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Industry Issues -- Can Costs Be Passed On?

December 2005
By Erik Cagle

Senior Editor

Are you, the commercial printer, feeling the pressure of increased costs? If not, you soon will; this winter, in fact.

The curious, but frustrating, amalgamation of upward cost pressures have left printers in a catch-22 position. Pass on your cost increases to customers and risk losing volume (or worse, their entire business). But if you choose to swallow that pill, it's going to hurt all the way down your throat.

Isn't it fair that paper vendors and ink manufacturers get to pass on costs to you because of the late summer fuel price explosion? But why should printers have to eat those price increases with their clientele? Or any cost increases?

The issues that most affect commercial printers are clearly those that impact their bottom lines. But some of the increases in costs have YET to be felt by printers. The increasing cost of mailing? That happens next month. And those high energy bills won't be seen until the January or February statement.

But try tacking on cost increases in an age of commodity pricing. Would those ad agencies really leave you high and dry, with the threat of alternative (read: cheaper) outlets for marketing goods and services looming? Does anyone have the courage, or capacity alternatives, to find out?

Instead of playing 20 questions, we have a list of several high-priority issues that printers need to monitor closely as we usher in 2006. None are jaw-dropping revelations, but perhaps some can provide perspective as you attack the most relevant concerns facing your businesses.

Postal Reform: OK, we heard a few groans in the back of the room. This issue has been visited with alarming regularity as the printing industry closely monitors what will become of the U.S. Postal Service (USPS) as it continually grapples with a business plan that is older than Watergate.

This much is certain. Reform is stuck in a Congressional holding pattern. Ben Cooper, PIA/GATF's departing executive vice president of public policy, is intrigued by the philosophical standpoint the USPS will take on issues such as work sharing and negotiating service agreements as it seeks future rate increases.

Working on the assumption that reform remains in a perpetual policy purgatory, the rate increase that takes effect next month only offsets the cost of the civil service escrow payment. And it has been four years since the last increase.

The USPS opposes postal reform in its current state, according to Cooper, and is trying to duck this legislation. One way of doing this: the USPS states it doesn't anticipate increasing rates above the Consumer Price Index for the foreseeable future. The reform saber rattlers have preached that future rate increases should not stray from the rate of inflation. Is this a promise the USPS can keep or is it mere lip service? Cooper, for one, has his doubts and believes printers would end up absorbing most of the blow for future increases.
 

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