“I am an OEM of Graph-Tech and I don’t see why I have to share any proceeds of my ink sales with Graph-Tech”
We at Graph-Tech (GT) think that we contribute a great deal to the final product offering, a reliable inkjet and controller that can be mounted on any machine, run any application.
We want to explain our standpoint with different models.
M0: Traditional Industrial Inkjet Supplier (TIIS) Model
We first want to remind our OEMs that this is all the result of a paradigm change in the supply of industrial inkjets.
TIIS like Videojet (BX, PrintPro, Excel), Imaje (Mailjet), Kodak (1”, 2”, 4” heads) will sell an inkjet to an OEM at a discount and do the aftermarket themselves. That means, the TIIS will install and train the inkjet, service and repair the inkjet, maintain spare parts, and sell the fluids. TIIS have service organizations in most big markets. In smaller markets, an OEM gets a part of the fluids sales if it could do all the functions above. The reason is that those inkjets are more difficult to install and service.
Inversely, GT thought that it could make an inkjet that is easier to install, operate, and service. That by sharing fluids revenues with the OEM, this one would be compelled to take ownership of the inkjet because it would generate profits for him, ultimately benefiting the end customer as well.
Do you think it is better for you to go back to a TIIS model?
Because, let’s face it, this is what is going to happen if you want all fluid revenues for yourself and not share it with GT. May be your customer would even want to buy the ink from GT. What do we do in this case if you decided to go it alone previously?
M1: Market Model
Before a product becomes a viable solution for a manufacturing process, many things have to happen:
- Market Analysis and Risk: a company has to “see” the market. GT continues to analyze this market and develop products to satisfy market needs. A company has to “risk” resources and capital. Invest in a product, not knowing whether the market is there or whether the product will work. GT continues risking time and money in this market.
- Market Investment: a company has to finance not only the initial product development but keep improving the product and developing the next generation. This holds true for the GT-Jets but also the inks tested and released. GT continues investing in new products and processes.
- Market Development: once a prototype is finished, GT engages in marketing the product in many fashions. One, by frequenting the biggest trade shows directly or through costless support of OEMs. Two, finding new applications suited for the same product. Three, integrating all kind of equipment needed for a process like readers, dryers, etc. Four, finding suppliers for specific tasks, which includes paying licenses to certain suppliers. An OEM system delivered by GT is the final result of such a market development process.
- Market Sales: our OEMs and resellers perform this function. In some cases, especially with new OEMs, we visit customers with the OEM to convene new developments or to support the sales process.
- Market Support: our OEMs and resellers perform this function. In some cases, upon OEM request, we visit customers when the OEM cannot find a specific problem or help when a new development needs on-site testing.
- Market Support 3rd level: once a product is finished, GT has resources put in place to do not only 3rd level support but to repair inkjets and controllers in Europe and USA.
What of the above did you contribute with?
No, we will not hand out our proprietary software, hardware or IP. For the same reason that you won’t give us all proprietary information like drawings and customer information. No company does that, it is not how it works.
M2: Supply Chain Model
In order to provide a product or a service, in this case an inkjet and controller, we may go back to the supply chain model of M. Porter, the Harvard business professor. Our model may look like something like:
Supplier: GT worked to find all part suppliers needed to build/run the product or service. The print module suppliers demand also a share of ink revenue and do not replace print modules if we use the wrong ink or ink batch.
Design/Development/Engineering: we design and engineer the inkjet and controller 100%. Technology companies have to invest between 10-20% of sales for this activity. GT has spent millions in development and will continue to do so, one source of funds for this activity is inks.
Manufacturing: we build 100% the inkjet. Technology companies have to invest 10-40% of sales for this activity.
Sales & Marketing: we deliver our OEMs all sales and Marketing material, we pay for shows or support during shows, visit customers. But the OEM makes the bulk of the work.
Support: we do 3rd level support, sometimes even 1st level because customers call us, we refurbish inkjets, we go to sites as last resort. This needs costly people and infrastructure.
In short, GT does a lot to earn a participation in ink sales and its business model is based on ink revenue.
M3: Contract Agreement
We have had two instances where OEMs paid and helped/followed closely the development of the inkjet and we made a special contract regarding fluids. The OEM shared the development risk resulting in another fluids contract.
If the arguments exposed above do not seem fair to you, let us revisit our contracts, which state clearly, that GT wants participation in ink revenues.
In general, we divide evenly the proceeds with the OEM (50% of list price – purchase price) or we ask for 20% of selling price, which mostly turns out to be the same.