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Lowering Output Cost

12 Sep, 2008 By: Jay Smith imageSource

Lowering Output Cost

As the economy continues to nudge itself into a deeper hole, businesses are
forced to creatively search for ways to make ends meet.  Traditional measures of
reducing expenses and maximizing profits just don’t seem to cut it anymore. 
While corporations continually search for innovative and creative ways to reduce
expenses and maximize every dollar spent, they overlook a simple but very
important cost center – the printed document.

In virtually every organization and industry, the most overlooked and
under-managed cost center is document production.  Companies are literally
throwing money in the trash by ignoring the true costs of moving and producing
paper documents.  All Associates, an independent industry research firm,
estimates that the fully burdened cost of document production and management can
be as much as 14.79% of annual revenue and averages about 6.61% across all
industries.  Furthermore, the cost to print a single black-and-white page
averages over 5 cents per page.  In a company that prints 25,000 pages per day
(about 500 employees), the cost of supplies alone can total a staggering
$420,000 per year.

Fortunately, analysts also estimate that companies can reduce expenses
associated with document production by up to 40% or $30 per employee per month. 
Overlooking these costs and cost reduction opportunities can be detrimental to a
business’ efforts to become more efficient, to streamline mission critical
activities and to reduce operating expenses. This article will discuss how to
identify out-of-control printing costs using a structured document output
analysis, and how to improve and control an origination’s printing environment.

Increasing Awareness

Most companies acknowledge that they print more than needed and probably
aren’t operating as efficiently as possible, but have no idea how to address the
problem.  Fortunately, in recent years major manufacturers in the printing and
digital imaging industry have begun leading with messages of cost reduction and
fleet management, instead of simply upgrading current printing and copying
technology.  This shift in messaging from a hardware focus to a cost reduction
focus has come from the commoditization of printing, faxing and copying
hardware, rather than a pull from the market. Typically, businesses still aren’t
actively demanding full-fledged document solutions from their printing and
imaging vendors.

When talking to customers about their output environment, most know exactly
how many copies they make per month or how much their monthly copier lease is,
but rarely have an accurate count of how many printers they employ.  In most
organizations, the acquisition of printers and consumables happens at the
departmental level rather than the organizational level, like that of the
copiers.  Decentralization of the procurement and management function has caused
printer fleets to grow unmanaged and out of control, and the result is an
alarming number of unnecessary output devices, virtually invisible to purchasing
and IT managers.  Statistics show that printing volumes out number copy volumes
by as much as four to one.  And even more alarming is that most organizations
have between seven to ten printing devices for every one copying device. 

“In a company that prints 25,000 pages
per day... the cost of supplies alone

can total a staggering $420,000 per year.”

Cost Drivers

So why is document production so uncontrolled?  The reasons vary from one
organization to another, but across all industries several pain-points stand
out: Low awareness of total cost of ownership (TCO) and too many devices. The
first, low awareness of TCO, has the most significant impact.  Just because a
printing device has a low entry cost doesn’t mean it’s inexpensive to run &
service.  Sales people in the industry project that over the life of a printing
device, 5% of the cost is acquisition, while 95% is found in the cost of
supplies & maintenance.

Another common TCO misconception is to ignore the equipment lease cost in a
cost-per-copy calculation.  People often view the operating expense of a copying
device as the service cost–per-copy, but completely ignore how much they pay
(per copy) for the equipment lease.  Understanding TCO takes much more than just
knowing how much an existing copier vendor charges a company “per click.”  This
concept is starting to sink in with IT managers but has not yet made it to the
officer level at most organizations.  Although TCO has moved out of the
“completely ignored” category, businesses rarely know how to measure this
important metric.

The second pain-point, too many devices, also has a very significant impact
but is slightly more difficult to quantify.  As mentioned above, the impact of
having too many devices goes beyond the initial cost of the output device.  The
total hard costs of printing, from equipment, toner and service, are very easy
to identify.  The soft costs are a bit more subtle and harder to pinpoint. 
Examples of soft costs associated with too many printing devices are: a greater
burden on IT staff, the floor space taken up by unnecessary devices, labor cost
of employees waiting on slow or overburdened devices, and the cost of revenue
tied up in keeping toner cartridges on site for resupply.

Understanding  Printing Costs

So what should organizations do about uncontrolled spending on document
production?  The first and most important step is to gain an understanding of
the current document output infrastructure. 

The best way to do this is through a comprehensive document output analysis.  A
document output analysis provides an assessment of the current output
environment and identifies opportunities to improve, streamline and make
document workflow more efficient.  There are several schools of thought on how
an analysis should be performed, but the most important factor is that the
analysis is conducted under a structured and proven methodology.  The
methodology adopted by Toshiba for their Encompass analysis program is Six
Sigma.  This is best described as a highly disciplined approach to decision
making using a data intensive analysis. Done properly, it will ensure that an
internal process runs at optimum efficiency and continues to do so with minimal

The Six-Sigma methodology for improving an existing process is called DMAIC,
the acronym for Define, Measure, Analyze, Improve, and Control.  The DMAIC
methodology has a proven track record and fits nicely into a document output
assessment.  Using this methodology not only ensures that the assessment team
uncovers all expenses relating to document output, but also requires that
controls be put into place to ensure that the improvements and changes stick,
and that employees adhere to new policies or practices.  The DMAIC methodology
and how it relates to improving a print infrastructure is explained below.


