Procurement of Toner

TONER AS A STAND-ALONE CATEGORY

Author: Marvin W. Ward, CPM, CPIM, Contracts Manager for Countrywide Home Loans 1994-2007
Contributing Editor: David Galen, VP of Strategic Sourcing & Print Production Manager, 1996-2007

Read the full white paper (PDF) to get the author's contact information: White Paper: "Toner as a Separate Category"


White Paper

TONER AS A STAND-ALONE CATEGORY

Introduction

This White Paper documents the benefits of managing toner as a separate category. It shows three common business models used to buy toner supplies. We conducted carefully controlled experimentation at Countrywide Home Loans. Our research was based upon evaluating eight manufacturing facilities. We reviewed the test results of each manufacturer by Buyers Labs and Rochester Institute of Technology. Countrywide then performed its own internal testing. We proceeded to use the business model shown as C below, (management of toner as a separate category), for nine years. We have now validated this model with the purchase of over 500,000 toner cartridges. We have summarized our findings below.

The data shows the strengths and weaknesses of the following toner supply management strategies:

  1. Toner bundled with Office Supplies.
  2. Toner bundled by the printer manufacturer using a cost per copy model.
  3. Management of toner as a separate category, unbundled, with toner/maintenance kits treated on a stand-alone basis.

Our research and extensive cost studies proved that the lowest total cost for printer cost management was achieved by unbundling the sourcing of printer hardware, maintenance, and toner/maintenance kit supplies. Here are the facts which led to this conclusion:

Vital Toner Management Factors:
  1. Our Total Cost of Ownership studies at Countrywide showed that toner constituted approximately 66% of the total cost of printing. Printer hardware, maintenance, and other costs made up the other 34%.
  2. Typical cost per page studies furnished by printer manufacturers are usually based on coverage figures with understated toner coverage, especially with increased printing of Internet pages and more graphics.
  3. Printer supplies accounted for 30% or more of the total budget for expendable supplies used, which made it the largest single portion of this expense and an ideal target for cost reduction.
  4. Printer-related calls account for as much as 75% of the total IT Help Desk calls.
  5. Freight costs have become more significant. They should be included in the net delivered toner cost.
  6. Prices should be based on no monthly, annual, or contract term minimum quantities to be ordered.
  7. Contract terms should not contain any guarantees of exclusivity. The distributor and the manufacturers will continue to look after the customers best interests because they are certain that they deliver the best value.
  8. Maximum savings occurs only if toner and maintenance kits are managed with more technical expertise and razor sharp focus than is devoted to a low unit price commodity like office supply items.
  9. Unlike basic office supply products, toner is vitally important to the day to day operations of your company. Toner supplies are a complex technical component of the printer hardware, which requires sophisticated technical support and management process.
  10. OEM Printer manufacturers make most of their profit from toner, not from hardware. Their business model and profitability is based on a constant introduction of new printer models as a defense to fend off alternative manufacturers.

Download the rest of this white paper for free: White Paper: "Toner as a Separate Category"


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