The accounting geniuses at the U.S. Postal Service calculate that the cost of delivering a publication rose 6% in the past year, despite lighter copy weights and various efficiency moves.
As a result, the Periodicals class was even more of a money loser in Fiscal Year 2009 than in FY 2008, according to the annual compliance report the USPS released yesterday. The class covered only 76.1% of its costs during the year that ended Sept. 30, down from 84.0% the previous year, according to Postal Service calculations.
Those results will fuel claims that Periodicals rates should be increased drastically so that publishers bear their fair share of Postal Service costs.
But the numbers will also bolster arguments that the Postal Service’s system of assigning costs to particular classes of mail is fatally flawed, especially in the case of Periodicals. (See For Periodicals, The Postal Service’s Math Doesn’t Add Up for an explanation of "automation refugees" and other flaws in the way the USPS assigns costs to the Periodicals class.)
The alleged 6% increase occurred during a period in which publications got lighter, co-mail adoption increased, and the Flats Sequencing System began taking on significant volumes -- all of which should have decreased the cost per copy. Nevertheless, the USPS reports that its average cost of handling a periodical increased from 31.7 cents to 33.7.
The new report might also prompt another look at the rules and rates that lead to inefficient Periodicals mailings. One area of focus might be the shipping of publications in sacks rather than on pallets because the USPS has recently become more aware of sacked mail’s high costs. A correspondent noted that a mailing of 500,000 catalogs (Standard class) is usually 100% palletized and dropshipped, while even huge 10-million-plus magazine co-mail pools typically create hundreds of sacks that generally are not dropshipped.
Periodicals volume dropped 8% and revenue 10% during the year. Although Periodicals rates rose about 4% in May, Periodicals revenue per piece declined 3% during the year as a result of fewer ad pages and lighter copies.
One bright spot was a 3% increase in the number of “in-county” Periodicals copies delivered by the Postal Service. Those are mostly small, non-daily newspapers, which have held up better during the recession than have big-city dailies. Some have recently switched from using a carrier force to the USPS for delivering their copies.
See also Can the Postal Service Still Afford Periodicals? for an explanation of why the USPS is better off with Periodicals than without, despite what its cost studies say.
Wednesday, December 30, 2009
Friday, December 25, 2009
Why Planting Trees Is Not Necessarily Green
A leading biologist says that encouraging the planting of trees can lead to ecological disaster while in some cases the cutting of trees helps preserve the environment.
Dr. Bernd Heinrich's recent op-ed piece in The New York Times ridicules "easily duped bleeding-heart 'environmentalists,' who absolutely love tree planting because it sounds so 'green.'" In a forest, there is no need for people to plant trees, he explains, sounding a bit like Dead Tree Edition, only more eloquent and knowledgeable.
"A forest is an ecosystem. It is not something planted. A forest grows on its own," writes Heinrich, emeritus professor of biology at the University of Vermont and an author of numerous books about biology and ecology. "When a tree falls, the race is on immediately to replace it. In the forests I study, there are so many seeds and seedlings that if a square foot of ground space opens up, more than a hundred trees of many different species compete to grow there."
The Kyoto Protocol set a bad precedent by allowing carbon credits for planting trees but not for preserving forests, Heinrich says. That has created incentives to clear-cut forests and replace them with single-species tree farms that have "to be ever coddled with fertilizers, herbicides, pesticides and fungicides."
He notes that forests are more likely to be preserved if they have economic value -- a truth that the environmental movement so often fails to grasp.
"I admit that those of us who really do care about forests have not exactly been helpful. We have not encouraged selective harvesting from naturally occurring stands, which may be necessary," Heinrich says.
For more on this subject, please see:
"A forest is an ecosystem. It is not something planted. A forest grows on its own," writes Heinrich, emeritus professor of biology at the University of Vermont and an author of numerous books about biology and ecology. "When a tree falls, the race is on immediately to replace it. In the forests I study, there are so many seeds and seedlings that if a square foot of ground space opens up, more than a hundred trees of many different species compete to grow there."
The Kyoto Protocol set a bad precedent by allowing carbon credits for planting trees but not for preserving forests, Heinrich says. That has created incentives to clear-cut forests and replace them with single-species tree farms that have "to be ever coddled with fertilizers, herbicides, pesticides and fungicides."
He notes that forests are more likely to be preserved if they have economic value -- a truth that the environmental movement so often fails to grasp.
"I admit that those of us who really do care about forests have not exactly been helpful. We have not encouraged selective harvesting from naturally occurring stands, which may be necessary," Heinrich says.
For more on this subject, please see:
Friday, December 18, 2009
Mamas, don’t let your babies grow up to be mail sorters
Several industries and occupations related to printed materials will be among those with the worst job losses through 2018, a new government report predicts. As if we didn’t already know that.
The Postal Service, printing, and newspaper publishing will be in the top 10 for employment declines between 2008 and 2018, the Bureau of Labor Statistics report says.
The 30 occupations with the largest projected decreases during that period include “postal service mail sorters, processors, and processing machine operators” (-30%); “paper goods machine setters, operators, and tenders” (-21%); “postal service clerks” (-18%); and “mail clerks and mail machine operators, except postal service” (-11%).
Oddly enough, the predictions, if accurate, might actually be good news for some of the industries and their employees. They indicate that the rapid employment declines of the past year will taper off.
For example, the report predicts the U.S. Postal Service’s employment will decline 13%, from 748,000 in 2008 to 650,000 in 2018; USPS is already about halfway there. Postal officials’ presentations indicate they will finish 2010 with about 650,000 employees, and it seems likely that downsizing will continue in subsequent years.
However, the BLS does seem to be on target with its projection that the bulk of USPS job cuts will occur among non-supervisory employees who do not deliver the mail. Letter carriers, it predicts, will decrease by only 1% and represent the vast majority of new USPS hires.
The projected decreases of 25% for newspapers and 16% for printers don’t seem so big when you consider the cuts they have already made during this recession-racked year. And the 8% decrease in “reporters and correspondents” since 2008 has probably already happened.
For further reading:
The Postal Service, printing, and newspaper publishing will be in the top 10 for employment declines between 2008 and 2018, the Bureau of Labor Statistics report says.
