Are There Downsides to the Right of First Refusal?
Written by Howard Fenton
Senior Technology Consultant, NAPL
There was an interesting question posted on one of the LinkedIn Forums recently. The question asked about the pros and cons for University in-plant printers who get the right of first refusal for the printing. Typically the right of first refusal for an inplant printer means that all the work goes to the inplant and they decide which work they will do, based on how busy they are and how their charges compare and decide if they’re going to do the work themselves or outsource the work.
I’ve sat down several times and written a response to this question and each time written a different answer. Why? While the question doesn’t seem complicated at first, if you have experience in the subject, you know that it can be complicated. At first blush, there is almost no downside to the right of first refusal because it increases the volume of work. And let’s be honest– more work can overshadow a host of financial issues.
But there are a few potential downsides. Although rare, sometimes a mandate to send all work can overwhelm the department. If that’s true you would have to take some quick action to try to avoid late deliveries or even the hint that you can’t keep up with demand. You need to immediately create an overflow strategy such as outsourcing until you can keep up. At the same time, you need to start researching new hardware / software, additional staff, or splitting shifts.
A second potential problem is the is resentment it can cause. It’s not always recognized but a mandate to send any kind to any specific supplier can create resentment. This is especially true when customers have long-standing relationships with outside vendors. These feelings of resentment can result in complaints about “losing the ability to competitively bid.”
Of course those specific words can be dangerous, because even a hint of uncompetitive pricing is a red flag for administration. That is why the leading inplants create a strategy to battle those claims.
This means creating a system to monitor competitive pricing. Different inplants used different strategies. Those that can afford it may invest in commercial bidding software such as P3 Software, while others who can’t afford it build their own.
At one of the University inplant peer groups I heard Abbas Badani from Penn State describe how he created his own bidding system. Abbas described how to program the system and years later I saw a version of that system at the University of North Carolina Chapel Hill.
The point however is that there are tremendous advantages associated with the right of first refusal, but there are some potential issues to watch for. First and foremost, you have to make sure that you can fulfill the demand. Second, you need to watch for possible resentment and build a strategy to overcome possible complaints about competitive pricing.
Can you think of anything else? Have you seen other pros and cons for inplants that get the right of first refusal?
Looking for similar topics? Check out these other Digital Printing Hotspot Blog posts:
- 5 Keys to On-Call Staffing Strategy
- Three Things In-plant Printers Must Do To Survive
- How the InterContinental Hotels Group Was Able to Cut through the Clutter
- The State of In-plant Printing
Howie Fenton is a consultant and business advisor at NAPL as well as a paid contributor to this blog. Howie advises commercial printers and in-plants on benchmarking performance against industry leaders, increasing productivity, and adding digital and value services through customer research. For more information click here.