Outsourcing – If Not Now, Then When?
This guest blog was contributed by Gil Wazana.
Outsourcing has always been a viable option, although for different reasons through the timeline of our industry. In the early days, or the boom years of our industry, retail remanufacturers were simply growing so fast and had no choice but to lean on larger wholesale manufacturers in order to meet the demand. In some cases, it was a temporary move as remanufacturing capacity was increased. In other cases, it was a permanent solution to avoid adding overhead and infrastructure.
In the middle ages, or between 2003 and 2007, outsourcing partnerships were still being established to support demand, but other factors started to influence this critical decision. Printer proliferation caused a need for heavier capital investment into R&D, as five engines no longer made up 80 percent of the business. Cartridges needed to deliver more pages per minute and higher yields, and this simply caused issues in the remanufacturing process that some could not contend with. The OEM components were now designed to only last one cycle and a deeper understanding of aftermarket raw materials became a necessity along with the ability to test and ensure consistency on said raw materials. The emergence of color printing in the later years was am additional reason to outsource. This created two types of retail remanufacturers: ones that invested further and somewhat “kept up” with the changing times and others that understood that they would eventually exit remanufacturing altogether. The latter group did it in different ways, some exited all in one shot and some built a strategic alliance and plan to exit over time.
Today, smaller remanufacturers face a completely different set of challenges, which are put in front of them for different reasons and from several angles. The aforementioned evolution in technology has been accelerated to the point where faster speeds and yields are no longer exclusive to monochrome, they are clearly present in color as well. In the last two years, the OEM’s have re-committed to the process of “death by printer release,” which further buries remanufacturers in R&D time and money.
Other factors are not as front and center and are often overlooked. The market has changed, and we no longer enjoy the boom years. A new buzz phrase has surfaced – “Flat is the new up” and remanufacturers and dealers alike have to work three times as hard to stay flat. Traditional retail remanufacturers can no longer purely rely on transactional sales and service, they need to be able to defend against MPS and depending on the segment they are serving, may need to build an MPS offering. The competition has intensified as the strong survive and get better. The copier dealers have moved into the laser printer channel as well and usually bring with them an army of salespeople, service technicians and service solutions. Last, but certainly not least, the First Sale Doctrine will certainly continue to affect the availability of cores, yet adding another element for a small retail remanufacturer to contend with.
In my opinion, these retail remanufacturers have arrived at a fork in the road and must make a decision or risk being ran off the road. The options are clear; invest in becoming a full blown manufacturing company, create budgets for R&D, capital equipment, facilities, core collection and IP due diligence, to name just a few, or transform their company into a lean and mean sales and marketing organization. The former is not likely for most as the cash required will more often than not be more than they are willing or able to spend. The latter is by no stretch of the imagination a cakewalk, and is a very dangerous move if proper due diligence is not conducted and if a true partnership is not secured. The reward, however, can be the difference between surviving in these trying times or not. Becoming a full blown sales and marketing organization will place emphasis on what today insures long term sustainability and profitability – selling cartridges – and that includes selling them in a transactional manner or via an MPS engagement. Done correctly outsourcing can free up resources that can be invested in building a stronger sales infrastructure that can and should include an ability to support MPS needs. There are many variables and ways to skin this cat, much too many to cover in an article or blog. The market is changing quickly and sooner then later, this type of decision may be forced as opposed to strategically planned, and this very difference can determine success or lack thereof.
In closing, consider this: The largest company in our industry has the resources and engineering ability to make their own cartridges, but it chooses to outsource 100 percent of its toner cartridge needs and focus on being the best sales and marketing company – we should all strive to take a page out of HP’s playbook.
Gil Wazana can be contacted at 800-673-4968 ext. 120 or at email@example.com.
Gil Wazana is a 13-year veteran of MSE and is currently the VP of sales for the Americas. He is responsible for managing the regional directors and for growing sales in the Americas. Wazana also interfaces with all of MSE’s strategic accounts and is an integral component of all MSE corporate initiatives and global strategies. Wazana began his career at MSE at the age of 18 and worked his way up through departments such as operations and customer service before joining the sales team as a junior rep. Wazana has since then been promoted from sales manager, to regional director to his current position of VP of sales.
Posted on Jan 17, 2012