The 30 occupations with the largest projected decreases during that period include “postal service mail sorters, processors, and processing machine operators” (-30%); “paper goods machine setters, operators, and tenders” (-21%); “postal service clerks” (-18%); and “mail clerks and mail machine operators, except postal service” (-11%).
Oddly enough, the predictions, if accurate, might actually be good news for some of the industries and their employees. They indicate that the rapid employment declines of the past year will taper off.
For example, the report predicts the U.S. Postal Service’s employment will decline 13%, from 748,000 in 2008 to 650,000 in 2018; USPS is already about halfway there. Postal officials’ presentations indicate they will finish 2010 with about 650,000 employees, and it seems likely that downsizing will continue in subsequent years.
However, the BLS does seem to be on target with its projection that the bulk of USPS job cuts will occur among non-supervisory employees who do not deliver the mail. Letter carriers, it predicts, will decrease by only 1% and represent the vast majority of new USPS hires.
The projected decreases of 25% for newspapers and 16% for printers don’t seem so big when you consider the cuts they have already made during this recession-racked year. And the 8% decrease in “reporters and correspondents” since 2008 has probably already happened.
For further reading:
- The BLS news release, which lists the top 10 industries and top 30 occupations for both job gains and losses.
- The full study on which the news release is based.
- Mail Volumes Have Declined Faster Than The Postal Workforce, But That Might Change, which presents details of actual and projected employment declines at the Postal Service.
Thursday, December 17, 2009
Green Publishing Quiz
An abbreviated version of this article appears in the December issue of Publishing Executive magazine under the title “Looking to Make Your Magazines ‘Greener’? – Take This Quiz First”. Yeah, that’s right, I’ve actually written something for a real dead tree edition of a magazine, though you can also check it out on PubExec’s dead dinosaur edition. Although geared to magazines, the quiz is relevant to other printed materials, especially catalogs.
I started trying some years ago to make the magazines on which I work more environmentally friendly, but there was a big problem: Me.
It took me a long time to realize that much of what I believed regarding the environmental impact of magazine publishing was misguided or just plain wrong. The realization that I'm "an environmental idiot" has inspired me to devote many of the articles at Dead Tree Edition to publishing-related environmental issues.
Rather than subjecting you to another let’s-all-go-green pep talk, I compiled the following quiz to help you recognize gaps in your knowledge. I hope it provides you useful information you can use to make informed decisions about the environment.
Q: Which of the following constitutes the largest portion of the typical American magazine’s carbon footprint?
a) Printing
b) Distributing the magazine, including freight and postal services
c) Paper manufacturing
d) Cutting the trees to produce the paper
e) The hot air generated by loquacious writers and pompous editors.
A: (C), paper manufacturing. A study commissioned by Time Inc. found that 77% of one magazine’s carbon footprint and 61% of another’s occurred in the manufacturing of pulp and paper. Subsequent studies by others have reached similar conclusions. Making paper is an energy-intensive process, with some mills generating more than a ton of carbon dioxide and equivalents for every ton of paper they produce.
Q: True or false, anything you do to make your publication greener will cost you money.
A: False. Here are some things you can do that won’t cost you a dime or that might even save you money:
• Display a “Please Recycle This Magazine” logo prominently in your publication. Magazine Publishers of America offers free downloads of the logo, even to non-members, as well as several public service announcements.
• Have the paper you purchase shipped in full railcars. See Use Rail to Lower Your Carbon Footprint for more on this potentially money-saving tactic.
• Use Gray Component Replacement (GCR) to reduce ink consumption. Money-Saving Trend: Using GCR to Reduce Ink Consumption explains how.
• Check whether you are using the optimal roll sizes of paper. It’s amazing how often printers quote, and publishers use, roll sizes that are wider than necessary.
• Ask your paper suppliers what they are doing to minimize their carbon footprint. The more they hear that customers are concerned about this, the more they will focus on reducing their emissions of greenhouse gases.
• An obvious one: Print as little as you need. Clean up mailing lists. Reduce newsstand shipments to underperforming locations. Eliminate unnecessary office and inventory copies.
Q: Which has a lower carbon footprint:
a) Paper made nearby at a mill with a high carbon footprint, or
b) Paper shipped halfway across the continent from a low-carbon mill?
A: While generalizations are always dangerous (How’s that for a generalization?), the answer is almost always (b). Transport of paper to printing plants is a tiny portion of the typical magazine’s carbon footprint, while paper manufacturing usually accounts for the majority. The variation in carbon footprint from one mill to another is much greater than the total footprint of the freight. The Time Inc.-commissioned study put transport to the printer at only about 1% to 2% of the total footprint.
Q: Is it easy to compare the carbon footprints of two competing paper mills?
A: Not at all. For example, if you include the carbon footprint of electricity used by mills, you will penalize those that are located in areas where the utilities happen to rely on coal. But if you don’t, you will fail to recognize those that generate green power on site through hydroelectric dams or other means. Rather than looking for a single number from a paper supplier, you should discuss what comprises that footprint, what the mill is doing to reduce its environmental impact, and what you as a customer can do to help.
Q: True or false, environmentally preferable paper always has high PCW (post-consumer waste) content.
A: False. Using PCW in North America to make magazine-quality paper can actually be bad for the environment if it involves “up-cycling”, as explained in I'm an environmental idiot!. Using large amounts of recycled pulp is especially challenging in lightweight papers, which can still be a good choice environmentally because of their efficient use of pulp. By the way, the U.S. is one of the few countries that distinguishes between PCW and other waste; in most of the world, recycled paper is recycled paper.
Q: When you buy paper that has virgin content, you should favor suppliers who promise to plant one tree for every one they harvest, right?
A: Wrong. Generally speaking, there is no need to plant trees in a sustainably managed forest, as Cutting some trees but saving the forest explains. And Illegal Logging in Indonesia: Not Funny shows that tree-planting programs can indicate unsustainable forestry.
Q: Does all sustainably harvested fiber have a certification from an organization like the Forest Stewardship Council or the Sustainable Forestry Initiative?
A: No. There is plenty of sustainable forestry that is not certified. That’s especially true in places like Maine and Finland where much of the forest is in the hands of small landowners because the FSC and SFI guidelines are more suited to large corporate and government land owners. There has also been criticism of the forestry practices of some certified logging operations, though it’s hard to separate fact from fiction because the certification organizations seem to be putting more resources into fighting each other than into promoting sustainable forestry. Still, using paper with certified fiber is the easiest way to ensure it comes from sustainable forestry.
