Big $ for OEM replacement parts

[william watts]

A post on the general woodworking section here mentioned a $250 blade guard and a $1200 motor price for replacement parts on a contractor saw. Delta was the company named, but they are not the only company that has ridiculous prices on parts. Wood working is not the only industry that does this. For years I have wondered why? Just cannot figure it out.

I have a theory; they have very few parts and need a supply for warranty replacement. These goofy prices would conserve what parts they do have. Could it be some kind of accounting requirement? Inquiring minds need to know, does anybody here have an answer?

[Bill Neely]

I'm not going to comment on the prices but to carry and inventory of anything costs money. Carrying an inventory with low turnover cost even more. The slower the turnover the more the markup.

[Walter Plummer]

Couple of years ago I purchased a new Ryobi string trimmer with battery and charger for around $88.00. Looked into an extra battery and was quoted $140.00 for the battery alone??. My fractional calculator died. New battery for that right at $2.00 less than a new calculator. I think this is how chop shops were invented. Part are worth more than what ever they came from.

[Valk Wilkinson]

I'm actually the one who made that post and I'm glad you made yours William. The saw costs $599. A replacement motor costs $1200. I've seen this in the automotive industry when a company does not want a person to use the part to build his own whatever. Or install on another makes vehicle cause the part they make is so much better than everyone elses. I get that. But I keep seeing this over and over. My Hitachi router cost me like $150 with both bases and the motor etc. To just buy the plunge base its $165. So basically noone will ever buy that part as long as that original product is still available. And yeah I get that it costs money to keep inventory but I can't figure out why a company would render their own product "irreparable". Can you imagine the alternator going "gear up" on your $30,000 car and your only options being to buy a new car or to cut a hole in the floor and go all Flintstone's on it?

The only idea I have come up with is this: Maybe there is some law for, well who knows... Lets say in order to be "UL" listed you must agree to have spare parts available for your product for at least 3 years after its manufactured. An easy way around this would be to charge so much for the damn thing that no one would ever be stupid enough to actually purchase it. I wonder if I emailed a Delta exec if I could get an answer...

[william watts]

I have heard the same thing, that parts must remain available for 3 yrs, or 5yrs, or some other number. Heard this from a fellow employ, or friend, or customer, never from an authoritative source. I have never heard of such a regulation ever being enforced. I'm not sure the regulation even exists. There is cost of keeping a parts inventory, there should also potential for a fair profit. What is the cost to a companies reputation when they cannot supply parts or cheat on the price?

[Clarence Martin]

Maybe I am looking at it wrong, but I don't understand how keeping a product costs a business money. Once it's been bought , it sits on the shelf until it is sold. Costs the store nothing. They have already paid for it. They get their money and profit back when it sells.

I have a 5 gallon bucket filled to the top with Copper Plumbing fittings. How does that cost me money by sitting in the bucket until they are used or sold ? They don't cost me a penny.

[Bert Kemp]

Business's are required to take inventory once or twice a year for tax reasons, it cost a lot of money to do inventory, people and man hours, sure it doesn't cost you anything to keep s bucket of what ever , but it does cost big business lots of money to keep an inventory.Not to mention the floor space it takes and the extra tax dollars and maintenance cost to keep that floor space.



Maybe I am looking at it wrong, but I don't understand how keeping a product costs a business money. Once it's been bought , it sits on the shelf until it is sold. Costs the store nothing. They have already paid for it. They get their money and profit back when it sells.

I have a 5 gallon bucket filled to the top with Copper Plumbing fittings. How does that cost me money by sitting in the bucket until they are used or sold ? They don't cost me a penny.

[Clarence Martin]

And yet I can still find products in my local Hardware store that have been sitting on the shelves for 7+ years with the original sticker on them.

Now, to make things even better, I recently went into the same store , and found an old Black & Decker Lids off jar opener. Forgot the original price, It's still in the box. They had 2 or 3 still left in stock after all these years. Well, they don't make it anymore, so , I figured why not buy it. Have the extra one for when the old one breaks. They sold it to me for 50 % off the sticker price.

Same thing happened when I bought some brass drawer pulls. Original price was $1.75. Bought all they had for the chest of drawers I was building. They didn't have enough , so had to re order new stock. The new stock cost $5.99 each. They sold it to me for the old $1.75 price.

[Erik Loza]

....I have a theory; they have very few parts and need a supply for warranty replacement. These goofy prices would conserve what parts they do have. Could it be some kind of accounting requirement? Inquiring minds need to know, does anybody here have an answer?

I don't think your theory is it; companies only make money when they are turning inventory over, so generally, regardless of which division it happens to be, they don't want to sit on stock, they want to to move it.

That being said, you are not alone. How the Italians come up with their "algorithm" for determining retail parts cost is beyond me.

Erik

[Matt Meiser]

Maybe I am looking at it wrong, but I don't understand how keeping a product costs a business money. Once it's been bought , it sits on the shelf until it is sold. Costs the store nothing. They have already paid for it. They get their money and profit back when it sells.

