The dreamer in all of us would like to attribute the vast improvements in Konica Minolta Business Solutions’ supply chain to the magic of the Christmas season. Truth be known, the venerable manufacturer saw clear signs as early as September that indicated hardware backorders were steadily dwindling, and a lion’s share of the product inventory was returning to normal. In fact, by March, the company projects the backorder scourge will essentially be over.
This should explain any loud sighs of relief that were heard emanating from the OEM’s Ramsey, New Jersey, U.S. headquarters. All things being equal—a disclaimer that has been necessary throughout the business community since the onset of the pandemic—it signifies a potential resumption of normal activities. Call it cautious optimism, but Laura Blackmer, president of channel sales, feels much better about where the company stands today than she did prior to September.
“It was a real interesting challenge—one I don’t want to go through again, by the way,” she added.
Talk within the dealer channel regarding Konica Minolta’s improved product availability had been growing in the months prior to the Dec. 13 press and analyst briefing held by the OEM. Emboldened by a strong second quarter and signs of continuous improvement throughout the second half of the year, the momentum is adding heft to the company’s continued quest for promoting and driving digital transformation (DX).
Hitting the Accelerator
President and CEO Sam Errigo provided an overview of the company’s strategic priorities and financial performance. He laid out a five-point vision for gaining acceleration in 2022, featuring:
Growth strategy: A two-pronged transformation initiative to increase market share in its core business and grow DX revenue. This entails moving quicker into the IT side of the business, he noted, along with document management (IIM), software solutions and video services.
Increasing shareholder value: The quest to streamline operations via AI-enabled process re-engineering to improve its cost structure. One of the goals here is to convert 15% of its staff to robotic process automation, allowing people to focus on higher-value projects through evolved role creation.
Customer experience: Investments in the growing realm of ecommerce to support a modern buying journey. “This is one of the areas I’m most excited about,” Errigo noted. “When you’re [thinking] about business transformation, if you’re not talking about change or how the experience with your customer is going to change, then transformation is just not possible.” He sees this as being beneficial to not only the organization itself but its direct and dealer channel communities as well.
Corporate culture: Concentrating on diversity, equity and inclusion to attract and maintain an engaged workforce. A more inclusive culture will be critical to accelerating the company’s business transformation.
Driving innovation: Leveraging infrastructure innovation in order to capture IoT data for new products and services discovery, which will benefit Konica Minolta internally, as well as its dealer/external customers and help them understand the data and the value the OEM can provide. This, he said, can help them manage costs within their respective businesses.
Financials
The Q2 analysis underscores Konica Minolta’s improvement. From a corporate standpoint, Q2 revenues increased 31% year over year, with gross profits up 29%. Freeing up product “helped us tremendously” and the company made huge strides. He noted that backorders slipped under $100 million for both the dealer and direct segments. December has been a strong month for inventory, and Errigo sees the backorder log continuing to decrease.
“We’re pleased with our Q2 financials, but there’s a lot of work ahead of us as we conclude Q3 and head into Q4,” Errigo noted. “Certainly, it’s a much, much better performance as opposed to Q1, and a lot of that has to do with inventory. We celebrated for all of about 30 seconds, because this is just a snippet in time, and a lot has to do with product and our ability to get caught up.”
In terms of segments, production print and industrial print are almost back to FY19 levels. Digital workplace (43%) and professional print (42%) both saw strong revenue gains in Q2.
Among some of the other presenters:
Michael Mathé, chief of operations and sales enablement, provided insights into the company’s new direct organization approach, which entailed switching from a four-region structure to two regions as part of its go-to-market strategy and commitment to DX and customer segmentation. The new structure will provide improvements courtesy of dedicated sales leadership to drive DX, as well as help focus on inside sales, plus digital sales in support of ecommerce.
To help increase the effectiveness of its All Covered platform and provide clients with quicker access to technical resources, Konica Minolta shifted to an operational excellence model with a customer success structure and teams to be able to address the needs of customers large and small in a more expedient manner to ensure client satisfaction.
Releases on Tap
A product update by Dino Pagliarello, senior vice president of product management and planning, included the April 2023 release of version two software for the i-series product line of A3 color and black-and-white devices as well as A4 units. The no-cost enhancements include new security functionality, enhanced user features and cloud solution compatibility with single sign-on, among others.
On the new product front, the bizhub 850i (85 ppm) and 950i (95 ppm) are slated for a March launch and will come standard with the version two software. He also touched on last month’s release of the C3100i single-function printer (SFP) and C3120i All-in-One (AIO), which represents the company’s first SOHO devices in the SFP and AIO categories.
Pagliarello also discussed Konica Minolta’s partnership with Google. The OEM is analyzing the data in its MIF to create analytical dashboards to better understand its capabilities, with the overarching goal to create new profit and revenue opportunities through data such as scanning volumes and toner usage.
An overview of the OEM’s current and upcoming product releases in the production and industrial print catalog segued into a presentation by Kay Fernandez on its virtual showroom. Created in partnership with Touchcast to develop a “digital twin” of its Customer Engagement Center (CEC), it allows customers to see demos of products, complete with videos that help provide a more in-depth look prior to seeing a given device in-person. There are two versions of the virtual showroom, and Konica is working with Touchcast on a proof of concept for an on-demand, demo-type experience within the digital showroom.
Hardware and Toner Availability
Blackmer followed suit with a dealer update, including a look at the early results of the Rev’d Up program. The last six months have validated the success of the digital transformation efforts, as more than 100 dealers (about 40%) are actively engaged in the program on multiple fronts, whether it’s in selling unified communications, managed IT, using Konica Minolta’s procurement engine or security projects. Total revenue for digital transformation has increased 71%.
“To come off a growth year and continue this high, double-digit growth was very exciting,” Blackmer said. “Not only does it mean this is a good monthly, recurring business model, but it’s also a very profitable model for the dealers to see the monthly recurring services revenue up 25% in [six months].”
She also got deep into the weeds of product and toner availability which underscored the continuous uptick in incoming deliveries to the OEM during the October-December time frame. As the backorders continue to wane, predictability for deliveries will gain more clarity for the OEM and get it closer to where it (and dealers/resellers) want it to be.
Dealer loyalty was critical to the entire experience, Blackmer notes, as Konica Minolta took the bold approach of prioritizing order fulfillment. “Dealers kept selling, so net-new orders for the year were very strong,” she said. “With the albatross of back orders, we were striking this balance between trying to help a dealer keep a deal that had become critical versus filling backorders. It was a managing challenge every single day. … There were times a deal needed to be shipped, even if it was a recent win.”
Toner availability has also witnessed meaningful improvement. Blackmer notes only about 10 SKUs out of hundreds that are being manually allocated in December; only one was designated restricted allocation/emergency only. By March, she projects full, normal shipments to dealers.
