State of the Remanufacturing Industry

The wind is shifting, and as every good dealer knows, you need to be able to adapt if you want to stay ahead of the fleet. The remanufacturing industry has seen early on the benefits of reusing, and they’ve developed some of the best processes out there that make a real impact on sustainability, and, more importantly, your profitability. The seas haven’t always been smooth, but due to the top remanufacturing companies with good practices and qualities, the industry has weathered the early days of skepticism about its quality and gained hard-earned legitimacy as today’s go-to source for many MPS service providers. This month at ENX, we gather together some of the top leaders in the remanufacturing industry to share their valuable insider’s point of view on current issues affecting the remanufacturing industry. We’d like to thank the following remanufacturers for taking the time to participate in this roundtable discussion. l
 
Luke Goldberg, Sr. Vice President, MSE Global
l Gary Willert, President/CEO, LMI Solutions
l Brad Roderick, Exec. Vice President, InkCycle, Inc.
l James P. Meyers, President , National Copy Cartridge
l Joe Shulman, VP of Client Solutions, ILG
 
1. What are some of the biggest misconceptions about the remanufacturing industry that you’d like to clear up?
 

Roderick: There are a couple of misperceptions about the remanufacturing industry that I would like to address. First is the perception that just because a cartridge remanufacturing company states ‘Meets or exceeds OEM specifications’ that the reman cartridge provides parity with the OEM page count. After almost twenty-five years in this business I am continually amazed by the number of units we sample from our own industry that do not make the OEM stated page count. The other perception that I feel should be addressed is the view from some industry people that a reman is always the best choice. While the majority of the time based on end user performance expectations and cost a reman unit is the best solution, there are specific cases where they are not. When the remanufacturer and the reseller work together to ensure the end user receives the best possible solution, even in the rare cases where this is OEM, our industry gains overall acceptance.

Shulman: It is important to distinguish that not all remanufactured cartridges are equal in quality. There are strong, consistent remanufacturers that practice a process and system every minute of every day and strive to maintain or improve the quality of their products. The true measure of quality is to mirror the OEM. The real quality is measured by the overall consistent success of the printer cartridges in density, yield, and functionality.
 
Willert: I think the main thing is that we are all trying to do the ‘right thing’ and not succumb to selling illegal clones in the marketplace.
 
Meyers: I think there is still a pervasive perception that remanufactured toner products are inferior and will cause damage when used. This perception has limited the market penetration of aftermarket supply. While some poor quality clones and refurbished products continue to be sold, there is and will be good quality aftermarket products that provide true value and comparable performance to OEM products. Unfortunately many times, it is a poor first experience that colors an end user’s perception of the industry. End users are well to be reminded that ultimately, the true value comes from lowest total cost, not lowest price.

Goldberg: End users and dealers who have had poor experiences in the past with the remanufacturing industry view it through a clouded prism that is skewed both by their negative experiences and by years of negative OEM propaganda. These perceptions paint the industry with broad brushstrokes showing that in its entirety it’s an industry with no technology, poor quality, and lacking resources. The reality is that this is now a mature, $10+ billion aftermarket with many companies in it that are true innovators that provide real alternatives to global consumers who seek and deserve choice with their imaging consumables.

2. What is the greatest threat to the remanufacturing industry now? What are your strategies to counteract the threat?

Goldberg: There are 3 main threats: 1. Internal competition precipitated by trading of share between new molds and remans, all creating a downward spiral of prices. MSE counteracts this by participating in a blue ocean strategy whereby we empower dealers to compete against escalating OEM prices versus plummeting aftermarket prices. 2. OEM IP strategy is placing more pressure on the aftermarket. For MSE, since we are a 100% legitimate remanufacturer who fully respects OEM IP, we view this as aligning the interests of the companies like MSE and the OEM. We believe that OEM IP pressures will actually shirt business away from new molds to remanufactured products since remanufacturing stands on much more solid IP footing due to right to repair doctrines. 3. Core availability is a big challenge as cores are the lifeblood of legitimate remanufacturers. New mold makers use this as one reason for the development of new molds, which circumvent the need to collect. The bottom line is this; in most markets 60-70% of all cores are still thrown away. It comes down to consumer education. The cores are there, we just need to incite the end user to remove them from landfills and to re-use them versus send to the OEMs for grinding. They need to understand that sending for re-use ensures their consumer choice, whereas sending to the OEM hastens the demise of the aftermarket which will ultimately lead to a lack of alternatives to high price OEM consumables.

Meyers: The continued supply of clone cartridges is a huge challenge to the remanufacturer. We believe continued focus on presenting a quality product made in the U.S. offers us a competitive advantage over imported clone product.

