The Cost Of Short Termism

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The Cost of Short-termism - HVAC&R Preview

Buying cheap products can cost more in the long run – from taking longer to install, to costing more to install, to breaking down more readily. Refusing to engage in this sort of short-term thinking, however, will prevent job hold-ups and ensure refrigerant engineers fit a system in the quickest, most efficient way. Manuel Battista Head of Sales, Brymec explains.

It’s a dilemma that every consumer has wrestled with since money transactions were first made around 7,000 years ago – does low price equate to good value or bad quality?

It is, in fact, perfectly possible simultaneously to believe that low prices mean good value and that low prices mean low quality. This cognitive dissonance – holding two contradictory beliefs, ideas or values – is uncomfortable, but by no means uncommon.

Psychologists have coined a rather obvious name for how people develop an understanding of the world – ‘Theory-theory’! In the context of buying behaviour, theory-theory essentially contends that consumers can’t know everything about a product so they fill in the gaps with their own notions to help them make decisions about whether a cheap product is a fabulous deal or a pile of junk.

Cost versus value for money can be applied to any commercial deal. In the HVACR sector, for example, it makes solid business sense to compare products on more than initial capital cost alone. Doing so might offer short-term cost advantages, but in the longer term it will almost inevitably cost more.

After all, there are other equally important considerations relating to the specification decision, including after-sales service, warranty period, and product performance.

Buying a cheap product can cost more in the long run, perhaps because it takes longer to install, or uses more expensive components, or is less reliable and therefore breaks down more readily, or the company supplying it offers poor after sales service and support.

So it pays to examine products in a holistic way, taking into account every element of its whole-life cost as well as issues beyond cost. This means choosing quality stock that can be easily accessed (to prevent job hold ups); has product training as an option (so installers can fit a system in the quickest and most efficient way possible); and saves on installation time (to enable installers to move onto the next job and, thus, maximise profits).

Take, for example, press fitting solutions for air conditioning and refrigerant pipework installation. The latest technology that we stock – the Conex Bänninger >B< MaxiPro press fitting and its specialist installation tools from Rothenberger – saves a considerable amount of time and effort.

Creating reliable, tamper-proof connections from a single action, >B< MaxiPro benefits from a three-point press – two presses, one on each side of the bead, and one press compressing the O-ring. This provides a permanent and secure joint.

The business benefits of >B< MaxiPro are significant. Besides being the fastest and safest way to join refrigerant pipework, using >B< MaxiPro means health and safety risk and method statements for the works are a lot simpler to complete and, with no need for hot works permits and fire watches, it can save hours on each site.

But an outstanding product is not enough on its own; it must also be supported with, for example, a long guarantee period (five years in the case of >B< MaxiPro) and suitable training.

Before taking delivery of any product from the >B< MaxiPro range from Brymec, one of the company’s certified trainers will get in touch to arrange the free practical training. This enables refrigerant engineers to learn about the features and functions of the technology and, therefore, make the most of it. Before attending the course, delegates receive a technical brochure to prepare them.

The training itself takes place on a mutually convenient date agreed between the Brymec trainer and delegate. Each trainee who passes the training programme – which includes a questionnaire and trial installation – receives a certificate and training pack.

So be warned – it is a false economy to buy on price alone because buying the cheapest tends to reduce the chances of receiving the additional service and support that can make the product more productive.

Finally, don’t underestimate the peace of mind that comes with the security of supply. The product is only part of the story (and a relatively small part at that). The best product in the world is worse than useless if you don’t receive it on time, or it is damaged when it arrives.

Quality, on-time delivery, certainty of supply, protecting against damage, and preventing counterfeit or substandard products entering the supply chain – all are critical to business success.

My overarching message is that it really pays to consider all possible procurement factors before buying. Apart from installation ease/speed and training provision, these include the warranty period, life expectancy, accessories and options, customer service and support and the strength of the business relationship in terms of honesty, flexibility and delivery.

Forming a close working relationship with a trusted supplier also allows you to benefit from the latest product developments and working practices.

So, rather than focusing on the bottom line, look at your procurement practices in the round, taking account of all the different aspects of the products you buy. Financier Warren Buffet got it right when he said: “Price is what you pay. Value is what you get.”

Total cost of ownership explained

Total cost of ownership (TCO) is an estimate intended to help buyers determine both the direct and indirect costs of a product or system.

It embraces criteria other than simple purchase price including service and support, efficiency, maintenance and repairs, training and security of supply (in terms of lost opportunity costs should the product fail to arrive on time, for example).

By some estimates, the ‘visible’ cost of a product can be as little as 15% of the TCO with many other contributing factors including speed and ease of installation, delivery, unplanned downtime, environmental issues and warranty costs. That is why the cheapest option often becomes the costliest in the long-run, and engaging in short-term thinking is always bad for business

Source: ACR-News