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ISM Article

Everything Old is New Again

18 Apr, 2001 By: Ronelle Ingram imageSource

Everything Old is New Again

The stock market and economy seem to be on a downward trend. “Not a recession, just a slowing of growth” is repeated in the daily business section. The selling of connected digital equipment continues to improve, as our sales force and customers finally begin to figure out how to use their new equipment capabilities.

All the talk about the connected digital equipment being more economical to service seems to be true. My problem is dealing with the enormous cost my dealership has incurred getting our staff geared up to sell and service these connected products. Who is paying this cost?

Every new digital copier we sell that replaces a current customer’s analog system, instantly takes money from the bottom line of the service and supply department. Last month, we sold a long time customer a new digital copier. It replaced an analog machine that was averaging 750,000 copiers per year. The new CPC (all inclusive cost per copy) program will generate $9375.00 less (income if anything) this year than last year. At an hourly service burden rate of $68 per hour, 137 labor hours will have to be saved this year to break even.

Including all PM’s and drive time, less than sixty hours labor was used servicing this equipment last year. The new digital equipment has already required over 12 hours of installation and instruction time during the first 2 weeks. Theoretically, I’m already in the hole over $10,000 and the first CPC lease payment has not been credited to our account.

Double Take On Analog

As a service manager with an eye on the profit and lost statement of my department, I am taking a second look at my old trusty “expensive to service” analog copiers. For years, our biggest profit source has been the selling and servicing of refurbished equipment.

As a whole, this market seems to be drying up. Several formerly prominent wholesalers of used equipment have closed their doors. Wholesale equipment prices have dropped radically. When I need to purchase used equipment on the open market, I find that the difficulty to find the product it’s increasing. Once found, if usually is more expensive than last year's pricing. But there is still plenty of money to be made in servicing the analog units.

I feel there is still a market place for the analog equipment. The selling and servicing of refurbs should remain as one of the options you offer your customers. No need to kill the proverbial goose until all the golden eggs are hatched.

Maybe it’s time to be a little retro. Think P T Cruiser. Let’s take another look at the value in selling and servicing used equipment. The true value is not what you sell, but how you sell and service it.

Webster Definitions

Refurbish: Renovate, brighten and polish.

Remanufacture: To refurbish a used product by renovating and reassembling its component make a new or different product.

Renovate: To restore to good condition; make new. Reinvigorate; refresh.

Manufacture: The making of goods or wares by manual labor or machinery. Making anything.

Used: Showing wear or being worn out.

No matter how Webster defines it, it is NOT NEW. But they can still make us money.

Honest Dealings

I have been alarmed at the seemingly random use of these words of our trade. The literal dictionary definition actually adds ambiguity. Government regulations are equally blurry on such matters. One of the most prestigious office equipment manufacturers has been placing new (or zeroed) meters in their previously used equipment for decades. Yet I read of independent dealers being fined or even imprisoned for falsifying the past history of equipment they sell.

In the remanufacturing arena, the question of appropriate testing, measuring and grading is of utmost importance. The vendor and buyer are constantly trying to provide a product that is good enough to be acceptable to the buyer, yet profitable to the seller. When many different (and mostly independent) vendors are providing an array of products to the wholesale and retail market, the quality assurance line is often a bit blurry.

The sale of not completely original equipment (OEM) is a great source of profit to most authorized dealerships. To those dealers who are not authorized by a manufacturer, the reselling of used equipment is essential. In either case, certain standards of acceptable selling conditions must be established, quantified, recorded and rewarded.

How can the seller of not new equipment stay within the letter and spirit of the law? How can we accurately quantify to the buyer, what we are selling? How can any sense of comparative shopping take place? How can we monetarily compete, with others who use the same words “Refurbish, Remanufactured, Renovated, Used,” but have entirely different standards, warranties and costs?

How do we test and measure the lucrative “after market”?

Putting Integrity On The Line

As a three-decade purchaser and seller of new, used, OEM and non-OEM equipment, I have learned to judge the product by the person or organization that sells it. A written warranty has little value if there is no one to back it up. If I save a $100 on a drum, that ultimately makes my $10,000 copier not work properly, I have made a bad business decision. If I sell a recharged cartridge that alienates a long time customer, I have made another poor business decision.

If I can save 17% on a non-OEM, or recharged product that satisfies (or exceeds) my customer’s expectations, I have made a good business decision. I have made an excellent business decision if I can package the non-OEM or not new product, in an ethical way, at a non-discounted price. The best test and measure for selling non-OEM and not new products is the integrity of the seller. As an office machine dealer, I must unconditionally stand behind (warranty) everything I sell. Or openly stipulate exactly what I am selling.

In my in-house refurbishing operation, I give a bonus to my employees for all refurbished equipment that goes 90 days (or the first PM cycle) without a service call. Every machine that leaves our shop carries the signature of the technicians who stands behind the integrity of their own effort and knowledge. Personal responsibility (ownership) for quality work is a strong reinforcement for ongoing excellence.

One of the strengths of the office machine industry is the way we seem to recycle ourselves. People regularly change jobs within the industry. Quality people always seem to carry their integrity with them. “I trusted what you said before, I will continue to trust you. Those who took advantage of my trust in the past will usually cheat me again.”

Most successful salespeople can convince their past, satisfied customers to purchase from any vendor. “Trust me, trust whatever product I offer you.” Our customers are more concerned with the finished product than the equipment that provides it. We sell equipment, but our customers buy the result.

The strongest test and measurement standards I can offer my customer is my promise to stand behind every product I sell. My (Company’s) Integrity is the only true way to measure the worth of the product I represent.

In turn, it is my responsibility to test and measure the integrity of the people (companies) who are my wholesalers. The entire remarketing cycle is no stronger than it’s weakest link. We must critically test and measure those who sell to us to ensure the product we sell to others.

In today’s business lingo, I think of analog as my bond portfolio and digital as my high tech stocks. A good money manager strives to blend different investment strategies to minimize risk during turbulent economic times. This same rule can be extended to maintaining a balanced base of mixed equipment under servicing agreements. Plan for the future by making profits from the past. Use the profitability of analog to shore up the startup cost of digital. The selling and servicing of refurbed analog equipment can augment your digital business.

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