By Ronelle Ingram 16-Aug-02
“Business is slow. How can we make more money in the service department?” I receive this common question via my email or voice mail on a regular basis. There is no easy answer to such a broad question. Each of us must be constantly aware of the need to optimize the opportunities for profits within our own company. There are a few bad business habits that will guarantee your business will lose money.
Many of us receive daily offerings via the fax and through email from sellers of surplus supplies. The one constant, being offered by these various surplus suppliers’ hot sheets, is COLOR. Color toner, color developer, color duplicator ink, color drums.
There always seems to be more magenta, cyan, yellow and black items being purchased by dealers, than is needed by our retail customers. I do believe unsuspecting dealers have enough unused color supplies on their shelves to create a paper rainbow that could cover the earth’s circumference a thousands times over.
There is a fine line between always being out of a needed supply versus buying and warehousing products that will never be sold. The cost of employing purchasing clerks, wholesale cost of the product, shipping cost, warehousing expenses, inventory control and potential of lost business; must be balanced against having to wholesale unused products for pennies on the dollar or throwing away the unsellable supplies.
Whenever you sell products that use color supplies, encourage your customers to always have at least one extra bottle of each color (toner and developer) product on hand. Diplomatically explain, “We always want to have fresh product on hand. We place orders for color products once a week.”
After years of being stuck with thousands of dollars of unsellable color supplies, I have made the business decision to minimize my inventory on all color related products.
If the color equipment is on the showroom floor, I will keep one or two containers of each needed color product in stock. For every 20 color machines I have under a full supply contract, I will keep one bottle of each color supply item as my minimum on my reorder list. This number may vary depending on the monthly usage of some high volume machines.
Every six months, a complete review of leases that are due to expire should be made. When picking up off-lease equipment that was covered under CPC or total care agreements check for left over supplies in the customer’s office. Those unused containers of toner, developer, oil, drum units, etc. you find in the customer’s supply room belong to you, the dealer. Even if you are not the re-selling dealer, those supplies are yours. The customer’s CPC rate only pays for copier/prints that are used.
Toward the end of any lease or service agreement, monitor the amount of supplies that are sent to the customer. Train your staff to politely instruct your customers there is a limit to the amount of supplies that can be shipped. Theoretically, under a cost per copy program, the toner should run out the same day, the 36-month lease ends.
Have your techs diplomatically review the number of supplies any CPC customer has on their shelf. Toward the last few weeks of an existing service and supply agreement pick-up any extra supplies. Have the tech or sales rep give the customer a receipt for the items that taken. If questioned, explain appropriate credit will be applied. Appropriate credit is zero. Only toner that is used on copies / prints that are made are paid for by the customer.
Adding the phrase “supplies and preventative maintenance service will be provided at rates consistent with the manufactures recommended intervals,” allows you to charge for excessive need of toner. The customer who calls for, a not yet due, complete Preventive Maintenance and a new drum one week before their service agreement is due, can be denied. Simply explain it is not consistent with the manufacturer’s recommended serving intervals.
In today’s digital world, of low CPC pricing, servicing dealers must be prudent. There is little room for error. If every customer has one extra bottle of supplies that is rated a 50,000 copiers / prints, hundreds of thousands of dollars of your potential profit can be thrown away (or picked up by another dealer) at the end of the lease or full service agreement.
In the late 1980’s, the average wholesale cost of a container of toner was in the $15 range. Today the wholesale cost of many containers of toner exceeds the $100 mark.
Color products require four (different colors) of everything.
When you walk through your warehouse, consider each one of those supply containers represents a $100 bill. During the lazy days of summer, take a closer look at your supply inventory. Reduce the number of color supplies you stock. Monitor the amount of supplies that are freely sent to CPC customers that are coming to the end of their leases.
Make sure supplies help provide your company with positive cash flow, real profit and no need to ever have obsolete products.
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