The Risk Matrix for MPS: Why Risk Management for MPS?

by Sarah Henderson, West Point Products

I recently reread “Good to Great” by Jim Collins, and I was struck how the author comes to the conclusion that there is no silver bullet for making a good company become a great company. The same can be said about MPS programs as they are modeled within the imaging industry.

Collins does note that at the heart of those truly great companies is a corporate culture that rigorously found and encouraged disciplined people to continue to think and act in a disciplined manner. I have observed this same key indicator for the success in MPS programs; dealer leadership teams that are disciplined in measuring not only the program profitability, but also in examining specific areas of risk.

Risk Management for MPS is a concept I introduced to an audience at the Imaging Channel’s Managed Print Summit in December 2013. This is an important subject for me because I believe in disciplined processes that will result in better decision making and a more profitable program in the long run. Risk mitigation can also help business owners understand key areas of performance and help them plan for program adjustments and changes going forward.  Understanding risk mitigation can also be something that a reseller can absorb even if they have not yet started an MPS program, because it will help them chart a plan in line with their risk comfort level. 

For most imaging dealers, MPS has been a program offering for some time.  If they have not taken the time to apply some risk management strategies to MPS, here is an outline of the process they can follow to find more profit in 2014:

Step 1: Identify areas of risk

The first step in this process is for a management team to sit down and list all areas of risk within the overall program. The following are sample key areas to review:

Sales Process/Staffing

Do you follow a consistent and documented sales process and manage sales process metrics? A sales process should follow defined steps related to prospecting, assessment, sales presentations, closing and quarterly business reviews. A manager should be able to approach reps and quickly determine how many prospective customers they have identified and where they are in the sales process. Over time, dealerships can develop metrics related to close ratios within the company and by sales rep. 

Do you need additional support, documentation, or training in order for this to affect your corporate culture? If sales people do not have the right training or support materials, or follow the correct sales process set up by your company, your program will suffer. Training may also need to be extended to non-sales roles such as your service manager, technicians, and customer service. When operational and support teams understand the business objectives of MPS they can better support the execution in the field.

Do you have the right talent selling? If an MPS program is less than successful, one area to examine is sales talent. Evaluate the skills sets and personality traits that make sales reps successful and determine if you need to make a change sooner rather than later. Some personnel fit better as MPS sales support specialists who can apply analytical and technical aptitude within an account, and not necessarily be the person prospecting new business.  On the flip side, do you have sales hunters spending too much time doing pricing calculations or managing software within MPS accounts?

What happens if you lose sales talent? Successful MPS programs may also have inherent risk if the entire program, or most of the program is dependent on one person selling everything. What happens if you lose that staff member? Do you have other professionals that can prospect and support clients? Have you had your leading sales reps keep records on the accounts under their name? Have you involved other managers or support staff in quarterly business reviews to deepen the relationship beyond one person?

What other roles do you have or do you need to properly execute MPS within your dealership? Evaluate what sales should own, where administrative support is needed or overburdened, and how your various providers can help.

Pricing

Another big area of risk within MPS proposals and contract management is the development of initial customer pricing that will be both competitive and profitable throughout the term of the contract. A key area of risk within pricing calculations is the need for accuracy. This means working off the most up-to-date product catalog from your supplier, applying printer-specific service metrics, and understanding your burden rate on service. When you begin the initial pricing, it is imperative that you remain as accurate as possible to the fleet you will be taking under management.

If your team does not have experience servicing printers for a specific brand, you need to accommodate for that inexperience on the front end. However you calculate your pricing, make sure up-front pricing assumptions related to cost of supplies, parts, service and other factors are up to date, accurate, and measurable. If this is an area you lack confidence in calculating, you can seek out industry partners who offer software support to calculate TCO, or offer full support programs with pricing guarantees where the dealer marks up the provided CPP.

Supplies

The performance of the toner cartridge can represent up to 70 percent of the profitability within an MPS deal. Selecting the right supplies is very important because you need supplies with the lowest failure rates, consistent performance, and the highest yield possible. If you do not measure your failure rates already, you need to begin to do so with your vendors. Also, you will need to develop measurements to determine if your cartridges are performing to yield. If they are not, your pricing calculations will immediately be inaccurate before you even get into the contract execution.

Equally important to cartridge performance is the method you implement for supply delivery. How are you managing your just-in-time supply delivery? Review this process and look for areas of automation with your business partners. Many dealers report that too often they rely on the end user calling in for supplies because the proactive fulfillment model is too cumbersome.

Do you set a standard percent of toner to fulfill when the time comes or do you vary depending on usage? There are options for automatic toner fulfillment in the industry that can help mitigate this risk.

