Putting the MPS Solution to work – MPS Floodgates: part 3 of 4
Dealers, value added resellers (VARs) and IT providers venturing in to the managed services arena look to MPS software to help them manage processes they offer their customers. Some who implement a program look to MPS as a savior, only to find their current challenges have become illuminated. Supply and service fulfillment are two such areas.
When it comes to supply fulfillment, consider this: A dealer’s profit on toner cartridges can typically range between 20 and 40%. Of course business machine providers are not in the business to sell toner, but what does the average toner cartridge go for – $50? $60 … $70 … $80? What about high yield cartridges or toner for wide format devices – $300? $350 … $400 … more?
How many cartridge sales go to retailers like Staples, Office Depot, etc.? Sometimes end users don’t know or realize the provider’s contract specifies exclusive suppliers. Other times they call because they need toner NOW – and the dealer cannot fulfill the need or must make “rush” delivery.
Consider the following example. A VAR deploys an MPS solution at an existing customer location to monitor their imaging devices. During discovery in addition to six devices the reseller supports, the client has 14 more. Through analysis, the dealer’s six devices make an average of 25,000–30,000 prints per month.For this example, let’s say the devices the dealership supports include:
- 1 color MFP with its 4 cartridges (Black, Cyan, Magenta and Yellow)
- 1 other color device (4 more cartridges)
- 4 mono printers (4 black cartridges)
Let’s assume that for these machines:
- 40% of the customer’s prints are color (10,000–12,000 per month).
- Average selling price per cartridge is $50 (both black and color)
- Average margin per cartridge is 35% ($17.50 gross profit per cartridge)
- Black cartridges yield 10,000 prints; color 5,000 prints
In one year the VAR’s customer will make 300,000–360,000 prints with six devices they support:
- 60% with black toner: 180,000–216,000 black & white prints
- (Requiring 18–22 black cartridges)
- 40% with color toner: 120,000–144,000 color prints
- (Requiring 24–29 color cartridges)
In one year, the customer may purchase 40-50 cartridges, or $2,100–$2,550 in toner; adding $735–$890 in revenue to the bottom line. While that may not be much, multiply the total for ten customers, 50 or 100. What if print volumes doubled? What about potential income for supplying non-contracted machines?
What about dealers who build supplies into their contracts? MPS software can help VARs control supply costs for devices under contract. In the example above, 50 cartridges should be built into the contract. All is well if the customer buys fewer or buys elsewhere, but if the dealer provides more, the cost per page increases.
How many working capital dollars are lost in supplies? Where do extra cartridges go? Do customers get cartridges from the contacting dealer and use them in non-contracted machines? Are cartridges being replaced before they are empty? Can the provider know when a cartridge is replaced before it runs out?
The right MPS solution helps dealers identify and control the dollars allotted in their contracts.
Service notices and alerts
Most dealerships build a certain amount of ‘normal’ or ‘expected’ repair costs into a service contract. But, how often does ‘normal’ occur and when is ‘expected’ service needed. In the toner fulfillment example above, 300,000–360,000 prints were made on the devices under the VARs fulfillment contract.
- Do the contracts that have been prepared allow for service dispatch?
- How many times will service techs be sent to the site?
- Does the customer have the right machines in place to efficiently complete the jobs they are doing?
Dealers often tell us their customers call for service. Most copiers, MFPs and printers report when service is needed, while continuing to operate until it is ‘broke’. When the device stops working, the call service is made. Many times the end user makes it a point to say that the device has been “broken for quite a while.”
- Is this delay in notification cause for additional expense challenges?
- Do service techs leave the office with the right parts on the truck?
- Is the dealership making more service calls than are built into the contract?
Certain service needs can compound other problems. Should providers cover expenses that are a result of other service needs? If not, that’s great because new calls are opportunity for additional service revenue. But how can cause and effect be determined?
MPS software can detect when devices trigger a service need – before customers call! When the device indicates a service need on the console, MPS solutions can and should be configured to send that information to someone within the organization who can take action.
Upon receipt of the service alert, the help desk can call the customer to schedule break/fix repairs, permitting service team management. Dispatch can send the tech out with the appropriate repair materials on the truck. Because service need is already known, cost control and customer service is improved!
What if non-managed devices were monitored? From the example, what if service needs for the additional 14 devices was available? — Imagine the revenue opportunities if the dealership knew of that need.
- Is the right equipment in use?
- How close is it to contract renewal time?
- Would the customer relationship improve?
Expanding on the example above can add potential service revenue. What if the customer asked for service on a just fraction of the 14 devices just once during the year – simply because the need for service was made apparent? 14 devices x 20% equals about 3 more service revenue opportunities per year.
- How much revenue is generated on the average service call – $35? $65 … $100 … more?
- What if the cost of service is prohibitive and the customer is told a new device is in order?
- How much income would service for 10 additional customers, or 50, or 100 customers add?
By implementing MPS in the services offered, VARs can harvest the low hanging service fruit ($$$).
Most MPS solutions provide the discovered data in a variety of formats. Some put the information out on the web, some send it via email, and some format it in Excel ® and still others tailor it to their client’s need for an additional fee.
To some, MPS is synonymous with meter reading. This may be the driving force behind the MPS thought process in the first place. How automated will the company’s billing process become?Meter data and in some cases supply and service alerting information can be imported into popular billing data bases to truly automate the MPS process. Determining which data gathering option is right for the organization depends on the number of meters managed by the billing team and the amount of time each billing cycle requires.
Pain-points for the billing team may differ from those of the dealer’s management team, but at certain times during the billing cycle, bookkeepers can be quite vocal. Many dealerships say they employ an entire staff whose sole purpose is to gather meters. Some even have drivers or runners who rack up thousands of miles a month, driving from customer to customer getting meter data.
That’s in addition to those ‘great’ customers who call, fax, email and/or go to the dealer’s website and use the links to get meter data to the billing team without prompting. All the manually gathered data still needs to be keyed into the billing system, taking even more time.
Data provided by MPS solutions can be automatically imported into ERP platforms such as e-automate, NextGen, OMD, Miracle Service (Nexent), SAP Business One, Falcon Soaring, Microsoft Dynamics. to name a few. The number of meters and the amount of time it takes to process them will help determine automation.
… In Summary
MPS is all about gathering data … Lots of data. That data flow CAN increase efficiency but only if it comes in manageable amounts. MPS software permits discovery of new business opportunity. The right MPS solution is the one that reports the information the dealership uses. Involving supply and service data in the information gathering process makes good sense. In the example above, 20 devices were discovered at the site; numbers of prints were deciphered, as were the prospect’s supply and service needs. Incorporating this information into a sales, supply or service contract will set the dealership apart from its competition.
Using real data gained from an MPS solution results in accurate sales, service and supply proposals.
Making a decision to secure the right MPS solution is an exercise in answering questions. In numerous MPS forums and Print Management blogs, it is said that dealerships must secure an MPS solution to remain competitive. But proceed with caution and be prudent before choosing one.
By considering and then answering the questions offered in the FREE “ MPS Program and Solution Adoption Checklist ”, Dealers can jump head first into the MPS pool with confidence.
Next installment … MPS Floodgates 4: Conclusion and Wrap up