How to Identify and Avoid MPS Pitfalls: Part 1

MPS has been around long enough to identify the many pitfalls that can prevent a dealer from being successful. Some of the pitfalls have been learned firsthand others by watching others fail. We asked successful MPS dealers and MPS advocates from the document imaging industry to share with us the biggest pitfalls they’ve seen or experienced over the course of their careers.

Kevin Morris, CEO of OneDOC MPS in Oklahoma City, OK and a member of the board of the Managed Print Services Association, has seen a few pitfalls in his travels, including one during a recent visit to a company that was under an MPS contract from a competitor.

“They had this huge storeroom full of supplies,” recalls Morris. “When we asked why they had all these supplies, they told us the dealer they do business with just keeps sending them supplies. I asked, ‘It’s not like supply and demand?’ ‘No, we just stock up, we even have toner on the shelf for equipment we’ve gotten rid of.’ They probably had $30,000 worth of toner on the shelf. I don’t know how many accounts that [dealer]has, but if they have many like that, that’s a lot of money sitting out there.”

Kevin Morris, OneDoc

Kevin Morris

The way that OneDOC MPS avoids that pitfall is by providing customers with just-in-time shipments.

“People get toner when they need it rather than having it sitting around on their shelves,” says Morris.

Another pitfall is failing to understand the cost of that as well as the cost of service and supplies.

“I was at a BTA meeting and somebody stood up and said, ‘We just bill everything out at two cents a page and roll from there,’” recalls Morris. “I said, ‘Really? On some devices you might make money and others you might lose your shirt. How do you go in blindly like that?’ At our company we know what the cost of operation is for every model from every brand. I can go into our database and see exactly what those things costs. Understanding those cost mechanisms is important.”

For Nathan Maust, a major account executive with ASI Business Solutions in Dallas, TX, one of the biggest pitfalls he’s seen is pricing models that weren’t calculated correctly with the end result the dealer loses money on the MPS deal.

“I remember when I was our managed print specialist and I took over a healthcare account for a previous rep—several hundred pages a month, $5,000-$6,000 a month in billing, and for some reason it was sitting at 3-4 percent gross margin and we couldn’t find out why.

“When we started doing more detailed analysis of the documents being printed it turned out five printers out of 80-something was being used by doctor’s to print X-rays. Picture an X-ray, there’s very little white on that page. Those five printers were bleeding us dry and we ended up parting with that client with the mutual understanding that it wasn’t working. We couldn’t continue to offer the level of service that they had become accustomed to for that type of price. It wasn’t realistic.”

Nathan Maust

Nathan Maust

What that taught ASI was it can’t simply look at how many pages the customer is running on its devices and coming up with an aggregate cost per page based upon that.

“We had to become very efficient and detailed in understanding what our clients are printing, how they’re printing, and how that impacts the pricing model.”

Another pitfall Maust has witnessed is organizations that continually deliver poor supplies.

“There are many drill and fill companies that don’t provide quality compatible supplies,” he says. “What happens is devices require more service, color quality is poor, and you have unhappy customers. There are large companies in this market that when you talk to their customers, they continually complain about issues they have caused by inferior supplies.”

For Bill Melo, chief marketing executive, Toshiba America Business Solutions/Toshiba Global Commerce Solutions, the one big pitfall he sees dealers struggle with is how to price deals.

“That’s a common pitfall because it’s kind of complicated. If you’re picking up a fleet that has 20 or 30 printers, you can have 10 different ones. Those 10 different ones probably have different price profiles based on the types of toner they use and the availability of reman, so pricing a deal can be complicated. Unless you have a good tool to do that you can easily make a mistake.”

Toshiba Portraits

Bill Melo

The other thing he finds that has been compounded significantly with MPS and an area where Melo doesn’t think everyone executes as well as they should is the re-supply process.

“If someone calls you up about their MFP and says, ‘I’ve run out of toner, ship me a new one,’ that’s dicey enough, but for every MFP you have two or three printers, or five, or six or eight printers, now your re-supply process and risk has gone up several fold. Unless you have a good process for remote monitoring, automatic toner replenishment, as a dealer, even if you priced the deal correctly to begin with you can get yourself in trouble very fast by sending out the wrong toner or too much. The cost of toner for printers is significantly higher than it is for MFPs and you have a lot more of them to service.”

We will publish Part 2 of How to Identify and Avoid MPS Pitfalls next Friday in the ENX Enews

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