Q: Are printers and paper mills that have chain-of-custody certification more environmentally friendly than those that don’t?
A: Not necessarily. CoC certification has nothing to do with an organization’s environmental practices, just its ability to track which fiber or paper was used on a particular job. Only certification of specific paper -- not of a mill or printing plant -- matters.
Q: Does the harvesting of trees in North America cause or prevent deforestation?
A: Both. Larry Selzer, president and CEO of The Conservation Fund, explains how logging can prevent deforestation: “We know that forests offering value economically and socially are more likely to continue offering value environmentally. And the economic value is an added incentive for owners to manage their forests with care, and to maintain them as forest rather than selling them for profit -- which often results in the forests being turned into malls or subdivisions.” Logging can cause environmental damage but rarely leads to true deforestation, which is the permanent loss of forest. Agriculture and development are more common causes of deforestation.
Q: Does delivering content electronically rather than in printed products save trees and help the environment?
A: Not necessarily. Data centers and electronic gadgets are huge consumers of electricity. While paper mills often rely heavily on renewable resources for their power, conventional electricity typically comes from coal or petroleum. That’s why I refer to digital content as “dead dinosaur editions” (as opposed to ink-on-paper “dead tree editions”). The mountaintop-removal method of coal mining and the processing of oil sands for petroleum are both significant sources of deforestation in North America. See Smackdown: Printed Editions vs. Digital Editions for more on how the environmental footprint of dead-dinosaur editions compares with that of printed editions.
Q: Will publishers that make their products more environmentally sustainable be more profitable as a result?
A: Some people take it as an act of faith that “Green business is good business”, but they don’t seem to be the ones actually making the magazine industry greener. Guy Gleysteen, who heads up production for North America’s largest magazine publisher, Time Inc., says going green is “about doing the right thing” because a publisher’s sustainability efforts “are not readily described in one or two lines that would appeal to a consumer.”
And just because some advertisers are touting their green efforts, don’t expect that to influence how they advertise. For the most part, the decisions about where to advertise are still placed in the hands of 23-year-old media buyers who have only been told to compare CPMs (cost per thousand), not carbon footprints.
Let's hope some day our customers demand that we be green. And let's be ready for that day.
I started trying some years ago to make the magazines on which I work more environmentally friendly, but there was a big problem: Me.
It took me a long time to realize that much of what I believed regarding the environmental impact of magazine publishing was misguided or just plain wrong. The realization that I'm "an environmental idiot" has inspired me to devote many of the articles at Dead Tree Edition to publishing-related environmental issues.
Rather than subjecting you to another let’s-all-go-green pep talk, I compiled the following quiz to help you recognize gaps in your knowledge. I hope it provides you useful information you can use to make informed decisions about the environment.
Q: Which of the following constitutes the largest portion of the typical American magazine’s carbon footprint?
a) Printing
b) Distributing the magazine, including freight and postal services
c) Paper manufacturing
d) Cutting the trees to produce the paper
e) The hot air generated by loquacious writers and pompous editors.
A: (C), paper manufacturing. A study commissioned by Time Inc. found that 77% of one magazine’s carbon footprint and 61% of another’s occurred in the manufacturing of pulp and paper. Subsequent studies by others have reached similar conclusions. Making paper is an energy-intensive process, with some mills generating more than a ton of carbon dioxide and equivalents for every ton of paper they produce.
Q: True or false, anything you do to make your publication greener will cost you money.
A: False. Here are some things you can do that won’t cost you a dime or that might even save you money:
• Display a “Please Recycle This Magazine” logo prominently in your publication. Magazine Publishers of America offers free downloads of the logo, even to non-members, as well as several public service announcements.
• Have the paper you purchase shipped in full railcars. See Use Rail to Lower Your Carbon Footprint for more on this potentially money-saving tactic.
• Use Gray Component Replacement (GCR) to reduce ink consumption. Money-Saving Trend: Using GCR to Reduce Ink Consumption explains how.
• Check whether you are using the optimal roll sizes of paper. It’s amazing how often printers quote, and publishers use, roll sizes that are wider than necessary.
• Ask your paper suppliers what they are doing to minimize their carbon footprint. The more they hear that customers are concerned about this, the more they will focus on reducing their emissions of greenhouse gases.
• An obvious one: Print as little as you need. Clean up mailing lists. Reduce newsstand shipments to underperforming locations. Eliminate unnecessary office and inventory copies.
Q: Which has a lower carbon footprint:
a) Paper made nearby at a mill with a high carbon footprint, or
b) Paper shipped halfway across the continent from a low-carbon mill?
A: While generalizations are always dangerous (How’s that for a generalization?), the answer is almost always (b). Transport of paper to printing plants is a tiny portion of the typical magazine’s carbon footprint, while paper manufacturing usually accounts for the majority. The variation in carbon footprint from one mill to another is much greater than the total footprint of the freight. The Time Inc.-commissioned study put transport to the printer at only about 1% to 2% of the total footprint.
Q: Is it easy to compare the carbon footprints of two competing paper mills?
A: Not at all. For example, if you include the carbon footprint of electricity used by mills, you will penalize those that are located in areas where the utilities happen to rely on coal. But if you don’t, you will fail to recognize those that generate green power on site through hydroelectric dams or other means. Rather than looking for a single number from a paper supplier, you should discuss what comprises that footprint, what the mill is doing to reduce its environmental impact, and what you as a customer can do to help.
Q: True or false, environmentally preferable paper always has high PCW (post-consumer waste) content.
A: False. Using PCW in North America to make magazine-quality paper can actually be bad for the environment if it involves “up-cycling”, as explained in I'm an environmental idiot!. Using large amounts of recycled pulp is especially challenging in lightweight papers, which can still be a good choice environmentally because of their efficient use of pulp. By the way, the U.S. is one of the few countries that distinguishes between PCW and other waste; in most of the world, recycled paper is recycled paper.
Q: When you buy paper that has virgin content, you should favor suppliers who promise to plant one tree for every one they harvest, right?
