MIF Management – Be in Control & Improve Profitability!
There are many ways to manage your Machines in Field (MIF), but which one will enable you to improve your profitability?
As revenue and profit expectations for click contracts are largely based on expected print volumes, the product selection for a contract should be decided by the device capabilities, emphasizing on the optimal volumes for that device. Obviously, peripheral equipment should also be taken into consideration, but most revenue is generated from the output on the main device.
Most devices will have a specified AMV (Average Monthly Volume) and additionally for colour devices, a ‘Recommended Colour Ratio’, for example AMV=10,000 prints (A4) per month @30% colour ratio (7,000 mono and 3,000 colour output per month on average).
In most cases a device that is running at or close to the manufacturer’s volume specifications will perform most economically from a cost point of view, resulting in a profitable click contract.
Lower volumes will always have a negative impact on revenue and profitability, while some devices will happily run at 150% of the recommended AMV without too much of an increase for CPP. Other devices, however, may generate a much higher CPP when over-utilized. This will vary by model and manufacturer and requires an in-depth understanding of the pre sales Cost Per Page (CPP) calculations to make the correct decisions regarding product selection for a contract renewal or a new contract.
The example chart below shows the profit expectations for a device running at:
- its recommended volume and colour ratio (A)
- a lower volume with the recommended colour ratio (B)
- a lower volume and a lower colour ratio (C).
It is evident from this chart that both volume and colour ratio have an impact on profitability. What is not reflected in this chart is the fact that when volumes and colour ratios are lower than recommended the service cost, which of course in value will be lower with less clicks to produce from a Cost Per Page point of view, will be higher. His applies more pressure on profitability and further reduces profit and gross margin (GM).
To minimize the impact on your business through lower than expected volumes and colour ratios it is important to recognize and properly manage three important aspects of MIF management:
- The contract proposal phase
- The contract running phase (Fleet management)
- The contract renewal phase (last 6-9 months of the contract)
Managing your MIF starts at contract proposal
Ensure that devices selected for a contract run as close as possible to the recommended volumes.
In practice, this will not always be possible, but if managed properly 70-80% of the MIF should be running at the expected volume levels, ensuring that the majority of your contracts will be profitable.
Linking contract volumes to sales bonuses will help to achieve this.
Managing your MIF during contract running phase
Monitoring contract performance for volumes and profitability is crucial to identify contracts that are not performing as expected and will allow you to make informed decisions about possible action to minimize the impact.
But what if the expected volumes are declining and your contracts are still in full operation?
In other words: what if a customer no longer prints that much anymore on your high or mid volume MFPs and you still have to maintain the same level of service, stock and organization (i.e. costs)?
Exactly! Your profit in hard cash decreases.
If the customer pays a certain fee in advance every month (rent MFP + fixed monthly volume) and the volume part has to be credited because of less paper printed, what do you do?
Adjust the monthly average volume in the contract to the lower volume? Credit the volume at the end of the year? Credit partly on the next invoice?
If not, the customer will search for alternatives. Either way, it will cost revenue and decrease profitability. Your operational costs will not decline in line with the volumes.
Managing your MIF at contract renewal phase
Many devices will show a relatively high cost towards the end of the contract, i.e. drums and other expensive service components that are due for replacement. Understanding the cost development during the contract, but especially towards the end of the contract, will allow you to make informed decisions for a new contract proposal. In some cases you may want to consider proposing an early device update, in other cases it may be better suggesting a contract extension of another 12 months.
MIF management in practice.
The actual MIF (before) on the left had over 87% (7,200) of the devices placed in segment 1 and 2 (low volume), while for the remaining devices the volumes were under-utilized.
In the current MIF (after) on the right low volume devices represent around 60% of the MIF (now also including small printers), while the remaining devices are operating at 80-100% of the recommended volumes.
The box in the middle highlights some of the actions that were needed to achieve these results.
Evatic’s goal is to improve profitability of our customers by giving them control, improving efficiency, and generating real time performance overviews and real time reports from our BI-Tool & KPI Dashboards.
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