Co-op pays off for office suppliers
October 29, 2010 – Sacramento (CA), USA
Independents land nation’s largest contract - $500M
Three local office supply dealers
expect to boost their business collectively by about $17.5 million next
year thanks to a national office supplies contract worth more than $500
million annually.
Sierra Office Supply & Printing, Burkett’s Office Supplies Inc. and Walker’s Office Supplies
are three of about 270 independent dealers in a buying cooperative that
landed the nation’s largest office supplies contract. It’s the
largest-ever contract for each of the three firms and could cause them
to add about 15 employees and a few more delivery vehicles.
“It’s the first time the independents have been able to compete in the national marketplace,” said Mike Kipp, president of Sierra Office Supply in Sacramento.
About 42,000 public-sector
agencies can purchase office supplies via the three-year contract. The
three local dealers anticipate more public agencies will opt to purchase
through the contract now that agencies can buy local and support the
local tax base.
This is the largest public-sector contract for office supplies in the United States “without question,” said Kevin
France, vice president of national accounts for Independent Stationers
Inc., the Indianapolis-based buying cooperative that landed the
contract.
The national contract, which is
administered by the U.S. Communities Government Purchasing Alliance and
awarded by Los Angeles County, is for three years with the possibility
of two, one-year extensions. Office Depot, which did not bid this time,
held the contract for 14 years.
Dealers within Independent
Stationers have just started pitching local governments, school
districts and other public agencies within their area about buying
through the new contract. The contract took effect Sept. 1.
The national contract was worth
more than $500 million when Office Depot held it, but the national
retailer did not reap 100 percent of the business, France said. The
contract could be worth more than $1 billion, he said, especially
considering the national push toward buying products locally.
Although this is the largest
public-sector contract for office supplies in the United States, there
are three to five other big ones, he said.
Los Angeles County tagged
Independent Stationers above nine other bidders based on price, said Joe
Sandoval, Los Angeles County’s general manager of purchasing and
contracts.
The local impact
“It could mean up to $10 million in new business,” Sierra Office’s Kipp said.
In business for 30 years, Sierra
Office employs 120 of its 160 employees locally and has sales of about
$35 million. Kipp estimates he will need to hire three to five
employees.
“Maybe more,” he said.
The economic woes caused Sierra
Office’s business to decrease by about 20 percent over the past couple
of years. “This will be a big help,” Kipp said.
Burkett’s owner Randy Mael
reckons that the new contract will bring his Rancho Cordova company $4
million in new business initially. To put that into perspective, he does
about $2.5 million in business with the state. With this new contract,
Mael figures he might need to add 10 people to his staff of 25, and add
four vehicles to his fleet of seven.
He’s been talking for about a
week with clients and prospective clients about the new contract.
“Initially, there’s interest,” Mael said. But “all of these clients have
other options as well.”
Public-sector agencies can buy
from a number of contracts, including the state of California contract.
Public agencies should be able to buy through the Independent Stationers
contract for 1 percent to 8 percent lower than what they’d spend with
the three largest providers in the industry — OfficeMax, Staples and
Office Depot, Mael said.
Buying through this contract, he
said, will save them money upfront and will keep the dollars local. The
biggest hurdle, Mael said, will be “that people don’t like change.”
Jarrod Anderson, Walker’s owner,
anticipates the contract will generate an extra $3.5 million in business
for his Auburn company. His goal is to increase revenue by 20 percent
every quarter during the first two years of the contract.
Anderson will immediately hire an
extra driver to dedicate to this contract and two more drivers at the
beginning of the year. “We’ll give them service they have never
experienced with this contract,” he said.
Schools have long said they
wished they could buy from Walker’s as the local provider, Anderson
said. “Now, we can give them what they’ve always wanted,” he said.
One school district that he couldn’t name has asked to be set up with a contract, he said.
The new business is especially
welcome after Walker’s closed its retail store last year amid the
difficult economy to focus on commercial accounts. The business that
Walker’s will pick up through the Independent Stationers contract is the
largest-ever contract for the company founded by Anderson’s grandfather
in 1959.
Other options
The local dealers are still
making public agencies aware of their buying opportunities through the
contract. Some agencies will choose to buy elsewhere.
The Los Rios Community College District probably will keep buying from Office Depot through the state of California’s contract, spokeswoman Susie Williams said.
Yolo County, meanwhile, will evaluate its options, spokeswoman Beth
Gabor said. The county spends about $220,000 a year on office supplies
with Staples and another $35,000 annually on toner with Office Depot.
*Source: Sacramento Business Journal