By Antonio Sanchez Navarro.
Dealers new to MPS seem to always take the same approach when addressing this new business: they read about it and attend seminars and webinars. Then they define their strategy, and they dedicate the biggest effort to justify their charging the customers for the “service” they put in place. So far nothing is unusual, except for what comes next. The service consists on letting the customers know how many pages they print every month.
There is a common understanding that MPS is to bill cost per page. That acronym stands for “managed print services”. But is there any “management” work or any “service” work in billing pages? The answer is a clear “no”. So the dealer is indeed tying to justify a service that is nowhere. The value added is so insignificant that competition is tough, prices are much reduced and the success rate is poor. The number of dealers failing with their MPS offering is enormous. Most of them do not even reach 100 printers. But worse is that we scarcely find someone exceeding 1,000 devices. Indeed, after 18 months most of the dealers stop offering cost per page to their customer, and they just do it as a defensive move: only when the customer gets serious on receiving a cost per page invoice will they comply.
MPS is more than selling pages, and more simple too.
But the consultants can’t be wrong when claiming that MPS is the only chance for printer dealers to remain in the business 3-6 years from now. What is wrong is the general assumption that MPS is billing pages, and that billing pages is MPS. MPS is more than this, but even more basic than this. Transforming the traditional transactional business into a service business can be summarized in the following statement:
“Keep doing what you are good at, but adapt yourself to the existing technology”.
This translates into the following “need to know” for the dealer:
- Is your customer happy with you billing cartridges at the end of the month? If yes, why change this? If you decide to change it, you’ll be asked by your customer to justify the reason you are doing so. But worse is that your customer must validate your new selling conditions, and he will then “invite” your competitors to send them their proposal. As a matter of fact you are therefore creating an opportunity for your competitors.
- Currently your customer holds the role and the responsibility of ensuring that the printers’ needs are satisfied; he is the one triggering the orders for supplies. The amount of errors taking place is relevant: wrong references, duplicated orders, cartridges get lost at the customer site. Your customer is sensible to all this; he may not know exactly the size of the problem, but he certainly knows that it exists. The press is regularly publishing cases where employees have been reselling cartridges valued hundreds of thousands of dollars, or even millions. As his provider you can offer to protect him from this internal theft. It is your opportunity to propose a solution to him: you taking the responsibility out from his organization for toner ordering and distribute the supply to the printers that needs it. The automatic fulfillment of toners and other supplies will solve plenty of problems for your customer. But when deciding to do so, ensure that you have the appropriate controls in place. What I mean by this is that the problems of your customer do not get solved just because you shift the ownership of the process. As a matter of fact, what really happens is that the problems remain or even become worse.
- Delivering the consumables to your customer in an automated and controlled way is not enough. Your customer still has many problems around managing his printing resources on which he needs your help. 8-9% of the cartridges bought never reach the printer. They may be received by a person different to the one who ordered them, or abandoned in a closet, or in the worst case scenario they may just be stolen (according to a report from ABC news in May 2013, 75% of the employees practice kleptomania, and there seems to be a preference for toners). So imagine how delighted your customer would be if you can ensure that every single cartridge acquired is really dedicated to a printer inside the company. An end to end tracking of each cartridge is not only possible nowadays, but I may say it is a must.
- One last aspect your customer will immediately buy is your capacity to let him know to which extend the cartridges used in his company are being replaced right on time, not too early. On average, 14% of black toner is wasted due to early replacement by the user. Controlling the leakage of toner will save a lot of money to your customer. It is also an environmental friendly attitude, as your customer will then be saving a relevant quantity of CO2 emission by just reducing his supply needs to a minimum.
At this point the dealer is probably getting excited: selling a solution that will solve the customer’s existing problems is certainly easier than selling pages. But let’s not lose focus: we do not want to sell services, at least initially. Selling services requires some capabilities that are not acquired in just a few months’ time. We must be ready for it, and in most cases there is no time, nor money to hire MPS specialists and at the same time perform the organizational changes. What we really want to do is keep selling cartridges but in a different way: in a way that the customer perceives more value from us.
The return on investment.
So our next question should be: if I am still selling cartridges and I have invested in a service infrastructure, how do I make my return on investment? This is the interesting part. And the answer is easy: by selling more cartridges to the existing customer at a lower cost to us. What this really means is that while we clear those inefficiencies the customer has, we are also solving some of our own inefficiencies, meaning unnecessary costs. Auto-fulfillment implies that we are the one knowing what the needs of the customer will be in the next 3 months. So we can easily use this info to determine how much inventory of cartridges we must have, how many empties of each type we will need, how much raw material and parts we need to keep, and which empties will be available from our customers to recuperate them for the refilling process. This is all because we know every single delivery weeks in advance before it takes place.
The best of it all is that one of the problems that most dealers have in MPS is that the selling cycle of a cost per page is long. The customer first needs to buy the idea, then validate the proposal, and finally sign a contract, which implies lawyers. Our approach is to focus on providing service to the customer, meaning resolving his current problems in managing his printing resources. This approach does not imply any legal change on the relationship with the customer. Therefore there is no selling process time. Therefore, implementing MPS in any existing customer is not only something easy and quick, but also natural: it is a natural evolution from the transactional relationship we have had with the customer over the past 30 years.
The provision of automatic fulfillment services as part of an MPS solution is not as simple as collecting the counters. You may have already understood that it requires specific technology. The accuracy when identifying the needs for supplies and their prediction is a must. The complexity grows due to the fact the lack of homogeneity among printers: the MPS compliance.
The complexity is such that only advanced algorithms and powerful A.I. engine can perform this task. If someone is thinking of building his own tool, meaning re-inventing the wheel, may I kindly suggest forgetting about it? Unless he wants to invest large sums of dollars over the next 7-10 years and the final objective is to manage millions of printers, there is no chance to have a tool good enough: a yield management tool for MPS. Just take a look at the OEMs and see how poor their result has been so far.
And if someone still pretends that the current tool he has to collect counters will suddenly be smart enough to manage auto-fulfillment, he may be waiting for years before he sees this happening. Meanwhile his market opportunity would vanish.