State of the Laser Parts Industry

Sinibaldi: It has evolved into a model that requires multiple distribution points and a diverse offering from multiple manufacturers. In addition the market has many experienced individuals that are demanding a higher level of service at a time when most products are commoditized. It is now a one call one solution that our customers have come to expect.McLeish: In the first 10 to 15 years of the parts industry we saw a consistent market with steady growth. However, the last five to ten years has been anything but that. It is our opinion that the three major changes that have occurred are the type of transactions, customer make up and the economy.

The economic environment went through one of the most dramatic changes in 100 years in the 2008 timeframe and the parts industry was affected as dramatically as or even more dramatically than other industries. Parts consumption is tied very closely to the employment rates. When the economy took a major downturn and unemployment skyrocketed, a unique thing occurred within the printer parts industry. As employees were let go, their printers were put in a corner, and as printers broke down they did not fix these printers, they just grabbed the unused printer for use. This caused a major downturn in the parts demand in 2008-2010. As employment gets better we have seen a slight increase in demand, but it certainly is not at pre-recession levels.

Prior to the recession we saw the beginning of the MPS marketplace. This has had two major effects on the parts business. The first is the way in which service organizations view parts in their business. For the better part of 20 years the majority of printers were fixed on a time and material transaction. This made parts a profit center for the service companies as they usually marked the parts up anywhere from 15 to 30%. The MPS engagement has completely changed that model. Parts are now a cost center for the dealers in a cost per page model or other managed service type models. The emphasis on high quality high yield parts is more important than ever.

Tied to the onset and adoption of MPS and largely related to remote monitoring software is the change in the type of organizations that consume printer parts. In the past the traditional consumers of printer parts were “printer centric” type organizations. Many of them started out as remanufacturers of toner. These customers still exist and the ones that made it through the recession are typically very strong and have implemented MPS. However, the fastest growing customer segment today is the copier dealers who are becoming or have become hybrid dealers. They have the resources to invest and create MPS that works in conjunction with their core business, which allows them to manage all types of hard copy imaging devices.

Diltz: The parts industry has expanded a great deal. You see new as well as established manufacturers with many new printers in their offering. With the lower cost printers for personal office we see a market segment that is “throw away” and impacts our market negatively. When this segment wants to service their printer they find the cost too high or the needed part not supported by the manufacturer. However, the high end, faster printers are still a large factor, printing at faster speed and having more features.2. What is the greatest challenge facing the parts industry today?

DeMuth: Vendors that supply poor quality parts and toner cartridges represent our industry poorly.

Diltz: Like all other areas of our economy, businesses don’t want to spend any more than they have to spend. In many businesses and particularly in the public sector there may be a budget for new printers but not much of a budget for repairing existing printers. Of course, we would like to see the older printers serviced. In some cases that is not possible because of the availability of repair parts but we still see a lot of HP 4 and 4000 series out there working great with the parts that are available.

McLeish: The parts industry is much like the toner and hardware industries in the fact that printed pages are going down. The better news for the printer parts industry is that pages are moving from the larger A3 devices to the smaller printer based A4 devices. With that said there is no doubt that the onset of tablets, smartphones, etc. will continue to cause a downturn in pages.
Sinibaldi: The greatest challenge facing the market is ‘Grey Market Parts” that are flooding the market from overseas, many of which are sub-standard quality.

3. How has MPS affected your business? What are your clients’ attitudes toward MPS?

Diltz: MPS has definitely affected the parts business. I believe that many of the independent technicians are being hurt by the concept because they can’t compete with the larger dealerships or manufacturers that are offering MPS. MPS is not a new concept, but it has resurfaced after many years (remember “cost per page” copier programs of the 1970’s) and now we have manufacturers directly involved instead of just the dealers.

MPS has also changed the attitude of the service market. Once a printer goes under MPS it becomes a profit center and the less you spend to maintain that printer the more profit it generates (over the short run). This “chewing gum and bail wire” approach may shorten the useful life of the printer or make for costly major service or replacement in the long run.

It is fairly easy to sell MPS. It used to be said that no purchasing manager ever lost their job by buying IBM. I think the same can be said today about MPS – it is a dream for the corporate purchasers who don’t have to commit capital to upgrade their copy rooms.

Sinibaldi: We have seen success in the MPS world again requiring the ‘one call one solution ” approach to provide added value for our customers. While we are seeing dealers add MPS to their offering, they are offering many versions of MPS and not all are seeing the growth expected. We are seeing a conversion to Managed Services which brings IT into the mix.

McLeish: I touched on this in the first question, but in regards to Parts Now specifically, MPS has been very good for us. We established a strong hosted MPS program early to help our clients enter the MPS market and we have continued to build on the program.

Additionally, Parts Now has always worked to produce the highest quality remanufactured parts, which are critical in an MPS engagement. Multiple service calls can turn a good MPS deal upside down quickly so buying parts from a company like Parts Now with 20 plus years of experience and the only ISO certified remanufacture is a good investment for the dealers.DeMuth: We see a mixed client adoption, but we are positive for growth in the reman industry. MPS has removed the end user from the decision making process and put it into the hands of a competent service manager, thus allowing the optimization of devices and support efficiencies. The data it provides helps companies make better choices, which ultimately leads them to quality printers and quality remanufactured parts. Most importantly MPS has eliminated the end user’s RFQ and their favorite overused term “OEM only”.

4. Do you find that you are selling more OEM parts or more Remanufactured parts these days? Do you see any trend emerging among different OEM products?

