Yes, it's because they can. They can ransom your machine back to you, and that has become normal. It isn't just the parts industry. The local air conditioning companies are charging $650 for a house call and a $56 fan motor. The Ford dealership refused to sell me a battery unless I paid them $90 to hook a computer to my car (20 years ago) and get it to tell me what I already knew. And, of course, I mentioned dentistry at $1000 per hour for labor. Everybody wants to earn a house payment per hour and retire on two or three years of work. I should be fixing laptops where a keyboard is less than $20 and the six minutes of labor is $100.

Hey Joe, can I install some cheap RAM for you? You bring the RAM and I'll only charge $200 for labor. After all, that would be a bargain if it takes me more than 12 minutes.

 

In most cases, the markup of repair parts starts at 100% and goes up from there.

Markup can never exceed 100 percent. --- err --- margins can never exceed 100 percent.

You can look at pricing guides, and the one from 20 years ago escapes me right now. It was written specifically for electronics. It's like the "real time" guides used by auto mechanics. It gave the average repair times for various items. All you needed to know was your shop hourly rate for the labor costs and your margin for parts pricing. The repair times allowed you to give a good estimate prior to your client.

margin = (Sales-Cost)/Sales and Sales = cost /(1 - margin) --- markup = (sales - cost) / cost

So if an item costs 1 and you sold it for 1.33, the margin was (1.33-1.00)/1.33 or 24.8 percent. Markup was 33 percent.

Other hidden costs include the cost of keeping the item on the shelf, as warehouse space cost money or is worth money if you own everything and only have the normal overhead ... taxes, utilities, maintenance, etc.

Those that run a repair shop can tell you, or should be able to tell you, their inventory turnover per year. Even though some count the items they buy and resell with very little time in the inventory, that could mask the data.

Attached is a page from the Certified Service Manager's study guide a decade or so ago ... it illustrates the costs in inventory rise with respect to the service level you want to maintain.

 

Hey Joe, can I install some cheap RAM for you? You bring the RAM and I'll only charge $200 for labor. After all, that would be a bargain if it takes me more than 12 minutes.

Nope... however, I was once contracted by one of those service centers who paid me $60 to drive and install ram they supplied for a warranty repair. I didn't make much as the drive was 60 minutes round trip in the Colorado sticks.

I've also received a request to "install" signs at a store that was offering the ability to wire cash elsewhere, think Mexico as I was in the OK panhandle at the time. They paid me 180 to do the work, but all their specifications indicated I needed some help. So I offered two people 60 each to assist. Turned out when the supplies came, and I had already requested their services, we were done in 15 minutes. There were two happy Coast Guardsmen that I hired. That was a hell of an hourly rate for them.

 

The local air conditioning companies are charging $650 for a house call and a $56 fan motor.

Do you know what their shop hourly rate and their margin percentage? I'm guessing you don't. Productivity comes into play. If you hire someone at X per hour and they are not working ... you have to increase the price they are working to cover those non-productive times. In fact, as an active repair person, what you charge is covering all the administrative salaries as well as the overhead costs.

If your client perceives you to be worth that $600 service call, you can demand it. If not, don't expect to get the call. You need to know your bottom line... whatever it is and be productive enough to support it.

if your bills were 800 per week and you wanted to make 800 per week for your self, you have to charge 1600 per week or 40 per hour. If you are not billing out 40 per hour, then you must charge more for the times you are billing out. So, if you were actually engaged 4 hours per day, you must bill at 80 per hour to make your 1600 per week and satisfy your MASLOW hierarchy of needs titled safety.

However, if your prices are too high, those needing your services could go elsewhere. It's a catch-22.

 

We have a problem with a centrifuge at work. The indicator on the panel jumps to the right. I suspect that the contacts are dirty and easily confuses the MPU. The estimate to repair the panel (excuse me, replace the panel), is about $1000 for the panel (it has about 14 touch switches, a 5 digit LED display and about 14 LEDs) and about $1000 for 3 hours of travel time and 1 hour of work. If the centrifuge was less than 5 years old, it might be cost effective to replace the panel. As it is, I believe that it is closer to 20 years old.

Maybe it would be cost effective to replace the panel since the motor, bearings and sensors are still working.

 

Was contact cleaning part of the normal maintenance done on site by the local maintenance team or was preventative maintenance a function that was disregarded or contracted out and management forgot to put that in the contract?

 

Markup is simply the difference between cost and selling price. An item that costs $1 and sells for $4 has a markup of $3, and the percentage of markup is 300%. There is no mathematical limit to the markup percentage achievable.

I know nothing about running a repair shop. My comments were about the prices that manufacturers charge for replacement parts.

Why do manufacturers charge so much for replacement parts? It's simple really: because they can. If if they can, corporate greed dictates that they will.

The markup for most of those parts starts at 100% (selling price is two times cost), and goes up from there. Replacement parts are often the most profitable items that manufacturers sell.

 

My comments were about the prices that manufacturers charge for replacement parts.

I would expect the manufacturers have similar overhead expenses as far as inventory is concerned, hence the markup. They could be squeezing more than necessary out of it as well. Our opinions on the pricing is just that our opinions. I'm sure someone at the company could explain their pricing policies better than our best guesses. Don't you think shareholders deserve a ROI? If you held shares wouldn't you? We could put money in the local bank's savings account at what ... 0.1%? To attract new investments, dividends need to exceed what the investors get elsewhere. ATT paid 5.3 percent average dividend, that's slightly more than a nickel per dollar. That's the top payer according to the graph at http://indexarb.com/dividendYieldSorteddj.html Any day traders out there?

That goes for any business entity.

