“The way our group works is like this: I go out and negotiate national agreements with suppliers of substrates, tools and dies, prepress equipment, and so on,” he says. “Those vendors give me pricing and rebates based on the combined buying of all my members. These prices aren’t the prices they’d get as a single label printer. That obviously gives them much more leverage and reduces costs all the way across the board.”
McKay brings decades of experience to FLAG. “I was with the Pitman Company for 25 years in various sales and management positions,” he says. “I spent the last 11 years in the National Account Division at Pitman working with the Independent Carton Group (ICG), who was one of my largest customers. I was the first vendor to start them as a buying group and it was how I learned about buying groups. After 25 years, I was looking for something else to do. ”
According to McKay, he hadn’t heard of any existing buying groups in the label market, and so he set out to start one. “I put together a business plan and launched it two years ago,” he says.
In order to get started, McKay first had to find people who wanted to participate. His original goal, he says, was to find ten converters who shared his vision.
“It took a while, but I found eleven charter members and have grown from there,” he says. “They really have to be a fit. They have to get it. They have to get the fact that they’re joining this group to be part of the leverage to save money. They have to make an effort to use the FLAG-approved vendors, unless of course they can’t.
“For example, if a vendor can’t deliver on time, that’s a different story. That would be something that I would need to know right off the bat, because if that were the case, that might not be the right vendor for us.”
McKay works with vendors to negotiate prices, but his members deal directly with vendors regarding payments and delivery. He keeps his members up-to-date on how much the group has purchased as a whole, what each individual member has purchased, and every quarter he sends his members a rebate check based on their purchases.
“We’ve got roll label substrates, healthcare, an incredible UPS freight package, prepress, stickyback tapes through Anderson & Vreeland, tool and dies through Wilson, and we also have a relationship with Independent Printers Worldwide, a buying group for commercial printers,” he says. “We got together with IPW and realized there was a synergy there. We formed a strategic alliance with them which brings some of those big ticket savings like freight and healthcare.”
McKay says that his goal has always been for everyone involved to benefit. “My goal is a triple win: a win for converters, a win for vendors, and a win for FLAG.”
While members see financial benefits as a result of bargaining, McKay says that vendors stand to see significant financial gain as well. “Vendors benefit because, once they’re in as an approved vendor, they have new national sales volume. It’s not just one customer, right now its 14, and by the end of 2012, we’re hoping it’ll be 50. We’re looking for new members across the US now.”
There is also a collaborative and cooperative aspect to FLAG that McKay works to cultivate. He has encouraged his members to support one another by sharing ideas and strategies. He also encourages his members to develop catastrophic recovery plans with one another. The value of which, he says, is almost priceless.
“With a catastrophic recovery plan, our members can say to their customers, ‘look, if I have a huge fire at my plant, you’re not out in the dark, my partner will back me up,” he says.
At the recent annual FLAG members meeting, McKay and his members met to discuss their year, then took a bus over to one member’s facility to take a look at how that converter was doing business. “People were able to walk away with ideas to use back in their own shops,” he says.
Since McKay takes pains to ensure that his members aren’t in direct competition with one another, the sense of secrecy so often seen in the label industry is significantly, if not completely, gone.
“I think they see the benefits a lot more than they see a risk,” he says.