By Antonio Sánchez Navarro
HP Instant Ink MPS program keeps generating lots of expectations. There are plenty of articles and posts talking about it. The reason is obvious: it is the first time an OEM launches a small ticked program starting as low as one single device that includes automatic order fulfilment. We broke out and analysed the different aspects of this proposal in a previous article “HP Instant Ink – Has future arrived?”. But we left out the analysis, a small though important detail: the program uses super capacity ink cartridges in an exclusive way.
Why would someone manufacture customized cartridges just to be used in a program that represents so little business for a giant like HP? Other OEMs like Lexmark also have special references for contract customers. But what is unique in HP’s Instant Ink program is that it is not just the change of the reference. Instead, HP has manufactured a special cartridge just for this program.
Special cartridges manufactured just for this program.
According to the site of HP [LINK], extra-large cartridges are specifically used for the HP Instant Ink program, and are available nowhere else for sale. Why would HP make such a significant investment just for a program that currently represents meaningless volume compared to their traditional selling model?
The answer is a combination of factors.
- Revenues: HP’s significant investment in the manufacturing plant implies that it has big expectations about the expansion of this program industry wide. The fact that HP has 2 models for its Pro version, and 7 for its standard version confirms this statement.
- Costs: HP needs to recuperate the investment for this super high capacity cartridge manufacturing. There are saving opportunities that can easily be identified if taking a lean management approach:
- The delivery cost is significant compared to the value of the item shipped (one cartridge of ink). Therefore, the less times HP needs to ship, the less is the variable delivery cost that impacts the profit of HP’s Instant Ink program
- For the same reasons, the risk of losing cartridges This risk is embedded in each cartridge delivery.
- If we fragment the cost of a cartridge, the container (the print head and the deposit for the ink) represents 35 to 40%, twice as much as the ink itself. Indeed, Embatex, a European leader in quality cartridge remanufacturing, confirms that the cost of the ink is just around 20 to 30% of the cartridge. So, under lean principles, you may want to reduce your marginal cost by increasing the volume of ink in each cartridge. This is a practice that has expanded among the cartridge remanufacturers as a way to keep costs low compared to equivalent OEM cartridges.
- Environment: over time, the waste that is generated, meaning the empty cartridge, is the item that has the greatest impact in printing. Whether the cartridge is re-utilized (remanufactured) or disposed of properly, there are CO2 emissions associated. So the most effective way of reducing the environmental footprint is to obviously minimize the amount of cartridges used over time, with no impact on the volume printed. HP’s Instant Ink special cartridges have more capacity and therefore reduce the waste.
Similarity with Remanufacturers
Funny that HP has adopted for its Instant Ink program the same solution that most remanufacturers have: the usage of jumbo cartridges is a strong argument in Reman sales. But the advantage for HP is that they can make it fully compatible with their printers, while the Remans have to live with a printer that does not recognize the extra capacity of the jumbo cartridge. This technical issue is a disadvantage for Remans in MPS contracts, as much as it is a competitive advantage for HP. Remanufacturers then have no option but to employ MPS tools that are fully compatible with their jumbo cartridges. Nubeprint Enterprise system adjusts its cartridge level indicators with the remaining toner or ink capacity, all independent from the fact that the printer is unable to interpret correctly the level.
HP has made a very clever move with the HP Instant Ink program. Not only is the program very aggressive, but it works with proprietary advantages (the XL exclusive cartridge) that cannot be easily replicated by other players in the market. Would someone want to launch a similar program with any of the eligible models, he will have to face the problem of lack of competitiveness for using standard cartridges, or use XL remanufactured cartridges and manage his program with Nubeprint MPS software (other MPS tools do not take into consideration the extra durability of an XL cartridge and, as a consequence, the dealer ends up by sending more ink than needed).