Once toner is shipped, what steps do you employ to make sure it gets to the right device? Do you properly onboard customers, or interact with reception or receiving to understand how to process and deliver supplies?  How often does the wrong cartridge ship due to order entry errors? Look for partners who not only label the supplies properly, but offer value-add to the fulfillment process.

Service

Are your technicians trained to work on printers? If not, invest in some hands-on training for them to get comfortable and efficient with printers. Look for partners who can also offer triage services to reduce your service instances and support to your technicians in the field. If you outsource service delivery, select partners who provide certified technicians, visibility and accountability within your accounts. A dispatch and service technician management system is another important area to measure. There are companies that provide leading industry stats for dealers looking to improve service performance or better understand how to implement change management.

Software

The use of a remote monitoring software is essential for MPS. Make sure your staff has been trained on how to utilize the various alerts, reporting, and daily management of the software. Training will provide the technical support you need for your staff and end users. A key area to examine is the management of “stale” devices, new or added devices, and equipment moves.  Furthermore, look for additional ways to integrate with other platforms such as your pricing tool and accounting software. By enhancing integration, dealers can reduce risk in pricing calculations, order entry, and invoicing while also eliminating manual processes and administrative overhead to support MPS.

Hardware

A big area of risk within MPS is when printers “fail” within the contract terms. When this happens, dealers need to have an effective equipment replacement strategy and also manage the brands that operate at the lowest TCOs. Without a process in place dealers will spend more in parts and service time attempting to repair printers that are less expensive to replace. Often, a replacement device will run on a lower Total Cost of Ownership (TCO) going forward. Dealers should also understand the TCO versus acquisition cost of a printer. Do not employ a strategy of placing a less expensive printer that might not have the right remanufactured or high-yield supplies available.

Plus

Dealers should review key areas in the invoicing and billing of usage-based contracts. Prior to selling MPS, dealers need to understand what it will take to properly configure and produce a usage base/variable bill. Also take time to understand various deal crafting strategies for MPS that take into account the financing and placement of equipment with an MPS agreement with leasing terms.

Evaluate the risk that is inherent to your competitive landscape. You will need to understand the impact of acquisitions and mergers as they affect your ability to sell the MPS provider of choice. Be sure to seek out partners in MPS that understand the legal landscape and offer products and services that are compliant.

Step 2: Determine the probability?

For each area of risk, dealers should document the probability of risk affecting the program. Sample questions are listed to help dealers start this exercise, and be sure not to ignore any area from Step 1.

  • How often can it happen?
  • What are the costs of servicing printer models?
  • What parts will I need, and how often?
  • How often does it happen?
  • What are my failure rates?
  • What is my service call avoidance?

Step 3: Assign a consequence rating

  • For each area of risk, dealers should assign a consequence rating based on the significance of the identified risks to the MPS program and dealership as a whole. Sample questions are listed to help dealers start this exercise, and be sure not to ignore any area.
  • What is the impact to profitability?
  • What is the impact to customer satisfaction/retention?
  • What is the impact to my staff?

Step 4: Decide on your MPS risk management strategy

Dealers can avoid risk through practices of only selecting customers that meet certain criteria such as print output, vertical markets, and local ownership. Dealers can also reduce risk in key areas by implementing training and management metrics designed to address specific outputs or processes. Dealers can also choose to retain risk within MPS by measuring areas closely and understanding the results. Dealers can also choose to transfer the risk by partnering with other MPS providers in order to outsource a portion or the majority of the program delivery.

In the book “Good to Great,” the author recommends that business leaders “get the right people on the bus, the wrong people off the bus, and the right people in the right seats on the bus.” Dealership leadership teams will need to apply that concept as they determine risk mitigation strategies for their program or components and then implement with the right team and business partners.

Sarah Henderson is director, MPS operations, for West Point Products. In this role, she plans, develops and manages the implementation of MPS programs and key infrastructure tools for multiple channels in North America through the Axess program. Since joining West Point, she has helped launch the industry-leading MPS TCO costing calculator, national service dispatch center, comprehensive MPS SalesPro training and a full-service MPS delivery model for resellers. Henderson serves on the board of the MPSA and was named one of the Top 40 Most Influential People in the Imaging Industry by The Week in Imaging. Henderson’s background includes more than seven years in the imaging industry, with hands-on experience assisting dealers in implementing MPS and marketing strategies. Prior to joining West Point Products, Henderson was director, strategic marketing, for the Office Equipment Group at GreatAmerica Financial Services. Contact her at shenderson@westpointproducts.com or visit http://www.westpointproducts.com