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Commentary & Analysis

The Secondary Advantage

By Bill Dale,

By WhatTheyThink Staff
Published: June 1, 2005

By Bill Dale, Allied Mailing Solutions of Michigan With the right questions asked, and the right vendor partner, savings of 50 percent over the cost of new are highly likely. June 1, 2005 -- As the printing and mailing industry continues to consolidate, quality secondary (used) systems have become more available. More and more pre- and post-processing equipment can be acquired at significant savings enabling businesses to expand faster, meet company’s growth targets, acquire larger contracts, or move into different market segments, all the while fulfilling the operation’s production requirements. How does “used” equipment fit into one’s business plan and what are the considerations? Let’s take a look first at some of the history of this market. Secondary equipment has been prevalent in many aspects of the printing and mailing industry for years. All types of offset presses, and various pre- and post-press equipment like folders, collators, and bindery systems have been bought and sold for years. Basic labeling and inserting equipment such as the old Cheshire labelers and Phillipsburg inserters that for years formed the backbone of production for direct mail operations were bought used, reconditioned and sold to lettershops world-wide. It's What You Don't Know That Will Get You The advancement of the whole printing and mailing industry into sophisticated laser and color printing on-demand and the movement of many addressing and inserting requirements to more “intelligent” transactional applications has created a new level of consideration in this “used market”. Just as my first boss out of college told me, “it's what you don’t know in your business that will get you," it's what you don’t know about secondary market equipment that will either get you in trouble or get you a lot of monetary savings. A quick story comes to mind. During the 1980’s demise of the savings and loan industry, many new fortune-seekers began attending the auctions being held at defunct S & L operations all over the country. I attended many of these. At one, the auctioneer proclaimed the extraordinary cost of a new complicated bank inserting system, its pristine condition, and how it could be purchased at a fraction of its new cost. A new fortune-seeker listened intently and then bought the piece for $30,000 which originally sold for over $275,000 new. He later proudly claimed his victory to me and offered me the piece for only a 10% premium over what he paid for it. When I announced to him that due to the manufacturer’s discontinuance of the software of the system that I wouldn’t buy the system at any price or even take it for free, he stared in disbelief and went so far as to deny that what I said was true. But I was right. Like I said, its what you don’t know that gets you. How to Avoid Trouble Here are some of the major considerations that can keep you out of trouble. Ask these questions of the seller, about how the equipment will be used, and of yourself before committing to any used equipment. Does the “used” equipment not only meet the necessary mechanical configuration requirements, but does it have the necessary software to support the application requirements? What about production speeds of the used equipment as compared to new high-speed systems? Can it keep up? Is it eligible for possible manufacturer’s maintenance agreements and the availability of parts? How will it work with my existing legacy equipment? Who has refurbished this equipment and what are their levels of experience? Have all the pre- and post-processing and IT considerations been discussed and thought through? Who will install and train my personnel if it can’t be done by in-house staff? With the right questions asked, and the right vendor partner, savings of 50 percent over the cost of new are highly likely. These savings can catapult a firm’s growth that may otherwise be inhibited by the high cost of new equipment and more than offset many of the labor savings dollars that will supposedly be generated via the "speeds and feeds" of the latest and greatest machinery. Remember, it was the tortoise that won the race, not the hare. So like the tortoise, be methodical and slow in your new versus secondary equipment evaluations. You may find that you will win the race with a lot of extra dollars in your pocket!



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