February 26, 2008
Motor Repair and Vendor Consideration and Business Impact Part 3
President, SUCCESS by DESIGN
Member, National Writers Union (UAW Local 1981)
To date we have covered the end-user or customers’ point of view of handling motor repair vendors and recommendations. We really have not taken a look at the condition of the industry from the repair vendor’s standpoint.
A great many manufacturing and service companies are feeling the pinch related to retirement of experienced personnel as well as business decisions to reduce operating costs by eliminating older workers and replacing them with younger workers. For most of the world, this ‘crisis’ has started and will continue through 2016 (See ‘Skilled Workforce in the 21st Century’ – http://www.motordiagnostics.com/presentations.htm), for the motor repair industry, the trend had already reached a crisis in the 1990’s. One of the interesting aspects of the motor repair industry is how it tends to lead certain economic and workforce conditions such as feeling the potential impact of economic downturns as companies cut back on maintenance, including repair. Some companies have responded by maintaining their aging workforce. This means that if you go into a motor repair facility, you will tend to see that the average age of the workforce is in the late 40s through 50s with very few younger personnel.
Successful motor repair vendors invest in modern technologies, have expanded their services to include support/pdm, and provide benefits to retain their craftspeople. However, at the same time, the average hourly rate for motor repair has remained relatively steady for close to 20 years. In fact, I was able to, in a number of instances, estimate the labor costs for a few repairs for one client based upon my early-1990 pricing information! The cost for fuel, labor, materials, and technologies demanded by customers has not remained steady or decreased over this time period. Instead, those costs have increased dramatically. This has resulted in a few different directions that facilities have to choose from:
1. Go out of business;
2. Adapt by reducing experience, materials, finding other ways to add cost to a repair; or,
3. Expand services, sales, and repair. Labor rates reflect actual costs with reasonable profit.
To my knowledge, it is a rare facility that is able to charge labor rates that have any excessive profit.
In the first case, I had looked at the purchase of a repair shop in the Northeast in 2006. I reviewed the books, which seemed reasonable, especially with repair charges that remained fairly consistent since the mid-1980s. Profit remained in the area of about 10-15%, which for the type and size of shop presented a few concerns. What worried me even more, however, was that all of the staff were looking to retire within the next 2-3 years and some had already semi-retired. Manufacturing and industrial work had been slowly moving out of the area and the remaining commercial and service support work was becoming even more competitive.
The amount of work to turn around the company, train new staff, and handle the purchase of the facility and equipment was daunting and would have required more time than I had, as my original purpose was to expand and include a service aspect to SUCCESS by DESIGN while maintaining our present efforts. From a business aspect, in order to accomplish this, we would have had to increase the hourly rate by 25%, increase the materials markup, and increase our labor overhead finding qualified trainees. This would have required a concerted investment in expanding services, sales staff, and repair territory in order to maintain/improve quality.
As I watched during one of the meetings and tour of the repair facility, mechanical services companies and commercial building customers would come in and the owner or personnel would do whatever was necessary to ‘make things work.’ This included everything from using Locktite® to glue components back on, to peening mechanical fit surfaces, to other ‘on the fly’ modifications/fixes. The company had a good reputation and a fair amount of traffic.
The final option would be to continue business as usual. However, in this instance, as well as similar cases that I have observed throughout the industry, modifications, shortcuts and other cost cutting measures are leading towards the inevitable failure of a great many motor repair facilities. This is coupled with the inability to find, train, and retain a younger workforce as the disadvantages include not being able to provide a livable wage and benefits.
Some repair companies get around these issues through diversifying their offerings such as adding field service, motor management, counter sales, specialized repair, and other opportunities. For instance, Dreisilker Electric Motors, Inc. (http://www.dreisilker.com) maintains an excellent field service capability, counter sales, and an online service for ordering and shipping motors, parts, tools, and instruments. They have also placed an emphasis on specialty equipment repair such as machine tools motors, drives, and variable speed motors. Another company is Hatfield Electric (HECO, http://www.hecoinc.com) whose emphasis has been on motor management programs, delivery, services, and motor management software (TracRat™).
In our next part on motor repair, we are going to discuss the published repair studies, the ANSI/EASA AR-100 repair specification, and the new IEEE Std 1068 motor repair standard that is presently under development and includes the ability to ‘score’ your repair facility.