Put $20 under your mattress in 2000. Take it out now. How many lunches can you buy today vs. then? Not a perfect explanation because they can of course raise the price of the part. But they have also been paying for the warehousing space, utilities, tax on the inventory, etc, etc. Also they are taking the risk no one will ever be so boneheaded as to bend some obscure part deep inside a machine. But if someone does and can't get the part you can bet they'll be on here screaming about how MachineCo doesn't support their stuff.

[Malcolm McLeod]

Business's are required to take inventory once or twice a year for tax reasons, it cost a lot of money to do inventory, people and man hours, sure it doesn't cost you anything to keep s bucket of what ever , but it does cost big business lots of money to keep an inventory.Not to mention the floor space it takes and the extra tax dollars and maintenance cost to keep that floor space.

Unfortunately, even that non-inventoried bucket of copper stuck in the unused corner of a 'free' shop space costs money. It might only be $5 in copper, but there is the cost of capital. It could be in the form of interest paid on the loan to purchase that bucket of copper, or interest 'lost' because the money is not deposited in the bank. What if its $5 million in copper?

There is also the lost opportunity cost. What else could your business do with that money? Invent a newer, better, faster, cheaper, lighter, faster, stronger, simpler, more-feature-rich copper fitting? (...bucket?) Or design a copper fitting printer? Or, could you hire a salesman-helper-supervisor-analyst-installer, and so grow your business?

I won't defend the OEM pricing model, but its all based on supply and demand. As consumers, we all have a simple decision to make. If we don't like the price, don't buy it (either the original or replacement parts). If the part is already built and there is no demand, the price will come down.

[Brian Elfert]

I used to work at a place that also did computer repairs. They used HP to supply parts for all makes. It was claimed that it cost over $150 in handling and logistics costs for every part that was shipped! And this was in 1990s dollars. I don't why anyone would use HP for computer parts if they charged that much in fees for every transaction.

[Rod Sheridan]

Maybe I am looking at it wrong, but I don't understand how keeping a product costs a business money. Once it's been bought , it sits on the shelf until it is sold. Costs the store nothing. They have already paid for it. They get their money and profit back when it sells.

I have a 5 gallon bucket filled to the top with Copper Plumbing fittings. How does that cost me money by sitting in the bucket until they are used or sold ? They don't cost me a penny.

You're not paying to store the part, a business is.

Cost of the building, heat/light/staff/taxes etc cost the business money to store the part.

We constantly review our spares storage at work and get rid of anything we don't need as it costs us money to store it..........Regards, Rod.

[Brian Henderson]

Maybe I am looking at it wrong, but I don't understand how keeping a product costs a business money. Once it's been bought , it sits on the shelf until it is sold. Costs the store nothing. They have already paid for it. They get their money and profit back when it sells.

I have a 5 gallon bucket filled to the top with Copper Plumbing fittings. How does that cost me money by sitting in the bucket until they are used or sold ? They don't cost me a penny.

Sure it does. You have to pay rent or property tax on the space you're storing that bucket. That's space that could be going toward making money otherwise. You have to pay inventory costs, you have to pay someone to come in and count those fittings at least once per year so you can pay taxes on them. For every piece of inventory you have on hand, you have to record it on your taxes. It depreciates. This stuff costs money, nothing is free.

[Clarence Martin]

Sure it does. You have to pay rent or property tax on the space you're storing that bucket. That's space that could be going toward making money otherwise. You have to pay inventory costs, you have to pay someone to come in and count those fittings at least once per year so you can pay taxes on them. For every piece of inventory you have on hand, you have to record it on your taxes. It depreciates. This stuff costs money, nothing is free.


It's stuffed in the back of the hall closet. Out of sight , out of mind !! LOL

And yes, it WAS free!!

[Malcolm McLeod]

It's stuffed in the back of the hall closet. Out of sight , out of mind !! LOL

And yes, it WAS free!!

Now, if only Delta could get their motors for nothing and the guards for free (and store them in the back of a closet)...

...Is it just me or is there a song lyric here?!

[Dennis Peacock]

Store them in a clo...set and save it for a rainy day.......... :rolleyes: :D

[Malcolm McLeod]

Store them in a clo...set and save it for a rainy day.......... :rolleyes: :D

I'm thinking this could be big. Classic even!

--
Malcolm
Wooo, Pig!!

[Brian Elfert]

I work for a company that recently moved from a old building with tons of space to a totally new space in a modern office building. The new space has far less storage and less space overall.

It is amazing the amount of spare parts that just had to be kept that suddenly can be recycled when you don't have the space. A lot of the stuff should have gone years ago, but somebody wanted to hold onto it on the 1 in 100,000 chance that it might be needed again. When storage was essentially "free" everything was kept. When storage costs money in monthly rent then suddenly the stuff isn't worth paying money to store.