A: Wrong. Generally speaking, there is no need to plant trees in a sustainably managed forest, as Cutting some trees but saving the forest explains. And Illegal Logging in Indonesia: Not Funny shows that tree-planting programs can indicate unsustainable forestry.
Q: Does all sustainably harvested fiber have a certification from an organization like the Forest Stewardship Council or the Sustainable Forestry Initiative?
A: No. There is plenty of sustainable forestry that is not certified. That’s especially true in places like Maine and Finland where much of the forest is in the hands of small landowners because the FSC and SFI guidelines are more suited to large corporate and government land owners. There has also been criticism of the forestry practices of some certified logging operations, though it’s hard to separate fact from fiction because the certification organizations seem to be putting more resources into fighting each other than into promoting sustainable forestry. Still, using paper with certified fiber is the easiest way to ensure it comes from sustainable forestry.
Q: Are printers and paper mills that have chain-of-custody certification more environmentally friendly than those that don’t?
A: Not necessarily. CoC certification has nothing to do with an organization’s environmental practices, just its ability to track which fiber or paper was used on a particular job. Only certification of specific paper -- not of a mill or printing plant -- matters.
Q: Does the harvesting of trees in North America cause or prevent deforestation?
A: Both. Larry Selzer, president and CEO of The Conservation Fund, explains how logging can prevent deforestation: “We know that forests offering value economically and socially are more likely to continue offering value environmentally. And the economic value is an added incentive for owners to manage their forests with care, and to maintain them as forest rather than selling them for profit -- which often results in the forests being turned into malls or subdivisions.” Logging can cause environmental damage but rarely leads to true deforestation, which is the permanent loss of forest. Agriculture and development are more common causes of deforestation.
Q: Does delivering content electronically rather than in printed products save trees and help the environment?
A: Not necessarily. Data centers and electronic gadgets are huge consumers of electricity. While paper mills often rely heavily on renewable resources for their power, conventional electricity typically comes from coal or petroleum. That’s why I refer to digital content as “dead dinosaur editions” (as opposed to ink-on-paper “dead tree editions”). The mountaintop-removal method of coal mining and the processing of oil sands for petroleum are both significant sources of deforestation in North America. See Smackdown: Printed Editions vs. Digital Editions for more on how the environmental footprint of dead-dinosaur editions compares with that of printed editions.
Q: Will publishers that make their products more environmentally sustainable be more profitable as a result?
A: Some people take it as an act of faith that “Green business is good business”, but they don’t seem to be the ones actually making the magazine industry greener. Guy Gleysteen, who heads up production for North America’s largest magazine publisher, Time Inc., says going green is “about doing the right thing” because a publisher’s sustainability efforts “are not readily described in one or two lines that would appeal to a consumer.”
And just because some advertisers are touting their green efforts, don’t expect that to influence how they advertise. For the most part, the decisions about where to advertise are still placed in the hands of 23-year-old media buyers who have only been told to compare CPMs (cost per thousand), not carbon footprints.
Let's hope some day our customers demand that we be green. And let's be ready for that day.
Wednesday, December 16, 2009
Illegal Logging in Indonesia: Not Funny
A government official in Indonesia has now acknowledged what environmental groups have been saying for years: The country’s enforcement of logging laws is a joke.
West Kalimantan Governor Cornelis was supposed to present “a key environmental speech” last week in support of the country’s “One Man, One Tree” effort to promote voluntary tree planting, the Jakarta Globe reports. But he kept getting interrupted by huge logging trucks rumbling by.
“If we ask the drivers, I don’t think they will have permits,” he laughed as two trucks rolled by. Finally, he ordered police to block any logging trucks until his speech was finished.
Legal or illegal, certified or not, logging has generally been an environmental nightmare in Indonesia, which has lost an estimated 70% of its original forest cover. And the tree-planting efforts ballyhooed by the government are mostly for single-species plantations that replace clear-cut natural forests.
Plans are already afoot in Indonesia to game the proposed REDD (Reducing Emissions from Deforestation and Forest Degradation in Developing Countries) program being debated in Copenhagen, reports Angela Dewan for NewMatilda.com. The plans involve clearing tropical rainforests (in some cases releasing greenhouse gases from the peat swamps), replacing them with “sustainable” tree plantations, and then collecting REDD credits for operating the plantations in a sustainable way.
Don’t count on the Indonesian government to stand in the way. Many have documented and described its rampant corruption -- none better than a farmer Dewan interviewed named Muhamad Nasir:
"When the government sends us a buffalo, by the time it gets here, all that is left is the tail.”
West Kalimantan Governor Cornelis was supposed to present “a key environmental speech” last week in support of the country’s “One Man, One Tree” effort to promote voluntary tree planting, the Jakarta Globe reports. But he kept getting interrupted by huge logging trucks rumbling by.
“If we ask the drivers, I don’t think they will have permits,” he laughed as two trucks rolled by. Finally, he ordered police to block any logging trucks until his speech was finished.
Legal or illegal, certified or not, logging has generally been an environmental nightmare in Indonesia, which has lost an estimated 70% of its original forest cover. And the tree-planting efforts ballyhooed by the government are mostly for single-species plantations that replace clear-cut natural forests.
Plans are already afoot in Indonesia to game the proposed REDD (Reducing Emissions from Deforestation and Forest Degradation in Developing Countries) program being debated in Copenhagen, reports Angela Dewan for NewMatilda.com. The plans involve clearing tropical rainforests (in some cases releasing greenhouse gases from the peat swamps), replacing them with “sustainable” tree plantations, and then collecting REDD credits for operating the plantations in a sustainable way.
Don’t count on the Indonesian government to stand in the way. Many have documented and described its rampant corruption -- none better than a farmer Dewan interviewed named Muhamad Nasir:
"When the government sends us a buffalo, by the time it gets here, all that is left is the tail.”
Sunday, December 13, 2009
The 10 Most Common Paper-Purchasing Mistakes
I wrote recently that I was on the verge of publishing “the best article I have ever seen on paper purchasing” when Google’s robots disabled this blog. Here it is, from guest columnist Bill Lufkin, one of the country's top experts on paper buying. As president of Lufkin Strategic Procurement, Bill has helped a wide variety of publishing, catalog, and printing companies save millions of dollars on paper through better purchasing and negotiating practices, as well as helping buyers negotiate new printing contracts. Bill is the former Vice President of Materials Procurement at R.R. Donnelley and has spoken at several industry conferences. Check out LufkinStrategic.com, which offers an additional article on the basic elements of a paper-purchasing strategy and another on how to negotiate a printing contract.With paper being the second largest cost item for most catalog and magazine publishers, avoiding common purchasing mistakes can be one of the best ways to reduce expenses.
