Managed Print Basics – Becoming an MPS Champion …

Cost per Page and Total Cost of Ownership …

Total Cost of Ownership Estimator screenshot with dataValue added resellers offering programs to reduce printing costs consider many things when making proposals.  What factors should be considered when defining the real costs of a printing environment?  What is Total Cost of Ownership and why is it important to understand?

As a general rule, a low purchase price for a printer translates to higher operating overhead.  Investing in equipment with a higher upfront cost usually results in lower consumables outlay.  Total Cost of Ownership (TCO) calculations can be used to help buyers and owners determine the direct and indirect costs of their imaging fleet.  Common TCO components include:

  • Equipment purchase cost
  • Toner (supply) cost
  • Parts cost (drums, fusers, maintenance kits etc.)
  • Service cost (service, time and material contracts)
  • Software cost
  • Help desk support fees
  • Paper (some MPS providers include paper, some don’t)
  • Energy consumption cost (not every dealer considers this)

Most accurate TCO estimations include more than the hard costs noted above.  Actual page volume should be used whenever possible and getting such information is only available when output data is gathered over time.  Uncovering information can open new opportunities.  Wise dealers start by getting an initial machine and meter read, then while waiting until the next data capture can be done, assemble needed resources. 

What is an average cost per page (CPP)?  Because usage between devices differ, it is important to know more than the basics of cartridge cost and support fees when calculating CPP.   In addition to TCO factors, CPP calculations often include output volume, cartridge yield, fill ratios, labor rates, and more.

When using TCO and CPP estimation tools, be sure to consider as many factors as possible to make certain all aspects are being considered.  Let’s look at a few of the things some dealers use to determine machine costs so profitable contracts can be written to cover long term management.

Fill Ratios and Labor Costs

It is important to know each customer’s printing habits and style.  If pages are frequently printed from the internet, or documents contain images, graphs or pictures, it is likely that more ink will be put on the page when compared to print going on prepared forms.

Cartridge manufacturers rate their products based on page fill.  The industry standard for fill ratio has been about 5-7% ink on the page for black and about triple that for color (3 cartridge colors times 5-7%).  Medical facilities, accountants, and businesses printing facts and figures usually put less ink on the page than those that print volumes of word filled or .pdf docs.  When fill data is not provided by machines, better TCO estimation tools allow for fill ratio adjustment and permit users to enter their own default settings. 

Labor and frequency rates can be refined as well.  Certain manufactures publish recommended maintenance schedules, complete with associated costs that can be passed to users.  Some OEMs recommend labor charges be assessed for every 150,000-250,000 pages printed.  How many dealers take this into account when writing sales proposals or service contracts?  As with fill ratio settings, good TCO estimation tools allow for labor frequency and rate variances permitting account managers to enter their own values.

Device Specific Settings

More advanced TCO tools allow for device specific adjustments once global parameters are set and saved. Account administrators can add individual device limitations to help shape cost per page analysis.

Supply (Toner Cartridge) Detail

Many TCO estimation tools allow users to enter or import information specific to the cartridges they provide, with part numbers, manufacturer suggested yield* and cost information being typical.  Be sure entered data is as complete as possible and enter detail for ALL cartridges used, not just black.  Monetary amounts entered into an estimator tool can be true cost (either using OEM, remanufacturer or supplier figures), suggested retail or even be from information gained through customer discovery.  Often two or more sets of data are used to show potential savings to the user. 

* NOTE – Check with your cartridge provider to know the fill ratios for each advertized yield.

Maintenance Kit Detail

Be sure to include kits in cost estimations.  Maintenance kit costs vary from machine to machine, with some machines using several kits.  As with supplies, managers should enter information specific to the maintenance kits used, such as part number(s), suggested yield(s) and cost information.

If parts used have different yields, be sure to enter information so that all frequency and costs factors are equal.  By way of example, if two kits are used, one with a yield and cost of 150,000 and $200.00, and another with a yield of 250,000 pages and a cost of $250.00, the yield entry should be the lower of the two – 150,000, because that’s when maintenance will be needed.  The cost should be $350.00 reflecting the calculation of … $200 + (0.6*$250) … to account for the yield difference.

Service Cost Detail

It may be desirable to include the dealer’s hard labor costs associated with machine servicing. Allowances can be made for volume and for labor charges for maintenance frequency as suggested by the manufacturer.  When none are available or suggested, the frequency could be adjusted to match that of the maintenance kits used.  If the kits used were expected to last 150,000 pages, the frequency rate could be set at that value and a rate added to cover the trip charge to replace the kit.

Service cost estimations can be included or removed from an investment plan to make offers sweeter.  It is a good idea to know the hard costs going in when preparing long-term service contracts.

Volume Detail

The best CPP calculations take into account actual volume.  After the first set of meter readings and devices in use are obtained, the analysis can begin.  When a second set of meters can be read, typical volume patterns can be established.  In general, it is best when volumes are gathered over time; a one or two-month or even longer period of time is recommended.  Most TCO estimation tools have the ability to use actual and/or add estimated volumes to assist in the accurate generation to true CPP.

Caution Be sure assessments are made when printing naturally occurs.  For example, it does no good to build proposals for school systems from data acquired in June, July or August as there is far less printing going on during this time.

Other Factors to Consider

Coming up with true TCO may also require other cost figures as well.  Most TCO estimator tools provide output in formats that can have these variables added.  Additional figures may include:

Energy consumption Monthly lease payment B&W cost per copy overage
Machine purchase price Monthly rental payment Color cost per page overage

Some TCO estimation tools allow account administrators to add and remove devices once the full mix of CPP characteristics has been considered.  This is especially helpful when the dealer is making recommendations for the repositioning or replacement of less efficient machines in the imaging fleet.

… In Summary

Smart dealers leverage their TCO discoveries.  When a complete TCO analysis is done, it is quite common for dealers to discover inefficient machine use, high machine usage costs and potential need of machine replacement due to age or position within the customer’s organization. 

Consider as many factors as possible to provide accurate CPP calculations.

How cost per page and total cost of ownership information is presented depends on the dealer, RFP requirements, and the customer.  MPS contracts may be conveyed with charges broken down by:

  • Monthly maintenance cost (per click vs. flat rate)
  • Monthly B&W Consumables cost (per click vs. flat rate)
  • Monthly color Consumables cost (per click vs. flat rate)

When TCO and CPP can be measured it can be understood.  The more hard cost information added to TCO estimations, the more accurate CPP calculations will be.  Measuring supply usage and maintenance kits costs and factoring in the repair and support costs over the life of the machine will provide dealerships with a baseline for cost containment.  Value added resellers use this to promote potential long term cost savings.

Be smart when presenting investment plans to prospective buyers.  True TCO and CPP detail takes time to compile and are only valuable when accurate input information is used.   Don’t be the dealer that calculates total cost of ownership and submits the RFP only to later learn that they lose money when they win the bid.

 

Written by Brian Dawson, Sales and Marketing Director, Print Tracker, LLC

Brian is a productivity specialist, sales coach, mentor, and offers managed print solutions world-wide with Print Tracker software.

View profiles at www.linkedin.com/in/briandawsonid/ and www.linkedin.com/company/514661.  Contact Brian at [email protected], (866) 629-3342 x7 or through the internet home of Print Tracker at http://PrintTracker.net.

   

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