[Clarence Martin]

Same way with the lumber. bought it years ago . 500+ BD FT of Maple , Cherry , Walnut and Oak.. Doesn't cost me a dime sitting in the Basement. Bought and paid for. Use it as needed. When it comes time to buy another 500 + Bd Ft., I will just have to pay the higher price and adjust costs to the new higher price.

[dennis thompson]

Same way with the lumber. bought it years ago . 500+ BD FT of Maple , Cherry , Walnut and Oak.. Doesn't cost me a dime sitting in the Basement. Bought and paid for. Use it as needed. When it comes time to buy another 500 + Bd Ft., I will just have to pay the higher price and adjust costs to the new higher price.
There is a cost, it is called "opportunity cost" . If it is assumed you have had the wood for 5 years and you paid $5 a bd ft for it you have $2,500 invested in your wood. If you had instead invested that $2,500 in the Vanguard total stock market fund you would have $5364 in the fund, the difference between your original $2,500 investment and the $5364 is your opportunity cost

[Bruce Page]

Now, if only Delta could get their motors for nothing and the guards for free (and store them in the back of a closet)...

...Is it just me or is there a song lyric here?!


I want my MTV!

[Keith Winter]

And yet I can still find products in my local Hardware store that have been sitting on the shelves for 7+ years with the original sticker on them.


I'd say your local hardware store has poor inventory turn. Most businesses want to turn inventory every 30 days (amazon) to 90 days (joe average retailer). If that part sits on the shelf it loses them money, they cannot put something else there because the spot is full, they have to pay taxes on it every year, cashflow is tied up, and there are many other reasons why this is bad news for a retailer.

So most traditional retailers would even sell that item at a big lose to get it off their shelf after 4 or 6 months, or even sell it for pennies on the dollar to [Insert generic closeout store name here] or whatever just to get it off their shelves, off their books, and free up a little cash for better sellers.

How this applies to the $1200 part in question is very likely as others have mentioned. They very rarely get requests for this part, don't want to stock it, or don't want to waste resources on the spare parts business so they price it ridiculously high so no one ever tries to buy it.

[Brian Henderson]

I'd say your local hardware store has poor inventory turn. Most businesses want to turn inventory every 30 days (amazon) to 90 days (joe average retailer). If that part sits on the shelf it loses them money, they cannot put something else there because the spot is full, they have to pay taxes on it every year, cashflow is tied up, and there are many other reasons why this is bad news for a retailer.

That's exactly why my local hardware store went under, because although they had the most bizarre stuff on the shelves, stuff that you could not find in a Lowes or Home Depot, they also never sold any of it. It just sat there gathering dust because they couldn't compete on the prices at the big retailers. So away they went, the owners closed the hardware store that had been there for decades and opened a thrift store instead.


How this applies to the $1200 part in question is very likely as others have mentioned. They very rarely get requests for this part, don't want to stock it, or don't want to waste resources on the spare parts business so they price it ridiculously high so no one ever tries to buy it.

When you're the only game in town and people have to come to you, you can charge whatever the market will bear. If people are willing to pay $1200, then they can charge $1200. If they're charging $1200 and nobody is buying though, they're going to go under.

[Val Kosmider]

Same way with the lumber. bought it years ago . 500+ BD FT of Maple , Cherry , Walnut and Oak.. Doesn't cost me a dime sitting in the Basement. Bought and paid for. Use it as needed. When it comes time to buy another 500 + Bd Ft., I will just have to pay the higher price and adjust costs to the new higher price.

Clarence,

Not picking on you, but this is exactly why so many small businesses don't survive.

This thread has outlined the "real" costs associated with handling that lumber. I understand as a individual...we all do the same thing...that you bought it for $.50 a foot, and that is that. I have a whole stack which I think I own for "cheap",

But, if you are a business, you pay for the wood, you pay to count it regularly (even though is "shouldn't" change), you pay for the floor space, the heat, the light, the depreciation, the interest on the loan to buy it, the insurance, the forklift, the operator, and the security, among other things.

When I call and order it, a person has to take my order.....write it down on something, with something, and then hand it to another person who actually goes to the stack and pulls the boards I want. One has a crack, so it is not salable (so a cost to "write if off"), and he pulls the other two boards. Someone has to write up a shipping label, pack up the boards, and call the shipping company. The boards then get moved to a pick up point, and all of that gets logged into a costly computer system so when I call and ask where my boards are someone who answers the phone can tell me.

It all adds up to a LOT of money. Especially when you get two orders a year for those "special" boards. But because that is your business, you must have them even though stocking them costs you more than you can ever make. Compare that with a "new" board which goes from the mill to the big box supplier in bulk form. He eliminates a LOT of those costs, and thus his pricing/costs are a whole lot different than yours.

Truly, when we want that off the wall motor or blade guard or trunion bearing, we REALLY want it. And we expect that someone is going to stock it, just waiting for our call. For a price. A STEEP price.