Lufkin Strategic Procurement recently completed a proprietary survey of more than 50 catalog and magazine publishers’ paper and print purchasing practices over the past ten years. The study found a number of recurring mistakes that, once corrected, saved some of the publishers millions of dollars.
For paper purchasing, the 10 most common mistakes, in reverse order, were:
10. Not understanding the potential value of paper underconsumption. So often a buyer focuses so heavily on the price per hundredweight that he overlooks the other part of the paper cost equation, the pounds the printer states are needed to produce the job. When catalog or magazine publishers purchase their own paper, most contracts stipulate that underconsumption (that is, using less paper than estimated) will be shared 50/50. On larger runs, 1% or 2 % savings on the waste allowance can be significant dollars. Since the printers are responsible for overconsumption, they tend to be conservative in their estimated pounds requirements. In 27% of the cases in this study, the buyers were not aware that potential underconsumption was a benefit of purchasing their own paper.
9. Publishers avoiding purchasing their own paper fearing that the administration and paper work is complex. This mythical illusion of complexity was an issue in 31% of the cases, influencing the publishers to buy paper through their printers when in many cases it may have been to the publishers strategic and economic advantage to buy their own paper. When a merchant or broker sells the paper to the publisher, much of the “paper work” is handled by the seller.
8. Assuming that the big printer’s volume equates to lower customer paper prices. While some of the large printers are able to secure low contract prices on paper, that doesn’t necessarily mean that the price to the customers will reflect that volume advantage. Again, in 31% of the study cases, this presumption influenced the publisher’s decision to go with printer-purchased paper. Many of the printers treat paper purchasing as a profit center and charge prices as high as the competitive situation will allow.
7. Moderate sized publishers assuming their modest paper volume lacks purchasing power. For 35% of the cases, these publishers thought volume scale was the biggest influence on price negotiation when actually market knowledge and relationships can be equally powerful. In a number of situations, the publisher can take advantage of spot purchases in a soft market through a broker that may equal or beat the large volume contract prices. Even with contract pricing, the price spread between large buyers and moderate-sized buyers isn’t especially large.
6. Receiving a $1.50/cwt. price decrease from the incumbent broker or printer when the market price really went down $2.50. Fifty percent of the time, buyers were so pleased to get a reduction they were unaware the market slide was more dramatic. Likewise, an industry-announced increase of $2.50 passed through to the publisher may have been delayed or reduced to the middleman. A number of printers or brokers use these abrupt price movements as an opportunity to increase their margins. Carefully benchmarking their prices against others can help the buyer keep pace with the competitive environment.
5. Accepting industry-announced price increases when resistance can often delay or reduce the increase. For 58% of the buyers there was a presumption that you could not be successful in fighting an industry-wide price increase. Again, market knowledge and relationships can play an important role in minimizing the impact of upward price movements. Another tactic that can control the pace and magnitude of price escalation is through some form of indexing.
4. Commitment to primary supply contract may preclude occasional spot purchases. A variety of large to small buyers totaling 62% of the cases had aligned 100% of their volume with one or two suppliers and had no tonnage available for opportunistic spot deals. With many publishers’ pages and print orders down substantially, they felt their negotiating leverage had disappeared. We found that a viable solution in several situations was to keep 10% to 15% of their volume uncommitted so they can still enjoy the supply assurance of a contract while taking advantage of spot situations that can help monitor current pricing.
3. Accepting printer’s paper pound requirements that may be padded. For some reason, over 65% of the buyers accepted the printer’s stated requirements without checking the level of waste allowance included. As mentioned earlier, paper is a profit center for many printers, and they are entitled to underconsumption savings when they purchase the paper. A quoted “competitive” price per cwt. may not be advantageous when the pounds billed on the invoice are higher than necessary. Just like manufacturing, paper requirements are negotiable and subject to competitive comparisons. In print contracts that were last negotiated several years ago, allowances that were previously competitive may have become out of line because of improved technology and efficiency gains. A printer is likely to retain such paper savings unless challenged in a competitive environment.
2. Trusting suppliers’ input on competitive market prices. For 77% of the cases, the buyer’s trust was being abused from slightly to significantly by the incumbent printer, broker, or mill. Because it can be cumbersome and time consuming to pursue competitive bidding every quarter, most publishers presume the incumbent supplier is providing valid market pricing input. Monitoring prices through an independent source that is not involved in selling paper is an alternative way to assure your prices stay competitive. If the incumbent supplier knows the buyer is diligently tracking the market, their pricing is more likely to stay within a competitive range. Also, by keeping a modest portion of their volume uncommitted, buyers can occasionally get a new quotation from a challenging supplier.
1. Accepting quarterly price volatility when six-month locks, caps, and/or collars may be available. This number one common mistake was an issue in 85% of the cases. For years paper buyers have become used to the paper industry practice of quarterly price movements. Mills would rarely hold prices for longer periods. Buyers who have been able to soften the volatility of their pricing have generally fared better than those who have ridden the roller coaster of soft and tight markets. Identifying the best strategies and dealing with the most trusted sellers have helped certain buyers save their companies significant dollars. Knowing when the best time to negotiate a longer term deal is critical to the success of these arrangements.
While the 10 mistakes outlined above were the most common, there were several others that came up multiple times and had a significant negative effect on the particular cases involved:
- Fragmentation of volume or suppliers or purchasing authority. Consolidation is still a good idea in most aspects of paper purchasing strategy.
- Choosing paper grades or weights that have higher specifications than necessary for the catalog or magazine’s content. An office supply catalog using a coated freesheet for its body stock is probably spending more money on paper quality than is necessary.
- Allowing printer’s handling and storage charges for customer paper to influence an otherwise prudent decision for publisher to purchase own paper. The paper has to be handled regardless of who purchases it. The charge should be minimal to cover some of the printer’s administrative cost but not so high as to discourage customers from buying their own paper.
