How Cooperative Buying Will Bring Cost Savings to Our Industry

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As the printing and publishing industry adjusts to change, we continue to seek new and more financially responsible ways to maintain sustainability—or in some unique cases find profitability. The informational services we strive to provide for our communities have become more expensive year over year and as a result many of our margins have been reduced, in some cases eliminated.

Outside of labor expense, our largest cost is for consumables. Although print is our most costly consumable, we also are faced with rising costs for ink, printing plates, print and media services, general office supplies, and numerous other pressroom and circulation supplies. As we all know, publishing and producing a newspaper is not an inexpensive venture.

Financial challenges directly tied to printing and production have led many publishers to abandon the printed product and find digital alternatives. Some of these undertakings have been more successful than others, but it seems while digital margins may have advantages as a result of eliminating print costs, there remains a strong desire for print from a select group of advertisers and subscribers. Regardless of reading habits and personal preferences, many publishers have been driven out of the market by the rising cost of consumables.

One of the ways to control many of these costs are through cooperative purchasing.

Over the past 36 years, PAGE Cooperative (pagecooperative.com) has grown into the strongest and largest cooperative purchasing entity for the newspaper industry with annual member purchases exceeding $100 million.

For this article, I found that while PAGE has had many strong leaders that have allowed it to grow and be successful through the years, its current CEO Gary Blakeley appears to bring several new and innovative ideas that has PAGE now growing at a rapid pace.

I recently spoke with Blakeley to find out more about PAGE, what benefits it brings to our industry and where he sees cooperative buying heading. Our edited interview is below.

E&P: Based on years in our industry and personal experience with PAGE, I feel the cooperative offers favorable pricing and service on multiple product lines vs. individual vendors who focus on a limited/specific product line. How has this helped PAGE to grow the cooperative and expand/improve services to its members?

Blakeley: We are a one-stop shop. A PAGE member has the opportunity to select product from more than 150 suppliers at superior pricing. Moreover, because PAGE’s spend volume is so significant and because we have such strong supplier relationships, members can and should utilize PAGE as their purchasing department for product acquisition, problem resolution and streamlining some accounting functions.

Early last year PAGE modified its bylaws to allow commercial printers and publicly traded organizations to become members. Can you tell us how this has worked out for PAGE and what advantages this may now offer to new and existing members?

Blakeley: I expect to be able to finally take advantage of the bylaw change beginning in the fourth quarter of this year. The impact should be better negotiation opportunities for PAGE as we add more members and more spend volume, and of course more product volume for our suppliers.

You have said before that PAGE's success is built on developing relationships. How does this differ from the same approach many vendors take with their customers, and how do you see this being a benefit to PAGE members?

Blakeley: PAGE is in a unique position of offering multiple products through multiple vendors. As such, we remain unbiased to vendor selection—our members select the product and vendor(s). Because of our impartiality, we can assist members with questions about best product fit based on member requirements. Similarly, we can provide the same assistance to PAGE vendors, i.e. identifying for them an opportunity based upon a member’s request. This works best if we maintain strong relationships with all suppliers.

The strength of PAGE is in the cooperative buying group. What is being done to ensure the continued success in this approach?

Blakeley: PAGE is focused more than ever before on expansion of sales with existing members, i.e., members who are not buying all of their products through PAGE. The more that we collaborate, the better our opportunity to aggregate spend and increase our leverage in price negotiation. This will translate to better pricing and rewards for our membership.

We will also be putting considerable effort into identifying and on-boarding new members as indicated above.

What is PAGE+ Pricing and what advantage does it offer to your members?

Blakeley: PAGE+ Pricing allows the cooperative to provide improved pricing for members. 

Let’s say that PAGE is currently offering a specific basis weight of newsprint at our listed price for all members. If a member wants to improve upon this price, it will need to provide something that a supplier wants, e.g., a term contract, volume, exclusivity, etc. PAGE is often able to bring both parties together and satisfy their needs by providing improved pricing and other benefits to both member and suppliers. If a member is interested in PAGE+ Pricing, they should contact me for more specific information.

PAGE operates as a not-for-profit cooperative. What are the advantages this presents to members?