 

Do you know what their shop hourly rate and their margin percentage? I'm guessing you don't. Productivity comes into play. If you hire someone at X per hour and they are not working ... you have to increase the price they are working to cover those non-productive times. In fact, as an active repair person, what you charge is covering all the administrative salaries as well as the overhead costs.

If your client perceives you to be worth that $600 service call, you can demand it. If not, don't expect to get the call. You need to know your bottom line... whatever it is and be productive enough to support it.

if your bills were 800 per week and you wanted to make 800 per week for your self, you have to charge 1600 per week or 40 per hour. If you are not billing out 40 per hour, then you must charge more for the times you are billing out. So, if you were actually engaged 4 hours per day, you must bill at 80 per hour to make your 1600 per week and satisfy your MASLOW hierarchy of needs titled safety.

However, if your prices are too high, those needing your services could go elsewhere. It's a catch-22.

The company that I work for charges $136/hr between 8AM & 5PM on weekdays, $204/hr between 8PM & midnight and on weekends, and $272/hr after midnight for me to show up and troubleshoot. The customer also has to pay that rate while I'm driving to & from their location, plus $1/mile and all tolls. I only get ~20% of that hourly rate, and 50% of the mileage rate. I get 100% of the tolls. So my company skims 80% of the hourly rate basically as a finders fee. This goes to pay my supervisor's salary and my company's portion of my health insurance, but other than that, it's a pretty lean operation and I can't guess at what else that 80% covers, other than profits. The part that bugs me the most is the 50% they take for the mileage. That has nothing to do with anyone but me; I'm driving MY car and paying for MY gas, and the number of miles I drive should not be a consideration to anyone not riding in my car with me.

 

I agree. What can you do about it? Not sign the contract you signed?

 

I agree. What can you do about it? Not sign the contract you signed?

I'm not perturbed enough to start complaining about my contract. I'm happy with my job. I was just giving inside info about service charges and markup, and corporate profits.

 

The "old" rule of thumb was a minimum of 4 x the hourly wage was the shop hourly rate. That's not too effective anymore when the business owners/managers can look at more detailed information.

It's like the price of gasoline. You have federal tax, state tax, and other taxes (local), plus sales tax in some states. I laughed when the Governor of MI was going to investigate for gouging when the gas hit above $4 per gallon ... and yet there was no complaints from her concerning the wind fall profit they made on the sales tax.

I do realize that the front line service people are making all the money to support the company and I also realize their share is small, percentage wise. OK DOT met with the Chamber of Commerce membership out in the little town I was in and during the casual conversation they revealed that labor costs to them equated to 60 percent of the budget ... after everything was considered ... leaving only 40 percent to actually repair the roads. Don't get me wrong, I'm sure the managers are doing whatever they do as well as sales. Someone had to do the marketing to acquire new business.

Yes, the 80 percent you don't see covers all salaries, benefits, overhead, and return on owner/shareholder investments for everyone not actively involved with the servicing side, the boots on the ground.

You still are in a business, sort of, commonly called the family. As the cash flows in, and out, your still grabbing some for "saving for the rainy day."

As far as unreimbursed employee expenses save your mileage record and whatever they reimbursed you. You can claim unreimbursed portions on your income tax ... if you surpass the standard deduction. For 2013 tax year, the standard mileage rate is 56.5 cents per mile for business miles driven.

 

Was contact cleaning part of the normal maintenance done on site by the local maintenance team or was preventative maintenance a function that was disregarded or contracted out and management forgot to put that in the contract?

The centrifuge was bought used (about 10 years ago) and as far as I know, never seen a technician while we've had it. The only way to get to the back side of the panel is to take it apart. But what's critical about a centrifuge aside from the bearings and motor?

 

You suspect it's a dirty switch ... and normal Preventative Maintenance usually inspects, tests, and repair as necessary. Of course it might be under the "just in time" maintenance, which typically runs till it fails then all hell breaks loose as the equipment becomes essential and must be fixed at all costs.

I don't know the environmental conditions where the centrifuge is located nor do I know the controls involved. Electronics fail, sensors fail, and there should be some minimum testing to ensure everything is working as advertised. Bearing could need grease. I can remember a three phase voltage regulator was seized up ... and after I took it apart, there was zero grease in the bearings. That was something I thought the local technicians should have handled.

 

"..and after I took it apart, there was zero grease in the bearings. That was something I thought the local technicians should have handled."




Yeah, I've seen that a "few" times doing Machining/Millwright work.

Some people are just too lazy to do their PM, (Preventive Maintenance) jobs, unless you are right there either holding their hands, or jumping their asses to get it done.

 

Talk about failure ,I saw fire alarm pull down with white mold growing inside....

you know moisture will set them off. Has anyone else ever saw or heard of mold

growing inside alarm pull down.The guy said it had just been installed in the last

6 months. Looked strange to see a a gob of mold in all four corners.

 

Loosewire,

You might want to gander at this page ...

How Fast Does Mould Grow On Building Materials? Under experimental conditions moulds are found to cover artificially inoculated building materials in 4-10 days. For example, fast growing strains of Stachybotrys chartarum produce visible mould growth on new water-damaged gypsum boards in 5 days. Slow growing strains of Stachybotrys take 14 days to completely cover the test materials. These observations suggest that visible mould growth could appear within 1-3 weeks after water damage. Under natural conditions mould growth is influenced by a number of factors. - See more at: http://www.moldbacteriaconsulting.c...ld-grow-on-building.html#sthash.0HxwwMG6.dpuf

Of course, the last I knew, fire retardant systems have a maintenance schedule in accordance with the NFPA Codes.