- Allowing too many brokers to contact the same mills for bids. Mills will not provide their most competitive bids if they sense a free-for-all approach. A broker who is challenging a printer-purchased paper situation should not contact the incumbent mill.
- Frequent spot purchases may lead to “bottom fisher” label. During very tight markets, the buyers who consistently shop for the lowest spot prices have had difficulty getting supply at any price.
©2009 Lufkin Strategic Procurement. All rights reserved. None of this report may be reprinted without express written consent. www.lufkinstrategic.com.
Thursday, December 10, 2009
Environmentalists Try To Put a Cork Into Black-Liquor Loopholes
Twenty-seven environmental groups are ganging up to bury the black-liquor tax loophole and to prevent “Son of Black Liquor” from being born.
They sent a joint letter this month to EPA Administrator Lisa Jackson asking her not to let “cellulosic biofuel producer credits” subsidize the burning of black liquor by pulp mills. The so-called Son of Black Liquor loophole has the potential to dole out $50 billion to U.S. pulp mills from 2010 to 2012 if the EPA makes a favorable ruling.
Signed by such organizations as Forest Ethics, Green America Better Paper Project, the National Wildlife Federation, and the Natural Resources Defense Council, the letter urges the EPA to declare “that black liquor is not eligible for the cellulosic biofuels producer credit.”
The letter also expresses concern about Wisconsin Congressman Steve Kagen’s recent proposal to extend the original black-liquor loophole rather than allowing it to expire at the end of this year. U.S. pulp mills are on pace to receive more than $8 billion from the U.S. government in 2009 for burning black liquor, a byproduct of the kraft pulping process, to power their mills.
“The original intent of both of these tax credits is to reduce dependence on fossil fuels and incentivize the production and use of domestic alternatives,” the letter says. “Instead, paper companies brazenly crafted a creative yet crude way to dip into the pockets of US taxpayers and are being paid billions for what they have been doing for over 75 years, and would continue to do without the credit.”
The letter cites a Goldman Sachs analysis stating that the “black liquor to gold scheme” is doing the “opposite of what the lawmakers likely had in mind when the tax credit was established” to encourage the use of ethanol and other biofuels. The letter also notes that subsidizing kraft pulp through black-liquor credits creates perverse incentives for paper makers to use virgin rather than recycled pulp.
“Thus, an incentive to increase the use of products that have less impact on our climate had the opposite effect: high energy and carbon intensive virgin paper was rewarded while lower energy and lower carbon recycled paper products were not,” states the letter, which is dated Dec. 4 but not released publicly until this week.
For further reading:
They sent a joint letter this month to EPA Administrator Lisa Jackson asking her not to let “cellulosic biofuel producer credits” subsidize the burning of black liquor by pulp mills. The so-called Son of Black Liquor loophole has the potential to dole out $50 billion to U.S. pulp mills from 2010 to 2012 if the EPA makes a favorable ruling.
Signed by such organizations as Forest Ethics, Green America Better Paper Project, the National Wildlife Federation, and the Natural Resources Defense Council, the letter urges the EPA to declare “that black liquor is not eligible for the cellulosic biofuels producer credit.”
The letter also expresses concern about Wisconsin Congressman Steve Kagen’s recent proposal to extend the original black-liquor loophole rather than allowing it to expire at the end of this year. U.S. pulp mills are on pace to receive more than $8 billion from the U.S. government in 2009 for burning black liquor, a byproduct of the kraft pulping process, to power their mills.
“The original intent of both of these tax credits is to reduce dependence on fossil fuels and incentivize the production and use of domestic alternatives,” the letter says. “Instead, paper companies brazenly crafted a creative yet crude way to dip into the pockets of US taxpayers and are being paid billions for what they have been doing for over 75 years, and would continue to do without the credit.”
The letter cites a Goldman Sachs analysis stating that the “black liquor to gold scheme” is doing the “opposite of what the lawmakers likely had in mind when the tax credit was established” to encourage the use of ethanol and other biofuels. The letter also notes that subsidizing kraft pulp through black-liquor credits creates perverse incentives for paper makers to use virgin rather than recycled pulp.
“Thus, an incentive to increase the use of products that have less impact on our climate had the opposite effect: high energy and carbon intensive virgin paper was rewarded while lower energy and lower carbon recycled paper products were not,” states the letter, which is dated Dec. 4 but not released publicly until this week.
For further reading:
- The letter sent to Jackson, including a list of the 27 organizations that signed it.
- Will the EPA Stop 'Son of Black Liquor'?, which explains why the EPA is crucial to determining whether black liquor can qualify for cellulosic biofuel producer credits.
- Wisconsin Congressman Tries To Extend Black-Liquor Credits, about Rep. Kagen's proposal.
- Less Than Free Enterprise, which links to a report discussing the connection between black-liquor credits and healthcare legislation. It also provides a company-by-company projection of black-liquor credits that pulp and paper companies will earn this year; the total is $8.5 billion, even higher than the $6 to $8 billion estimated in the 27 non-profits' letter to Jackson.
- A report from the Confederation of European Paper Industries to the U.S. Senate providing various examples of how the black-liquor credits “lead to market distortions and constitute unfair competition.”
Wednesday, December 9, 2009
A Storm in the Cloud: Is Google Run By Brain-Dead Robots?
Cloud computing is hot these days, and for most of us The Cloud means Google.
We use Gmail to send and receive messages, GDocs to create or exchange documents, and Google Reader to track our favorite Web sites. Those on the Web check their traffic with Google Analytics and monetize their sites with Google's AdSense. Some of us even use Google’s Blogger to create and host our sites.
All of these services are free – except that they can be very expensive. I found out the hard way:
Seven days ago, without warning or notification, Blogger (AKA Blogspot) disabled my blog. Visitors got a screen saying simply, “The blog you were looking for was not found” without any indication that the blog had ever existed.
My Blogger account had this message: “Blogger's spam-prevention robots have detected that your blog has characteristics of a spam blog. Since you're an actual person reading this, your blog is probably not a spam blog. Automated spam detection is inherently fuzzy, and we sincerely apologize for this false positive.”
