By Gina Ferrara, Senior Analyst, Madison Advisors

Organizations that currently operate an internal print and mail production facility probably have had the “should we outsource” conversation at some point. Some may have broached the subject more than once, and may have gone one step further by distributing an RFP. Inevitably, within the organization there will be different opinions on the subject; however, there are several factors to take into consideration before making this decision.

While our nation (and world) currently battle COVID-19, which has caused thousands of deaths, put millions out of work and wreaked havoc on the US economy, businesses in every industry will need to focus on ways to remain profitable.  A renewed focus on increasing efficiency, reducing risk and reducing costs may drive large financial, insurance and healthcare services organizations that produce millions of transactional communications to consider revisiting the outsourcing discussion once again.

Financial considerations

Outsourcing print and mail does have financial benefits. Capital expenditures associated with an equipment refresh for end-of-life or end-of-lease equipment are eliminated, including expenses associated with maintenance contracts on the newly purchased equipment. Declining print volumes due to increased electronic delivery will drive up the unit cost per mail piece. Since postage is the biggest cost in customer communications, a decline in volume poses the risk of losing postal discounts if zip code densities are not met. By outsourcing to a third-party service provider, a company can benefit from the provider’s buying power for consumables such as ink, paper and envelopes and potentially reduce postage expense as work can be comingled with other clients’ to increase postal densities.

Risk is also mitigated with service providers that have invested in workflow automation software and have the processes in place to ensure quality controls, document integrity and mail piece tracking so every mail piece produced on the shop floor is tracked during the manufacturing process. Additionally, service providers are subject to strict data security standards, especially if they print for highly regulated industries such as healthcare and insurance.

Disaster recovery

In-plants that operate a single site have to contract with a third party for disaster recovery and business continuity services to ensure production of critical communications in the event of a disruption; whereas print service providers have multiple redundant production facilities and conduct testing for many scenarios, including natural disasters or power interruptions to ensure minimal impact. The current health crisis has forced manufacturing plants to shut down for one or more days to disinfect the facility when employees test positive for COVID-19. Multi-site print service providers have the ability to route files to another facility while one is closed for cleaning to ensure critical communications are processed and mailed, thus providing peace of mind to their clients and the ongoing ability to meet set SLAs.

The downside

Drawbacks to consider regarding outsourcing include risks associated with sending customer data outside the company firewall.  Internal lines of business may feel a loss of control due to their inability to perform quality checks on critical documents at the print center. Other items to consider when calculating the financial benefits of outsourcing relate to contract negotiation, transition costs and pricing. A typical contract duration is 5 years, anything less than that will result in higher pricing. Many service providers include a certain number of hours of development time as part of the transition; however, be mindful of any additional development time necessary for prepping non-optimized files for production as this may quickly eat up that time.

The all-important vendor relationship

Above all, an important factor to consider when making the decision to outsource is the relationship with the chosen service provider and their ability to create a true partnership with your organization. Open communication between both organizations and collaboration during a challenging time will be critical to ensuring a successful relationship.