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RIT School of Print Media-Refocus from Traditional to Digital Equipment

Rochester Institute of Technology’s School of Print Media [my Alma Mata] is removing a traditional press to increase space for digital printing. This is another indicator that digital printing is growing and another viewpoint which I believe is in-line with my Putnam blog of last year. https://printerone.wordpress.com/2011/12/05/roger-l-putnam-vocational-technical-high-school-print-shop/

Insanity: doing the same thing over and over again and expecting different results.
Albert Einstein

Printing: Paying the Right Price

When a customer’s order is complete, will they have paid the correct price?

In traditional printing, there are numerous variables that affect costs – these variables are driven by customer requirements, such as: quantity, number of colors, coating types, and finishing operations, to name a few.  In digital printing, however, there are fewer variables that affect cost.  It can be said that each variable produces waste and the printer estimates the price based on historical averaging of these known variables.

Conventionally[i], the delivered quantity of an order has been +/- 10 % of the quantity ordered, – for either traditional or digital printing.  Furthermore, the delivered quantity will most likely be different than what was ordered.

How will the customer evaluate the invoice during the auditing phase so to determine the proper price from the ordered quantity versus the delivered and the estimated price versus the invoice? The answer to this query lies in the billing technique used by the sales representative.  The easiest technique to use and comprehend is the “Thousand-Rate Price” [TRP]; however, it is generally inaccurate, because the customer has already paid for the fixed cost, as the following example demonstrates.

                          Quote                          Quote

Item                  Quantity A                    Quantity B

Quantity            90,000                         100,000

Pricing              $29,000                        $30,000

TRP                  $322.22                        $300.00

The “thousand-rate” price [TRP] is defined as: the estimated price [$30,000] divided by the order quantity [100,000].

Another technique is Additional-Thousand Pricing [ATP], which should be lower than the Thousand-Rate Price [TRP], because all the Fixed Costs [FC] have been covered in the base quantity [100,000] estimated price.

Fixed Costs [FC] are defined as: costs that remain constant, regardless of any change in a company’s activity[ii]. They include such items as: pre-press, plates, equipment and material make-readies, dies, etc.

Pre-Press                    $15,000

Plates                              1,000

MR Press & Bindery        2,500

Dies                                    500

MR Materials                   1,000

FC                                $20,000

The “Additional-Thousand” Price [ATP] is defined as: the estimated price less fixed costs divided by the order quantity or the variable cost to produce one-thousand pieces. The additional-thousand pricing can be sub-divided into two categories: arbitrary discount [ADATP] and variable cost pricing [VCATP].

Variable Costs [VC] are defined as: costs that change in proportion to a change in a company’s activity [quantity] or business[iii] and include such items as: non-make-ready materials; paper, ink, and non-make-ready equipment or production run costs.

The Arbitrary Discount Additional-Thousand Price [ADATP] is defined as: a discount percentage the sales representative has developed based on their intuition over the years such as discounting the Thousand-Rate Price by 30%. This discounted rate may or may not be a fair price, i.e. $300 x 70% = $210

                          Quote               Quote

Item                   Quantity A        Quantity B

Quantity             90,000             100,000  

Pricing             $29,000             $30,000

TRP                 $322.22             $300.00

ADATP             $225.55             $210.00

The Variable Cost Additional-Thousand Pricing [VCATP] is defined as: the Thousand-Rate Price with all Fixed Costs subtracted: TRP – FC = ADATP.

For illustration purposes, assume that Quote Quantity B is the ordered quantity, and the printer delivered a quantity of 102,000 giving the customer a 2% over run. Two percent over run is well within printing guidelines.

When evaluating the invoice the customer may use extrapolation or interpolation when there is a minimum of two different quantities per illustration.  For reliability when using interpolation or extrapolation, the estimated quantities should be within a reasonable quantity range of the billing quantity. When quantities are drastically different from the estimated quantities however, other factors within print production or estimating may influence the accuracy such as: plate ware, additional make-readies, price discounts on materials, arbitrary printer charges, etc.

Extrapolation would be used to audit the invoice pricing for the illustration above. The illustration below provides how the VCATP is determined.

                         Quote               Quote

Item                  Quantity A        Quantity B      VCATP

Quantity            90,000     –       100,000   =     10,000 quantity difference

Pricing             $29,000    –       $30,000   =      $1,000 pricing difference

TRP                 $322.22            $300.00           $1000/10,000=$0.10 each or $100/M

ADATP             $225.55            $210.00

Extrapolation is defined as:  the process of constructing new data points outside a discreet set of known data points.[iv]

Interpolation is defined as: constructing new data points between known data points.[v]

The following are three pricing examples based on the illustration:

TTP: 2 x $300=600 + 30,000 [Order Price] = $30,600

ADATP:  2 x $210=420 + 30,000 [Order Price] = $30,420

VCATP:  2 x $100=200 + 30,000 [Order Price] = $30,200

Alternatively the example showed a delivered quantity of 98,000, then $200 would be deducted from the 100,000 price of $30,000 = $29,800.

To sum up the arguments, VCARP is clearly the fair price for both parties, and additionally for the customer it is the best price, for most occasions.

The following are important keys to insure the printing is priced fairly:

  • When requesting pricing, always request a minimum of two quantities.
  • Use extrapolation or interpolation to verify pricing.

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Your comments and your print-procurement questions are appreciated concerning this article and other related matters.


[i] “11. OVER-RUNS AND UNDER-RUNS. Over-runs or under-runs not to exceed 10% on quantities ordered, or the percentage agreed upon, shall constitute acceptable delivery. Printer will bill for actual quantity delivered within this tolerance. If customer requires guaranteed exact quantities, the percentage tolerance must be doubled.”[http://www.multiad.com/print/Virtual_Center_PDFs/White_Paper_PDFs/PRINTING%20CUSTOMS-rev.6-25.pdf ]

[ii] http://www.investopedia.com/terms/f/fixedcost.asp

[iv] [http://en.wikipedia.org/wiki/Extrapolation]

[v]  Ibid.

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