Supply chain problems are a hot topic right now, for good reason. I just hosted a very interesting panel on the topic with Doug Albregts from Marco, Jerry Blaine from LDI Color Toolbox, Mark Mathews from Epson and Ron Petrucci from Katun, which shed some light on the topic. You can watch that recording here. But a week earlier, in beautiful Asheville, North Carolina, the BTA hosted an OEM panel at their event, moderated by the wise, witty, and very skilled Bob Goldberg. Unsurprisingly, a good deal of the time was spent discussing these very same issues.
The panel included three OEM representatives — Konica Minolta’s Laura Blackmer, Sharp’s Mike Marusic, and Ricoh’s Jim Coriddi. Specific supply chain struggles were discussed, along with how they are helping dealers manage the situation, and what dealers can do to diversify their business.
Everyone’s Supply Chain Problems
No one is immune from the chaos of COVID-19 and the ensuing supply chain crisis that we’ve been plunged into. The panel agreed that these supply chain problems aren’t going to clear up anytime soon. Marusic predicts that this logjam will take a year to clear, and Laura Blackmer reported that chip shortages will persist throughout the rest of this year and into the next. The panel also agreed that communication is the most important and useful tool for navigating this mess.
Ricoh’s Supply Chain Problems
Ricoh’s Coriddi said that the company’s A3 and A4 business is feeling the pressure from the supply chain problems. “[The problems] got their start months ago on the manufacturing side, and now they are working their way to the distribution centers,” he said. Coriddi anticipates that the issues at the ports will continue to create inconsistencies in the supply chain for months to come.
At the moment, Ricoh has desperately needed products sitting idle on the Pacific coast. When the product does get through the port, they are going to rely on trucks — using tandem drivers to accelerate shipments — to avoid the crowds on the rails. Ricoh is also relying on air freight to expedite shipments of everything from A4 models and accessories to raw materials.
Konica Minolta’s Supply Chain Problems
Blackmer said that Konica Minolta has been hit particularly hard. “It has been probably the most challenging time that I’ve ever experienced in terms of product, and I worked at HP when you couldn’t get a DeskJet to save your life, so that’s a pretty bold statement.”
Konica Minolta has been dealing with all the same pressures and forces as their competitors, with the added bonus of two factory fires within four months. After some government intervention, Konica Minolta was able to get one factory back online on October 18 and anticipates the other will be producing in November.
Like its peers, KM is relying on air freight to bypass gummed-up shipping channels. They are also buying up advance shipping lanes and containers in anticipation of ongoing delays.
Sharp’s Supply Chain Problems
Sharp ran into their first major supply chain problem in September, according to Marusic. “We left 100 containers of product sitting off the coast of Long Beach from the first week of September through the first week of October,” he said. That product has since been shipped. The company is also struggling in the labor market. Once the ongoing longshoremen labor dispute is resolved, Sharp will have to find workers to get products on their way from the various points of entry into the U.S..
On the manufacturing side, Sharp is chugging along. Per Marusic, the company hasn’t encountered chip shortage problems yet — a benefit of being owned by the world’s largest electronics contract manufacturer, Foxconn. Due to its size and scale, Apple supplier Foxconn has significant leverage over the foundries that produce the world’s semiconductors. However, Marusic also noted that they are having chips bound for A4 devices redesigned and using them in their A3 devices. Clearly, the A3 devices Sharp sells represent the largest revenue component for them, so the A3s are the machines getting the scarce resources right now. And scarce is the word – Sharp wouldn’t be retooling chips unless they saw shortages being an ongoing problem. Nevertheless, Sharp was able to secure enough chips to produce what was budgeted for, with a certain amount of growth, and it is producing A3 machines at well over 2019 levels.
Helping Dealers Deal
As noted above, communication is the most effective tool right now. Coriddi said that it’s important for dealers to set expectations. “No one is going to be shocked when you tell them there are delays in your supply chain,” he said. Coriddi also recommended that dealers lean on their manufacturer contacts and bring them into the discussion with customers to help them understand. At the very least, this strategy can help dealers maintain their reputation as a trusted and reliable service provider, effectively pushing the blame on the manufacturer.
Blackmer also had some recommendations for how dealers could overcome device shortages while keeping their clients happy. “70% to 75% of all products are replacing an existing product. These products are typically less than five years old and haven’t been used much — if at all — for over a year,” she said. Blackmer’s plan of attack is twofold: refinance viable products in existing accounts at a very low cost and extend it by a year, which she says will increase profit margins, and prioritize new devices for net new business. As for compensating your employees, she recommends a payment plan of 50% on booking and 50% on delivery. “This helped stop the bleeding a lot. Our attrition rate was curbed by 80%,” she said.
Search for Greener Pastures
The panelists were also asked about what dealers can do to replace their declining print revenues. Coriddi recommends that dealers focus on transitioning from being trusted print providers to serving as a trusted source of managing information. He pointed to the success Ricoh has had with DocuWare. Blackmer recommends dealers look into the cyber/physical security, unified communications, and/or managed IT spaces. These are outstanding sources for the monthly recurring revenue that dealers are so effective at cultivating. “In the last six months, the breadth of dealers selling these solutions have doubled,” she said. Finally, Marusic recommends dealers surround the office space with technology. Think of products like laptops, smart boards, collaboration and communications solutions, and so on. He pointed to Sharp’s recent success with their acquisition of Toshiba’s laptop business, as well as their partnership with Microsoft to improve Microsoft Teams by augmenting it.
Will the supply chain problems persist longer than one (or maybe even two) manufacturers can endure? Be it by M&A or tapping out, I don’t think we will get through 2022/2023 without some consolidation.
Ultimately, the supply chain is just one of many problems that are putting the squeeze on print, and the supply chain problems are temporary — eventually, we won’t have to worry about them. The other existential forces — namely digital transformation — aren’t going away.