I suspect a few recent spammy comments caused the problem, but I wasn’t even able to go into my account to delete those. I went through Google’s process of requesting a review and an appeal but got no response from the Googlopoly except this, “We received your unlock request on December 2, 2009. On behalf of the robots, we apologize for locking your non-spam blog. Please be patient while we take a look at your blog and verify that it is not spam.”
(Brilliant idea: If you've got a customer-service problem, blame it on the robots!)
The timing couldn’t have been worse. Several prominent postal-news Web sites had linked to my Dec. 1 article about the Flats Sequencing System, bringing thousands of visitors. Dead Tree Edition’s coverage of the black-liquor controversy had recently received praise from the Vancouver Sun’s Gordon Hamilton -- who as far as I can tell is the only reporter covering the North American forest products industry full time. A guest columnist had drafted the best article I have ever seen about paper buying. And a magazine that was planning to publish an article I wrote -- with links to Dead Tree Edition for more information -– got cold feet because of the outage.
I posted several messages on Google help forums that got no response except a rather surly one and a fellow blogger agreeing that the site obviously wasn’t spam. Finally, after 5 ½ days, I put in a query that caught the attention of an actual human being -- or maybe a robot that was programmed to mimic the customer-service skills of a Division of Motor Vehicles clerk: “OK, I've put this in Gatsby's queue. Possible resolution tomorrow, if you are not a turkey.”
He (She? It?) then suggested I read his post characterizing Blogger users as hyenas, coyotes, and turkeys – none of them having flattering descriptions. More than 24 hours later, this person or robot notified me that Dead Tree Edition was alive again.
When I started this blog a little more than a year ago, I decided to keep things simple because I didn't know my RSS from a hole in the ground. I chose Blogger assuming it would work well with other Google products and Google search. I also figured the money Google made from AdSense ads would give it an incentive to provide reasonable service even though I pay nothing for Blogger itself.
Two problems:
1) Google is brilliant in some areas but arrogantly incompetent in others. Several competitors have leapfrogged over its neglected Blogger product. And I’m glad I’m not into IM because Gmail’s “Chat” feature seems to be down at least half the time.
2) Google’s products don’t talk to each other well. While the blog was disabled, AdSense and Analytics continued recording visits and clicks at the cached version of Dead Tree Edition. But their bots apparently never said to the Blogger bots, “Hey, traffic and revenue suddenly dropped by more than 99 percent. What the hell is going on?”
So now what? I've already changed the settings so that I have to approve any comment before it is posted. I have learned so much from comments, so I hope that doesn't stifle participation.
I’m still studying the advice and feedback that came in during the past week from various webmasters and editors, which are worth sharing:
We use Gmail to send and receive messages, GDocs to create or exchange documents, and Google Reader to track our favorite Web sites. Those on the Web check their traffic with Google Analytics and monetize their sites with Google's AdSense. Some of us even use Google’s Blogger to create and host our sites.
All of these services are free – except that they can be very expensive. I found out the hard way:
Seven days ago, without warning or notification, Blogger (AKA Blogspot) disabled my blog. Visitors got a screen saying simply, “The blog you were looking for was not found” without any indication that the blog had ever existed.
My Blogger account had this message: “Blogger's spam-prevention robots have detected that your blog has characteristics of a spam blog. Since you're an actual person reading this, your blog is probably not a spam blog. Automated spam detection is inherently fuzzy, and we sincerely apologize for this false positive.”
I suspect a few recent spammy comments caused the problem, but I wasn’t even able to go into my account to delete those. I went through Google’s process of requesting a review and an appeal but got no response from the Googlopoly except this, “We received your unlock request on December 2, 2009. On behalf of the robots, we apologize for locking your non-spam blog. Please be patient while we take a look at your blog and verify that it is not spam.”
(Brilliant idea: If you've got a customer-service problem, blame it on the robots!)
The timing couldn’t have been worse. Several prominent postal-news Web sites had linked to my Dec. 1 article about the Flats Sequencing System, bringing thousands of visitors. Dead Tree Edition’s coverage of the black-liquor controversy had recently received praise from the Vancouver Sun’s Gordon Hamilton -- who as far as I can tell is the only reporter covering the North American forest products industry full time. A guest columnist had drafted the best article I have ever seen about paper buying. And a magazine that was planning to publish an article I wrote -- with links to Dead Tree Edition for more information -– got cold feet because of the outage.
I posted several messages on Google help forums that got no response except a rather surly one and a fellow blogger agreeing that the site obviously wasn’t spam. Finally, after 5 ½ days, I put in a query that caught the attention of an actual human being -- or maybe a robot that was programmed to mimic the customer-service skills of a Division of Motor Vehicles clerk: “OK, I've put this in Gatsby's queue. Possible resolution tomorrow, if you are not a turkey.”
He (She? It?) then suggested I read his post characterizing Blogger users as hyenas, coyotes, and turkeys – none of them having flattering descriptions. More than 24 hours later, this person or robot notified me that Dead Tree Edition was alive again.
When I started this blog a little more than a year ago, I decided to keep things simple because I didn't know my RSS from a hole in the ground. I chose Blogger assuming it would work well with other Google products and Google search. I also figured the money Google made from AdSense ads would give it an incentive to provide reasonable service even though I pay nothing for Blogger itself.
Two problems:
1) Google is brilliant in some areas but arrogantly incompetent in others. Several competitors have leapfrogged over its neglected Blogger product. And I’m glad I’m not into IM because Gmail’s “Chat” feature seems to be down at least half the time.
2) Google’s products don’t talk to each other well. While the blog was disabled, AdSense and Analytics continued recording visits and clicks at the cached version of Dead Tree Edition. But their bots apparently never said to the Blogger bots, “Hey, traffic and revenue suddenly dropped by more than 99 percent. What the hell is going on?”
So now what? I've already changed the settings so that I have to approve any comment before it is posted. I have learned so much from comments, so I hope that doesn't stifle participation.
I’m still studying the advice and feedback that came in during the past week from various webmasters and editors, which are worth sharing:
- “You should look at hosting the blog yourself or use something like Wordpress.com or Typepad. BlogSpot is too much BS.” (This being a very part-time venture, I don't relish the thought of moving everything to a different site and changing software.)
- “Do not resist. You will be assimilated."
- “For what it's worth, I use Blogger.com to produce [a website], but I don't use Blogspot to host it."
