part 1):
Ask for recent financial’s.
Not fiscal year end, but quarterly reports. If they are fiscally stable, they should have no problem sharing these with you. Some vendors will react negatively to your request, and they have every right to. You are asking to see their profit and loss. I advised my client, that if the vendor was wiling to do so, they too must be willing to share with them their most recent quarter/yearly print spend. You must also be willing to sign a confidentiality agreement or a NDA. Almost every print vendor you look at will be showing a loss – but you need to dive in deeper – are the losses growing? Are they cutting costs? Do their numbers fit within industry guidelines (there are some real simple metrics to look for in regards to billing per employee etc available from the Printing Industries of America or PIA). You want to make sure that they have the current fiscal stability to weather this financial storm while still being able to afford you strategic cost savings (a great reason to show them your print spend – how can they benchmark any savings if they don’t have a starting point? A real starting point).
A CPA or a CFO can look at these numbers in a second and give you a pretty accurate guess as to the stability of the company in question. If my client were to have looked at my financials, they would have seen a debt to equity ratio that was out of whack, and lack of cash reserves, and COG (or, “Factory Expenses”) that was in excess of 83% (based upon industry standards I should have been at <75%) and COS (Cost of Sales) in excess of 12% (Again, based off of industry standards, I should have been <9%).
Resources:
“Rules of the Road”: The PIA Ratios
Bottom-line, if you are looking for a long term, mutually beneficial relationship – you need to be willing to ask some hard questions, share some information and be willing to spend time talking with your vendors about the economy and your cost savings goals. They are relying on your continued relationship as much as you are relying on theirs.
I look forward to your thoughts and feedback.
[...] wrote a post about vendor qualification when I first put this blog together (here). At that time, I introduced the idea of using the PIA ratios to help scrutinize a potential [...]