by Mario DIaz, VP, Virtuytix
Office Products and Imaging Technology Providers who support users are going crazy trying to balance profitability with customer service decisions related to replacing supplies at customer locations.
According to Dave Leabater’s “day 1 summary of Itex 2017”, the number one issue facing dealers is margin pressure. OPI magazine identified declining print volumes, margin erosion, and challenges with compatible supplies as the “triple threat” for the imaging industry.
Sure, some dealers are doing very well. Benchmarks of dealers with a mature MPS business in the “Virtulytix Leaders Index for MPS Providers” demonstrate strong performance. In 2016 these dealers had median annual revenue of $245,112 per employee, and median annual revenue of $450,000 per service employee. However, even these dealers are concerned about increasing margin pressure.
A quick way to fight the margin squeeze we see in the imaging industry is to recapture the precious margin dollars lost with toner cartridge replacement. Toner cartridges typically have a sensor which alerts the printer when the toner falls below 35 to 40% of the total cartridge capacity. Once the sensor doesn’t see toner in the optical window, the printer attempts to estimate the toner level. So when the toner says it has 25% toner left, it may or may not. This is only an estimate. The challenge is that many times the cartridge is being replaced prematurely.
A dealer who is managing printer fleets is losing margin because they do not achieve the level of cartridge yield their CPP (Cost Per Page) calculations are based on. In effect, they are paying a premium for the cartridges. Ultimately each page they sell is less profitable than it should be.
How big a problem is this? On average, this costs a dealer $50 annually for each device under management in additional toner and extra shipping costs (monochrome printers, more for color). This may not sound like a lot, unless you manage 5,000 devices, the costs represent $250,000 a year in lost margins. If you manage 10,000 devices, this is costing you $500,000 in a year. That is if your fleet is only monochrome printers. If it has color, the lost margin is even greater.
These numbers aren’t just some theoretical estimate. Virtulytix worked with a leading fleet management software provider, distributors, and large resellers to capture the ‘empty’ cartridges. This was done in “well managed environments” with user modification programs to minimize premature replacement of cartridges. Even in these “well managed environments,” Virtulytix found that over 20% of the toner was still in the cartridge. This number has been validated by a number of OEMs and cartridge destruction companies.
If you are interested in finding how much this costs your business, try our free impact calculator at www.virtulytix.com/impact/ to find out how much this is costing your company.