ManagingThe Imaging Channel's Crisis

by ray stasieczko March 21, 2020

In this article, I will share what I envision coming, and some things dealers can immediately do to soften the impact of that vision. As the Industry's Customers investigate and explore their current circumstances so, must the dealers who sell and service them. Any mis-alignment will prove way too costly now and in the future. 

Over the last couple of weeks, the industry has been dished a new reality. The work from home business model is now mainstream, and many, including me, believe there's no putting the Genie back in the bottle. This phenomenon and the looming financial crisis will bring awareness to the industry's end-users like never before.

My friends this is not a 2008-09 scenario. That crisis however bad; was based on businesses in a vertical. This crisis is a global shut down causing an evaporation of revenue from both hardware sales and the annuities from service and supplies the industry's cash -flow has stopped.

The longer it last the worst it gets obviously. Unfortunately, many organizations in the industry are not in great cash positions as they invested in growth through acquisition. Also many were already being squeezed as print volumes and hardware placements were declining as well.

The digitalization of the channel's end-users will ramp up, and this experiment in sending workers home to work remote will highlight many outdated paper-based business processes.

Those in the industry who start now will gain traction as things return somewhat normal. 

However, I do caution that all in the industry to be open-minded to what a new normal will be. Because for the Document Imaging Industry as many other industries, there will be a new normal.

Let's, not sugar coat our new realities; let's instead deal with them.

The impacts of the Virus on an already declining business model should cause concern. These new realities will be devastating to many of the channel's core go to market strategies. The channel's leaders are being introduced today to the channel's customers as they would have been presented in 2025. The channel's end-users are in-fact quickly finding themselves in the channel's future. Unfortunately, many of the channel's actors are not prepared.  

I have been bullish on the migration of A4 equipment replacing A3, and that movement got an at least a five-year jump start. The challenges facing the manufactures and the dealers who represent them will not be easily overcome. However, these challenges must be immediately addressed. It's time we stop worrying about saving old processes and create new ones that align the industry closer to their customers.

All businesses are built to provide a product, service, or sometimes both as in the case of the Document Imaging Industry. The good news is that the business of delivering products and services regarding helping businesses with workflows is not going away. What is going away is how the industry's end-users acquire and how they use the core product the industry sells and services.

Print equipment, its services, and its Leaders will be forced to align with the market's new realities. 

Right up to the Virus outbreak, the customers were mostly led by the channel's actors. The channel's product manufacturers and its dealers completely controlled the message to the end-users, and for the most part, the message was identical from all the channel's current actors.

Now many of the end-users are in a situation where they will quickly learn the realities of being oversold through outdated leasing platforms. The financial crisis the channel's end-users will find themselves in caused by this Virus. Will create a reality check for all their spending. End-users will question what they have and why they need what they have.

Many end-users will also find themselves financially challenged and will exit current contracts. Many of these end-user lease contracts have maintenance included in the lease payments. Without the leasing companies receiving payment, the dealer will not receive their service pass-through revenue. As end-users re-evaluate lease contracts, equipment needs, and volumes actually produced. End-users will begin asking many new questions.

Unfortunately, again the Leasing component in our industry will receive a mighty blow. This blow will push back to the dealers who will not receive pass-through service revenue as end-users neglect payments. Leasing companies will also tighten credit lines. Let's prepare and quickly implement aggressive cost controls and cuts.

Here are my immediate suggestions regarding Service cost controls for dealers during the Virus. 

1) Dealers should immediately turn off all auto ordering for both parts and supplies based on run rates. Run-Rates will drastically change as volumes evaporate.  

2) Dealers must prepare to align technical staffs immediately to what the data says is needed pre Virus and prepare for a re-adjustment soon. The gov't response will help dealers determine the needed exit strategies. Dealerships and manufacturers will have to adjust human capital through all departments.

3) Do not perform any unneeded calls. Preventive maintenance is not necessary during the shut-down, and frankly, the reductions in volume won't support the cost of service activity or parts used prematurely.

4) STOP ORDERING EVERYTHING!! Now order only based on REALITIES AND DATA Eliminate much of your inventories. Your dealership should get down to only four weeks of usage. Many dealers are only turning their part and supply inventories 3 to 4 times a year in reality inventories should be turned 9-10 times a year minimum. Use this time to eliminate all over stock-based on outdated mindsets or uncontrolled disciplines in inventory management. Study your needs based on the equipment population and stop ordering parts based on the "think we need it program."

5) Dealer owners must make sure the parts and supply managers understand inventory control in a crisis. It's not business as usual, and the skills to manage this critical part of your business must match the current circumstances, not yesterday's. it will take a hands approach from owners and senior leaders.

6) There's never been a better time to get control of inventories. NEXERA can help guide service inventories. Also, NEXERA has a system to help dealers move excess parts to other NEXERA dealers. I can't stress enough for dealers to engage with NEXERA at this time. There simply isn't anyone in the world with the accuracy of their data. Who can help dealers control all cost associated with the service deliverable.

Dealers don't worry about maintaining what you were doing pre Virus; everything has changed. The time is now to manage through a micro-scope. Data Data Data must be the first three steps in everything you do.

Working together as an industry and looking to your peers for help is essential. However, the most crucial thing our industry can do to ensure it prospers in the future is to be open and honest about the realities we face and communicate along with taking the actions needed based on those realities. 

There will be a conclusion to this, and many things will be different. My passion says, let's create that difference and not fall victim to it?

"Status Quo Is The Killer Of All That Will Be Invented"  

Ray Stasieczko  CEO/Founder TEASRA, The Innovation Channel and Host of The End Of The Day With Ray!

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