McLeish: We do not disclose the makeup of our parts business between OEM and Remanufactured, but needless to say, it is a very fine balance for us and all of the authorized parts resellers. MPS has put a counterbalance of stress on the parts decision between maximum quality, which is an OEM product, vs. minimum price, which is a remanufactured product. This makes the decision for the dealers a delicate one, day in and day out.

Our core business is HP and Lexmark parts and given the installed base of these machines will be for a long time. But with the onset of MPS many of our customers are servicing very diverse fleets that require a lot of different OEM parts. We have an individual who is dedicated to the sourcing of our non-core product parts so that we can continue to keep fulfilling our customers’ needs.

DeMuth: Across the board, OEM price increases and supply disruptions, coupled with dramatic improvements in reman quality have funneled new customers to the reman market.

Sinibaldi: Our business is balanced so we see a nice split in both categories. OEM price increases can drive higher demand for Remanufactured products. The trend is really in printer segments. We are seeing an increase in the color segment.

Diltz: We sell more OEM parts because that is the nature of our business. Many repair facilities require part support before remanufactured parts become available. The main remanufactured parts we sell are fusers, which we rebuild in our Los Angeles and Seattle warehouses. We also sell fuser rebuild parts to our customers who want to rebuild their own fusers. If by remanufactured you mean aftermarket – we do sell aftermarket parts primarily when the OEM is no longer available. The aftermarket parts usually become available well into the printer life cycle and if you deal with a quality supplier they do offer a sometimes lower price alternative which is desired for the MPS market.

5. With flat or possibly declining printed page volumes, where do you see key areas for growth in the coming years?

Diltz: That is a great question — I consult my crystal ball as often as I can. Hopefully someone else in this discussion group will offer a great idea. Since our typewriter days, I’ve had to turn the rudder several times and will probably have to do it again.

McLeish: For the industry I still see color as a real opportunity for growth along with mobile printing. We all have come to live our lives in vivid color with tablets and smartphones and an effective way to do that with print will be welcomed if it is affordable. I also truly believe that those same smartphones and tablets can provide additional print opportunities. I’ve been at numerous conferences in the last several years where I have wanted to print, but it is just too inconvenient to do so. If there were easier more convenient ways to wirelessly use printers in common areas I think we could see an uptick in print. Widespread color printers with Wi-Fi capabilities in places like coffee shops, hotel conference centers, restaurants, etc. will create additional print.

Key areas for growth for Parts Now will be the adding and enhancing of services. We are not a product company like an Apple or HP. We need to get better and grow through services.

A few key areas will be a  greatly enhanced customer experience through online ordering, additional distribution centers in more convenient locations, and we will continue to increase our product offerings to help fulfill all of the hard copy imaging needs of our customers.

DeMuth: I see MFP and workgroup as growth areas.

Sinibaldi: We see key growth with our value added services that we offer in our portfolio. In addition, we see growth in the managed services space.

6. What’s your opinion on the emergence of business inkjet technology?

McLeish: We believe it will have a place in the business environment so much so that we have become Memjet’s North American distribution partner. The high speed and relatively low cost color ink products Memjet and HP are offering will give businesses an opportunity to use color in an affordable way on lower volume devices. In the past, higher end ink machines and smaller color lasers were just too expensive to operate to be a viable MPS option. These new business ink devices really open up that market.

Sinibaldi: The technology will certainly put pressure on the laser side of the channel. While there has been some early adoption, I do not believe we will see a shift from the work group mono and color printers to this technology in the near term.

DeMuth: We have been watching this technology and its iterations for 10 years and attempts of market entry. With simple calculations you can quickly deduce there are efficient options. Costs aside there is chasm of bad customer experiences over the last decade with the term “inkjet.”

Diltz: It depends on whether the manufacturer wants support for their printers from independents. We have successfully supported the Canon and HP plotter (wide format) parts for some time. Repair parts for the 8 ½” x 11” business ink jet printers have been almost non-existent.

7. Many parts companies market themselves as a solutions provider. What is one of the ways you provide added value to your customers?

Sinibaldi: We offer ‘one call one solution’ and we work with our customers in a consultative approach to understand their business and to apply the solutions we have to increase their profit opportunities and provide growth.

DeMuth: Metrofuser’s value added advantages revolves around propitiatory technology that we implement to products we remanufacture and develop. We force part evolution, meaning we strive to improve upon the last generation of technology, by making parts faster, stronger, and more durable, such as our 4200 fusers that don’t suffer from film tearing.

McLeish: I agree many of them do market themselves as solutions providers but few of them actually deliver on that. Parts Now has been the leader in value added solutions for our customers for 24 years. We offer solutions for all aspects of a dealer’s organization. For the service departments, Parts Now offers world class technician training for HP and Lexmark machines. To date we have trained over 9000 technicians through onsite, online, and custom in house training programs. For the times when the technician has questions we provide excellent technical support to our customers in both English and Spanish. Our technical support team takes more than 5,000 calls per month.

Our MPS program helps both the sales and service departments work to achieve the highest profit per page possible. We offer two hosted remote monitoring options and a suite of products such as assessment, QBR, and hardware optimization tools. Lastly, we have taken traditional parts distribution to a new level with multilevel customer support, the most OEM printer authorizations in the industry, and eight distribution centers in North America. As our customers’ needs grow in this ultra-competitive space we will expand our services to match those needs.

Diltz: We have always considered ourselves to be a “one stop” solution. We have the parts and the tools, supplies, accessories, chemicals, vacuum, etc. available and also source most everything our customers ask of us. The maturing MPS market continues to be a challenge to us and a value added service to our customers. We find parts and accessories for all the different printers they are putting under MPS.