Blakeley: The biggest advantage to our members is year-end patronage. PAGE collects a nominal fee for all product purchased through PAGE. The fee is built into product pricing and still results in significant discounts for members’ purchases. The revenue generated by this fee typically covers all of PAGE’s annual expenses. If there is a profit that is leftover,  it is returned back to our members in the form of a check, an increase in that member’s equity in the cooperative, or a combination of both.

What can you say to potential members who remain on the sidelines questioning the logic of joining PAGE or feel they are not able to afford a fee?

Blakeley: PAGE does not charge an upfront fee to join. Instead, we have new members post funds, an equity membership, which is returned in the event they leave the cooperative. If the value of the cooperative grows over time, which is our goal, so will the value of their equity.  An equity membership is an investment, definitely not a fee.

Our members save substantially on their purchases and, depending on the member’s volume of purchases the same amount can be saved in a single transaction. Keep in mind, PAGE is essentially a company that gives away money. We aggregate spend to provide savings to our members, we pay a year-end patronage and the member’s equity is credited back to the member’s account, i.e. all surplus funds are returned to the member should the member exit from the cooperative. 

Paper is a significant expense for all newspapers and commercial printers. Does PAGE negotiate pricing directly with suppliers of newsprint and specialty grade paper, and how can this benefit PAGE members vs. printers working directly with the vendor?

Blakeley: Yes, PAGE does negotiate pricing directly with suppliers and there are multiple benefits. PAGE negotiates with all newsprint suppliers for a common price for all members. This is a parallel process based upon all market intelligence that is gathered. This is a significant time savings for our members.

Because of our volume of spend with newsprint suppliers and the advantage that PAGE has with assuming the credit risk for the supplier, we have a stronger negotiating position with suppliers. 

PAGE is a not-for-profit company; part of the PAGE fee charged to newsprint vendors is returned at the end of the year via increased equity for the member or patronage paid. That is to say, there is additional dollars saved beyond the initial price.

In a previous discussion, you stated that PAGE takes the “credit risk” and this provides an advantage to newsprint suppliers helping your ability to negotiate and subsequent ability to pass savings on to members. Can you better explain the details of this thought process?

Blakeley: This is a credit risk advantage that PAGE applies to all suppliers, not just our newsprint partners. When a PAGE member orders product, the member orders directly from the supplier (the direct relationship between member and supplier is always maintained). The product and/or service is then sent directly to the member and the supplier then bills PAGE directly. In turn, PAGE pays the supplier according to terms and then bills the member. This process significantly improves the billing process for the suppliers—they have one “bill” and one responsible party for multiple companies. This benefit to our suppliers also provides a cost advantage to our members, that is returned either in the initial product cost, in the year-end patronage and equity.

Some vendors offer rebates on paper to their customers; you’ve designed a program for PAGE members that offers upfront rebates. How does this program work?

Blakeley: I need to separate this question a bit between specialty grade paper and standard newsprint. PAGE provides a rebate on specialty grade paper; the rebate amount is known up front by the member and therefore, the member always knows the true cost of specialty grade paper at time of purchase. On standard newsprint however, PAGE no longer provides a rebate. Rather, any rebate price is now rolled into the upfront price. This approach makes it much easier for our member-owners who do any commercial work, i.e. they now know the cost up front for their paper and can accurately quote a job at time of the bid.

The approach of eliminating rebates on standard newsprint also simplifies the financial process for not only the member but also for the supplier and PAGE’s accounting team.

Fastmarkets RISI (Resource Information System Inc.) is a leader in the industry supporting more than 97 percent of the world’s forest products producers, giving them tremendous insight and influence in a volatile paper market. Does PAGE rely on information of price fluctuation from RISI to assist in negotiating with vendors?

Blakeley: We do monitor RISI closely for price fluctuation. We also work with EMGE (an offshore company that has been very accurate in newsprint price projections). I would categorize both of these companies as two data points that we use to assist with our price negotiation with suppliers, but would not use the word “rely” as this may imply sole dependency.

Is there any additional information you would like to share with our readers?     

Blakeley: PAGE is committed to serving our member-owners by working to provide best product and best price via our quality suppliers. We need to be very collaborative in this process and committed to the aggregate spend model. I welcome any opportunity to assist current members, non-members and suppliers. It is clearly a very tough time for our market, but PAGE stands ready to assist.

Jerry Simpkins has more than 30 years of experience in printing and operations in the newspaper industry. Contact him on LinkedIn.com or at simpkins@tds.net.

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