An Outsourcing Debacle
Folks are fuming in Texas after The Dallas Morning News reported that copying/printing costs at the Dallas Independent School District (DISD) have more than doubled since the district contracted with Kinko's. In 2003, before the contract, the district spent $5.87 million for copying/desktop printing equipment and services; by last year it had jumped to $12.82 million.
This is no surprise to those of us in the in-plant industry. Kinko's, like every other outside print service provider, needs to make money to stay in business—lots of money. The way they all do it is by providing companies and other organizations with very high estimates of their current reproduction costs, then boasting they can beat those prices.
For example, the article says one high school was told by Kinko's it was spending $104,116 annually to run its copiers, and the company promised to save that school $45,000. The principal, though, contends costs were closer to $42,000, and she had no idea how the company came up with its high figure. The formula Kinko's uses, the article says, adds in time teachers spend making copies, time spent by repairmen, and supplies like toner, which had been free under previous contracts. (Incidentally, after contracting with Kinko's, that school saw copying/printing expenses jump to $158,000 by 2005.)
According to the article, the contract called for Kinko's (not then part of FedEx) to analyze how DISD's schools could improve productivity. Its recommendations (surprise!) called for leasing new equipment from Kinko's and letting Kinko's stores handle large jobs.
There it is: the root cause of this situation. Upper management made the mistake of letting a vendor act as a consultant and analyze its current printing capabilities. (If a fox says he's a "Hen Consultant" should you let him assess your hen house?) Sadly, this happens all the time. Just last month a different school district contacted me and revealed it was about to allow a vendor to scrutinize its in-plant and offer an "unbiased" opinion of whether or not it was operating efficiently. I quickly recommended a more neutral consultant.
What the Dallas Morning News article didn't mention was that DISD has a large in-plant, which handles the bulk of its production printing. Reportedly, Kinko's has been trying to shut down the in-plant and take over all this printing, again promising massive cost savings. Based on the article's findings, this hardly seems likely now.
Though the district can cancel the contract with just 30 days' notice, the article says, officials worry that they have no plan for providing copies. The in-plant can offer some assistance, but without on-site copiers and desktop printers, teacher's jobs would become much more difficult.
In the beginning, most at DISD just trusted Kinko's cost and savings estimates, without understanding how they were calculated. Now, however, their trust shattered, officials are cringing at the reality of the cost increases. For the 64 DISD schools under its contract, Kinko's billed $7.1 million in 2005, the article states; for the other 153 schools, copying expenses totaled about $5.7 million.
Think about that the next time a Hen Consultant offers to assess your business.