- “If you have copies of your articles that you can post elsewhere (posterous.com is a good option), let me know and I'll pass the word.” (Posterous is an interesting service, but I don’t see a business model for posting my stuff there – not that I have much of a business model now.)
- Two sites offered to host the blog, but the business model there is a bit murky because not all of the content is suited to either site. Maybe I could cut Dead Tree Edition up and pass the parts around to different Web sites – one for postal stuff, another for paper articles, a third for environmental reporting, etc. Not sure if any legitimate site would want the infamous “cardboard porn” series or other humor items.
- “Google, as you know, practically owns the Internet -- or at least they think they do. I don't know how you got in touch with them for an explanation...they try very hard not to give you anything but 'see our forums.'”
- “I would strongly advise purchasing web hosting to have better control.”
- “Get off Blogger.”
- “I sometimes will run across such a problem with my websites, and because everything is automated, it's hard if not impossible to speak to an actual person.”
- “I hate Google.”
- "I hope the outage is 'only a flesh wound' and that you are 'not dead yet'," wrote a fellow Monty Python fan.
Tuesday, December 1, 2009
Flats Sequencing Forecast: Cloudy With a Chance of Bravado
Despite equipment problems, schedule delays, and evidence of engineering miscues, postal officials are eagerly moving ahead with installation of the Flats Sequencing System.
The U.S. Postal Service’s recently released annual report says FSS “is revolutionizing the way we process flat-size mail, such as magazines and catalogs, by sorting it in the order in which it’s delivered by carriers. This new technology will deliver high-impact efficiency and improve mail processing, and make sure customers get even more value from the mail.”
Other recent USPS statements and presentations about FSS have been equally positive, generally ignoring such negatives as two failed acceptance tests and the reported replacement of the engineers who designed the system. The huge machines definitely seem to be reducing the Postal Service’s operating costs; the question is whether the savings will be great enough to justify the roughly $1 billion investment.
Below is a roundup of recent items about the Flats Sequencing System. Further information about FSS can be found at The Unofficial Guide to Flats Sequencing.
The U.S. Postal Service’s recently released annual report says FSS “is revolutionizing the way we process flat-size mail, such as magazines and catalogs, by sorting it in the order in which it’s delivered by carriers. This new technology will deliver high-impact efficiency and improve mail processing, and make sure customers get even more value from the mail.”
Other recent USPS statements and presentations about FSS have been equally positive, generally ignoring such negatives as two failed acceptance tests and the reported replacement of the engineers who designed the system. The huge machines definitely seem to be reducing the Postal Service’s operating costs; the question is whether the savings will be great enough to justify the roughly $1 billion investment.
Below is a roundup of recent items about the Flats Sequencing System. Further information about FSS can be found at The Unofficial Guide to Flats Sequencing.
- Behind Original Schedule: Eleven machines are up and running in four locations, while another 16 are being installed in nine other facilities, according to postal officials. (See the recent presentation to MTAC for details.) A year ago, the schedule called for about one-third of the 100 Phase I machines to be running by now, but equipment problems and a need to rework the plan in light of volume decreases has put Phase I about six months behind that schedule. Phase I is now to be completed in 2011 rather than late 2010.
- Replaced Engineers?: Postalnewsblog.com included this in a summary of a late October meeting between postal officials and USPS management associations: "The current FSS deployment has been plagued by software issues. The USPS will continue its plans to install equipment but the actual deployment from a use standpoint must be resolved by the contractors. DPMG Donahoe advised that the USPS is working with the contractors to resolve the bugs in the system and that the contractor has replaced all of the engineers who have been working to correct the bugs." Financial statements of the contractor, Northrop Grumman, reveal nothing about the problems.
- Full Speed Ahead: USPS is moving forward with FSS installation despite the Office of Inspector General's recommendation that it install only one more machine "until the system demonstrates operational stability and sucessfully passes the field acceptance test." (See Can the Flats Sequencing System Be Fixed? for more details.) FSS improved in its second acceptance test but still failed; results of the third test have not been revealed.
- Good Results: "We exceed 98% quality on a daily basis," Deputy Postmaster General Pat Donahoe said in a recent video. USPS learned from the mistakes that were made on delivery-point sequencing of letters, enabling it to have a smooth start-up of machines, he said.
- No News Is Good News: As far as mailers are concerned, FSS has been a non-event so far. Most indications are that service has not suffered and that there have been no other major problems where FSS has been implemented.
- Volume Down: The volume of flat mail declined nearly 14% during the fiscal year that ended Sept. 30, with a smaller decline projected for the current fiscal year. The original FSS plan assumed stable or rising volume, but flats mail has declined about 35% in the past three years. As a result, the 100 Phase I machines are being deployed in 42 locations rather than the 32 in the original plan. (See Declining Volumes Lead to FSS Expansion for details.) A revised deployment schedule has been "under development" for several months.
- More Street Time: FSS is meeting its goal of giving letter carriers "less time in the office, more time on the street," Donahoe said in the video. Carriers who used to case (sort) seven to eight feet of flats are now casing one to two feet, he said.
- A Few Tweaks: "An ergonomic stowage and retrieval system has been designed for delivery vehicles receiving FSS flats with a limited deployment set for 2010. An FSS optimization effort is underway in Northern Virginia to streamline current operations and reduce manual processing of flats," according to USPS's recent 2009 Comprehensive Statement on Postal Operations.
- Site Deployment: "FSS deployment requires precise integration of facility expansions, operational moves, equipment migrations, equipment disposals, and site preparation activities including training and staffing. Site readiness in all 31 original Phase 1 locations is complete," the operations report says.
- Change of Location: Postal officials revealed two weeks ago that San Diego is replacing San Francisco as a Phase I location. There was no word on whether that meant Bay Area flats sorting would be consolidated into San Jose, which is slated for four Phase I machines.
- Delayed Rate and Regulation Changes?: Eventually, mailers will package flats for FSS areas differently (e.g. larger bundles, no carrier-route bundles) than non-FSS areas and will presumably have a different price structure for FSS. There was talk that the new packaging regulations and the accompanying rate changes would be implemented in 2010, but the Postal Service's promise not to change rates for most classes of mail next year probably means a 2011 implementation.