One of the areas I see MPS professionals struggle with in managed print services is the area of explaining the difference between what a prospect has spent on cartridge for a period of time, versus what the professional has determined to be the toner expense based on usage. Many times they want to use the prospect’s spent amount in their assessment /review as the basis for calculating current output costs. This is a big mistake.
The assessment process is designed to capture current output costs in order to build a sound business case to outsource the responsibility of their fleet to your firm. It starts by identifying types of devices, page volumes, internal resources used to support the current fleet, current supplies on hand, current business process for cartridges, service, parts, and how new technology is acquired. Except in the case where an MPS agreement is already in place, the current costs for the prospect are fragmented and not readily known. Sometimes amount spent on cartridges is known for a period of time but this is not necessary to complete the assessment. You are looking for what they pay for each individual type of cartridge used in the output fleet. This might draw attention to what they have spent in this area for a period of time but this is not their expense based on usage for the same period of time.
A proper analysis of toner costs is to apply page volumes by device to the cartridge yield to the cost of the cartridge to determine each device’s cost. Summing all devices then determines the toner cost for the assessment period which is converted to a month’s expense. This might be very different to what the prospect believes is their monthly toner expense.
The reasons for this are many. First it is impossible to match when cartridges are purchased to when they are used. Cartridges are purchased in most cases well in advance of the need. Most companies stock on-hand extra cartridges, and since the print volumes and cartridge yields by device vary, at any point in time you do not know how full or empty a cartridge may be in each machine. Measuring toner usage based on cartridge yields and print volumes account for all the variables mentioned.
A similar example of this would be use of gas in a car. Let’s say a few days before a scheduled trip you filled your tank with gas. When you left on your trip, you had ¾ of a tank. Upon returning from your trip you still had a ¼ of a tank remaining. You did not buy any gas while on the trip. Was the cost of gas for this trip $0? No. While you did not buy gas during the trip, you did use the gas in your tank, let say 8 gallons. So the real expense for this trip would be $24 (at $3/gallon).
Printer usage/expense calculated based on the method described above will account for printers with low volumes, printers with high volumes and the different yields each type of cartridge produces. A very important difference when determining prospects current cost.
MPS can be very rewarding for your business but there are many pitfalls. If you would like to learn more about our approach to MPS, register for one of our workshops. The next workshop is May 10 & 11 in Chicago. You can register at http://www.bta.org/i4a/pages/index.cfm?pageid=2127. I hope to see your there.