The most basic and fundamental aspect of a   document  output  assessment
is  to  know exactly where all of the printing devices are.  Nine times out of
ten, a person who thinks they know where every printer, fax machine and copy
machine is, typically is wrong.  The  define stage of the (Six-Sigma) process
says that this is the time when the project team defines and characterizes the
current output environment.  The best way to do this is to mark all devices on a
floor plan.  Ideally, the assessment team should use an electronic asset
management program that is geared toward output devices.  Some of the better
asset management programs incorporate a database of popular output devices & the
related cost for consumables.  Toshiba’s Encompass assessment team uses an
electronic asset management program that allows for easily marked devices on a
floor plan using a tablet PC.  An electronic asset management program also
allows for flexibility when relocating devices in another part of the building
after the assessment is over.


During a walk-through, the assessment team must capture several key pieces
of information.  In addition to the make, model, type and location of the
device, they should also capture any asset ID, serial number, service ID, or
unique identifier located on the device.  Another very important piece of
information is the average monthly volume of the device.  The assessment team
can usually get very accurate volume information for the copy machines, but
printer volumes may be a bit more difficult to capture.  Typically, when a
vendor services a printing device, they capture the print or output meter on the
device.  These periodic meter-reads can be a great help in determining the
monthly volume.  When service logs are unavailable, the best and most reliable
way to capture meter reads is to walk to each device, print a test page, capture
the meter and return in 30 days to repeat the process.  The obvious downsides to
capturing meter-reads this way are the investment in time to walk to each
device, and the fact that meter-reads can miss important annual cycles in print
volume.  Several software companies have developed tools to help capture printer
volumes and manage printing environments, and are well worth the investment in
the long-term analysis of an organizations’ document workflow assessment.  The
issue with these tools is that they typically don’t capture print usage for
locally connected devices, they only monitor network traffic. The major players
in this market have released a local client solution that collects all printing
volume, local and network.


Most companies find it very difficult to re-task an internal employee with
the responsibility of analyzing all the data gathered in the Define and Measure
stages.  In most cases it’s more cost-effective and efficient to outsource this
responsibility to a third-party consultant who specializes in processing and
interpreting the data.  It also helps to have a trusted advisor who knows
printing and imaging well enough to make recommendations based on the latest
technology.  When selecting a partner to help with a business’ analysis, make
sure they have some type of analysis tool to help sift through the data and
identify improvement opportunities.  A good analysis tool will automatically
identify irregular data and raise flags on existing uncontrolled costs.  Often,
this information will allow quick and almost transparent changes to an output
environment.  An example would be a marketing department that prints 27,000
pages per month to a low-volume printer that costs 5.2 cents per page, and
another department that prints 1,200 pages to a high-volume multifunction
product (MFP) that costs 2.1 cents per page.  The cost reduction may be as
simple as swapping an overworked low-volume printer with an underutilized
high-volume multifunction product (MFP) already on-site.  This type of simple
swap could save an organization upwards of $800 per month.


All of the work done to this point comes together in the Improve stage.  In
Six Sigma, the term for identifying the most important pieces of information is
called identifying the “Critical X’s”.  In this case the critical X’s are the
most costly devices.  To quantify and identify the critical X’s, the analysts
need to ask the difficult questions: Where is the low hanging fruit for process
improvement?  Where can the company improve efficiency and reduce unnecessary or
redundant costs?  Are there inconsistencies in supply costs stemming from
vendors? Does the organization have adequate network drops to connect all the
required products?  What are the company’s options for improvement?  Would
changes be well received or rebuffed by the end-users?  Is the change going to
be tied to a “green” initiative?  And most importantly, what is the financial
impact of making changes in the printing environment?  Just as printing
environments are adaptable, so should the improvement strategy.  The adopted
strategy should be fluid and adaptable to many different type of business and
departmental needs.

This is when a company should take a good look at their current print vendors
and approach change with an open mind.  There is a lot of good printing
technology (in both product and software solutions) available and most of it is
sold as a commodity.  Traditional acquisition of output devices focuses too much
on price and cost per impression.  The most important aspect of choosing a
vendor is to determine who can address every aspect of a company’s printing
infrastructure: service copiers, provide consumables for printers, implement
software to streamline document workflow, and provide consulting services to
identify improvement opportunities.  Chances are, if a vendor provides solid and
structured assessment of the output environment, they also have the willingness
and ability to provide a solid catalogue of products and exceptional service. 
Partner with someone who has the willingness and ability to look beyond the box
and exhaustively look for ways to help the organization save money.


The control phase of the DMAIC methodology is very simply stated as the
practices and procedures used to control and manage the improved printing
environment.  Most professionals know that the toughest part of any project is
change management.  Users almost always view change as something that has the
potential to make their jobs more difficult.  Change often can require slightly
more effort in the short term, but in printing environments, change almost
always makes things easier and more efficient.

A very popular method for controlling print environments is to implement a
print management application.  Print management applications offer the greatest
impact to a printing environment and to a corporate culture by automatically
rerouting print jobs to the most capable device.  For example, in an optimized
environment, a user may have the privilege of printing small color jobs (less
than 10 pages) to a high cost-per-page convenience printer on their desk, but
any job larger than 10 pages gets automatically routed to the nearest
high-volume (low-cost) color device.

Most print management applications also have the ability to track print jobs
by using pop-up windows.  When a user initiates a print job, a pop-up window
will prompt the user to enter information about the job.  By requiring the user
to enter an employee ID or department code, they will be discouraged from
printing non-business documents.  They will be less likely to print pictures for
personal reasons on the new high-quality color printer.  Accountability goes a
long way. 

All in all, the steps outlined in this article should help any organization
realize significant savings, and ultimately improve the bottom line in an
economy that can use all the help it can get.

Jay Smith is Director of Managed Services-Channel Development, Toshiba. He
can be reached at 817-656-8855 or by email:


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