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Whitepaper - Managing the cost of printing and copying.

Executive Summary. 

 

In the early 1900’s King Camp Gillette was one of a number of pioneers of a new kind of selling technique – that of the loss leader[1].  Gillette sold his shaving handles for a loss – but made his money on his consumables – the blades themselves.  Virtually all printer manufacturers follow this model today, selling very cheap printers and making their profit margin on the toner.
     

Things are slightly different with the copier companies.  Copiers have always been sold on a “Cost per Copy” basis.  In reality this is a financial agreement in terms of a lease (where the copier company partners with a lease company and the lease company is ‘hidden’ from the client).   There is a fixed monthly lease payment and a charge per page based on an average toner coverage of that page (usually 5%).  The lease company owns the machine and the copier company gets paid in full for the capital cost of the machine when the agreement is signed by the client. 

In recent years copier companies have realised that a copier is simply a printer with a built in scanner – and now takes them to market as Multi-Function Devices (MFD’s). 

 


It is interesting to note that printer 
manufacturers expect the average business client to purchase 4 sets of toner cartridges a year per colour laser printer. 

As colour laser printers take 4 toner cartridges costing £50.00 - £250.00 per cartridge – it is easy to see that this business model not only pays – it pays well 


This is a very profitable business model and these companies have large sales forces commissioned on selling a “Print Management Strategy” which essentially means a 5 year lease of multiple MFDs that include all consumables and results in removing all the clients’ desktop printers and supplying a smaller number of MFD’s – which will be in place for the duration of the contract.

This white paper discusses the pros and cons of each procurement method.

 

What is a “Print Management Strategy“?

Documents drive business processes – that is why an average of 1-3% of a company’s annual revenue is consumed by document production.  In many cases (especially SMB’s) this expense is ‘under the radar’ as printers are purchased ‘ad-hoc’ and toner is purchased via the stationary catalogue.  A Print Management Strategy allows you to control this expense.  The printer and MFD manufacturers would have everyone believe that the best way to purchase their products is via a ‘pay per print’ leasing model – however our research suggests that this is not necessarily so and there are a number of alternatives which we will discuss in this paper.


1)     Purchase and run

 

60% of cartridge sales are panic buys and cost more than a planned purchase.


This is the un-managed usage of printers, MFD’s and consumables.

PROs

-        Simple

 

CONs

-        When printers are purchased little or no attention is given to running costs.

-        The most expensive ownership model.


There are usually three different suppliers involved in the ‘Purchase and Run’ model – the printer seller, the toner seller and the maintenance company -
AND THEY ALL WANT THEIR PROFIT MARGIN…..

 

2)    Outsourcing to a MFD supplier/manufacturer


In this type of usage-based model, you pay a rental for the machine and for the pages you print. No capital expenditure is required since the agreement is for a 5 year lease which includes the purchase, maintenance and running of the fleet

 

PROs

    • Established business model
    • Usage based payment model (pay per page printed)
    • Reasonable choice of vendors to compare
    • OPEX and not CAPEX (usually an advantage…)
 


IT Managers dislike desktop printers due to increasing proliferation and differing models which make maintenance harder – plus the need for a different set of cartridges for each different model of printer requiring the stockpiling of bulky cartridges.

 

CONs

    • 5 year lock-in contract.
    • One MFD per floor or per office is a single point of failure
    • There is a monthly charge on each machine regardless of usage (this is the lease payment).
    • Additional desktop printers are purchased by departments who consider that their needs are not met by the MFD – resulting in a proliferation of uncontrolled “Purchase and Run” printers and copiers.
    • No redundancy.  These contracts usually offer a 4 hour callout basis for breakdowns.  This is not the same as a 4 hour fix....  
       
    • The selling company usually revisits the contract at just over the half-way point to try and sell a new 5 year contract.  This is attractive to the selling company because it keeps the client locked into them and the client may need to re-sign as their needs will (almost definitely) have changed since the contact started.
 