Roderick: The greatest threat to the industry is the same as it was 5, 10, 20 years ago…providing poor quality products. Inferior quality or puffed up marketing claims do nothing more than denigrate the perception of what our industry can offer. Our strategy is simple, build products that perform and partner with resellers who have the same values.

Willert: Technology changes and advancements are always a threat. What we have done is partner with our vendors that are the “best of the best” in the industry to keep ahead of the latest cutting edge technologies.
 
3. How do OEM cartridge collection programs and the first sale doctrine restrictions affect how you do business? Willert: This is obviously a concern, and everyone is watching this very closely. Every day we are improving and streamlining our core collection strategies and this will never stop. Our goal is to ensure we take care of our customers and future customers without any interruption.

Roderick: As OEMs have increased their effectiveness in collecting empties for destruction there has been a significant impact on the pricing and availability of certain models. In late 2011 we invested heavily in our ReCore program, which allows us to 1) Comply with first sale, 2) Acquire the necessary raw materials at a favorable cost and 3) Provide our resale partners with another tool to help them deliver new value to their end users.

Goldberg: There are still plenty of cores. Clearly OEM first sale restrictions and OEM collection impacts the base of available cores but given that the vast majority are still thrown away we have millions at our disposal. We just need to present a more compelling value proposition to users than OEMS can to sway their choice in terms of where their collected cores end up.

4. How has MPS impacted the remanufacturing business?

Goldberg: Mostly positive. It has opened up two channels of business for us that didn’t exist before: On the end user side, MPS has allowed us to penetrate the formerly OEM only bastion of enterprise sized end users who were contractually locked up. Major dealers are now penetrating these accounts using remans. On the dealer side, we now have access via managed print and managed services to new customers in the IT/VAR realm that wouldn’t have touched a toner cartridge prior to MPS. In addition, most major copier OEMs offer brand agnostic MPS solutions powered by high quality aftermarket products for devices that aren’t their own. This has fostered a great deal of OEM/Aftermarket cooperation.

Roderick: MPS has seen growth over the last few years in some channels. The biggest change to the remanufacturing industry has been the innovation the industry has brought to the table to create longer lasting, higher yield models to reduce the number of units that need replacing, increase call avoidance and drive the CPP lower. This type of innovation continues to provide a greater value to the end user and the reseller than an OEM strategy.
 
Shulman: The opportunity to save money, time, and the freedom to know that printer services are automated is extremely important. To the remanufacturer, it gave us the challenge to create new products and offer extended yields for these CPP opportunities. Aftermarket toners compete well and give the industry an edge to offer value, especially with the Jumbo yield products.
 
Meyers: If the MPS provider is independent from the OEM, it potentially is a great benefit. MPS providers have an inherent interest in high quality, low cost per image performance. That is a great match for us as a supplier to these providers.

Willert: For us it has been a great success. The programs that we have put in place over the last couple of years have just taken off. Most of our dealers are growing by leaps and bounds.

5. It’s been said there can be quality issues with remanufacturing if virgin cores are not used. As a result, most cores get used once and end up in a landfill. So while some say remanufacturing is good for the environment because it reuses, others say it is better to recycle the cores. Has there been any significant development in your R&D to address this issue?

Goldberg: This reuse versus recycle is a major tenet of OEM marketing against our industry. In some cases the OEMS are correct if we only use cores once and throw them away. The reality today differs from what OEMS propagandize; most major remanufacturers are ISO 14001 certified and go to great lengths to document continuous improvement in terms of landfill waste and recycling. In many cases parts that aren’t reused, ranging from plastic, corrugate metal, and aluminum, are recycled. In addition, there are strides being made to recycle non-virgins. We are investing heavily in this area, as are others. We will only do so if there is no fall off in quality.

Meyers: Reusing anything is a much more efficient use of resources than to recycle. At NCC, we take our charter seriously as we strive to reuse as much of our supply as possible while strictly maintaining quality.

Willert: We never compromise on quality, period. We have too many MPS providers that absolutely rely on the performance of our cartridges. We have tripled our R&D and Quality Control staff over the last couple of years and are seeing amazing results. For the cartridges that cannot be remanufactured to our specifications, we have an end of life solution that recycles the cartridges into reusable product. And this is not “waste to energy,” i.e. burning cartridges, which is widely used. We have a great solution for our dealers as well as the end user.

Roderick: This argument has been around a long time and we continue to see an ebb and flow between OEM only – multi cycle production models. The best remanufacturing companies today do not allow any of their non-usable units to end up in landfills and have not for the last few years. The effective use of both downstream waste expert service providers and reuse of certain OEM cores provides us with both the greatest environmental benefits as well as cost and performance considerations. Our company has invested heavily over the last few years in continuing to analyze the practicality of multi-cycling the cores on a model-by-model basis. As newer materials and processes continue to be developed, we are committed to being at the forefront of this, with an absolute and unwavering commitment to quality first.