Usually one MFD replaces up to  20 desktop machines so you can see why IT prefer this - the trouble is this may not be the best solution for the business user.
 
Amongst the additional consumables that laser printers use, fuser kits need replacing at regular intervals – between 50,000 and 200,000 pages depending on type.
 
 

3)  Pay-Per-Cartridge.

 

This is a relatively new offering.  Essentially it means that you pay for the cartridges that you use and nothing more.  Clever software monitors the toner level in each of the client’s printers and when the toner reaches a pre-agreed level the supplier is notified by the software and the supplier ships the appropriate cartridge to the printer in question.

PROs

  • The cartridges are 30% cheaper than those supplied by usual means (such as a stationary supplier or direct from the manufacturer). This is because they are ‘remanufactured’ and not OEM cartridges.
  • No charge or rental for the printer/MFD (s)
  • >No charge for the maintenance
  • No monthly rental charge
  • Purely a usage based model
  • Works well for desktop printers – and is a viable option for MFDs.
  • The contract can be flexed up or down.
  • No tie-in to any particular printer manufacturer.
  • Redundancy can be provided by way of a ‘hot spare’.  Usually within 24 hours the supplier collects the defective device and replaces the ‘hot spare’.

 

  Remanufactured cartridges are more expensive to manufacture than OEM cartridges.  Why?
    • The empty cartridge has to be purchased and shipped to the factory.
    • The re-manufacturing process involves - cleaning, replacing worn parts and refilling with high quality toner which is a manual process.
    • There are 120 parts in a single toner cartridge. Around six are replaced when remanufactured including the ‘chip’ which the printer reads to check the status of the cartridge.
    • The remanufacturing process is done in the UK.
    • Whilst they are more expensive to manufacture they are sold at lower cost point to be competitive against OEM products.

CONs:

    • There is still a minimum contract of 12 months.
    • Requires all printing devices to be networked.
    • On signature the client is billed for a complete set of cartridges.
    • The supplier uses ‘Remanufactured’ cartridges.  These are OEM cartridges that have been refurbished and refilled.   (Ensure that your chosen supplier meets ISO 9000 and ISO 14000).

Conclusion

For many years now printer manufacturers have reaped the rewards due to them for their investment in innovation and engineering.  As the market matures, profit margins decrease due to more competitive offerings from other innovative vendors hungry for a slice of the market.

Pay-Per–Cartridge is one such innovation that has the potential to significantly decrease the OEM market share in the supply of Printer / MFD consumables – which can only be good news for the consumer

Pay-Per–Cartridge is worth considering if you meet the following criteria:

    • You have a diverse printer estate
      • If your current printer estate meets your business needs and you wish to keep it and/or:
      • You wish to refresh your printer estate but do not wish to spend capital purchasing the hardware.
      • You do not wish to store toner cartridges on site with the cost and space issues that this necessitates.  (‘Just in time’ delivery of toner removes the need to store multiple toner cartridges.)
  • You want a flexible approach to your print strategy without a restrictive lease agreement.  
    • A ‘Pay per Toner’ agreement is a flexible 12 month contract; the client’s printers/MFD’s estate can be reworked to reflect customers changing needs as those needs arise
    • As the toner is remanufactured and it is 30% cheaper than OEM toner.  This is exceptional value.
  • You do not wish to be tied or locked into a 60 month contract.
    • Very few businesses can predict their printing needs over such a long period – this factor is part of the business plan and revenue model of the companies that sell such restrictive lease based deals.
  • You do not wish to pay a standing monthly charge on your printer estate.
    • After all - it is good business practice to reduce all recurring bills if possible.
  • You are happy with remanufactured toner over OEM toner.
    • Providing you check out the credentials of your supplier - there is absolutely no reason why you shouldn’t be.  Your supplier should use the best quality toner available and comply with all the relevant ISO standards.

 

 [1] http://en.wikipedia.org/wiki/Loss_leader