What Is The Right-to-Repair Movement?
The right-to-repair movement includes all the different ways equipment and consumer goods owners fight back against OEM’s aftermarket service policies that excessively burden their maintenance costs.
While most right-to-repair activity is focused on electronics and computer repair, the issue can and does affect every industry and type of product. Your company may even employ restrictive practices and damage your reputation with customers.
Why Is Right-to-Repair Getting So Much Attention Now?
The internet has systemically changed business in the last 10 to 15 years. Everyone knows everything about everything, which makes sustained differentiation extremely challenging. While innovation can create short-term advantages, sooner or later, competitors will catch up and reset customers’ expectations.
All this shared knowledge drives prices down in a race to the bottom. Currently, services appear to carry a higher margin than products because intangible work is harder for customers to quantify than tangible products.
From the late 1890s to the early 1900s, many businesses established monopoly positions in their industries; soon after, the federal government stepped in and broke them up. The monopolists not only employed restrictive practices in equipment repair but also restricted competition in general.
Years later, we’re seeing similar trends across various industries. Thomas Insights recently published two articles about the right to repair, one highlighting the issue with farm tractors and the other regarding Apple’s service policies.
Interestingly, I recently read a few articles about how military equipment suppliers’ contracts require the military to send defective parts back to the OEM for repair. In peacetime, this means that:
- Major capital equipment is unavailable because the OEM is repairing key assemblies.
- Military maintenance specialists do not get to use their troubleshooting and repair training, which they will need in a war zone.
In the automotive sector, for example, the 1990 Clean Air Act Amendments outlined that vehicles constructed after 1994 needed computer systems incorporated to track emissions. The Amendments also dictated that automakers must provide independent repair shops with the same information regarding emissions servicing as car dealerships.
In the 2000s, the U.S. Senate and various state legislatures considered bills requiring automobile manufacturers to provide the same information to independent repair shops as they do to their dealer’s shops. Then in 2012, Massachusetts passed the first Motor Vehicle Owners’ Right to Repair Act. Later in 2014, various motor vehicle manufacturers and organizations representing independent repair shops signed a Memorandum of Understanding that basically extended the Massachusetts law to the rest of the United States.
High Price (and High Margin) Spare Parts
In general, people do not connect right to repair with high spare parts pricing, but it has the same negative effect on the customer’s minds as not providing diagnostic software. The customers feel as though the OEM believes they have a monopoly in the marketplace and can wield their pricing power as they see fit.
But customers are pushing back.
I recently interviewed a number of facility and maintenance managers. One topic they all brought up was spare parts pricing. They went on to tell me a few things they are doing to save repair money:
- In the past, they purchased all repair parts from the OEM, but now they buy all commercial off-the-shelf parts from distributors and save the “last” markup.
- When they receive an OEM’s quote for a proprietary spare part, they turn to eBay and usually have great success saving money and getting what they need. Sometimes, they buy new excess inventory from another end-user and other times; they buy a used part. Either way, they get quick delivery and big (and provable) savings.
- If the part is expensive and custom, they take a worn-out part to a local machine shop and have them replace it. I spoke to a maintenance person who was responsible for 10 of a particular machine model. He claimed that a high-wear part cost $250 from the OEM, but his local machine shop made it for just $27.50. He buys them in lots of five at that price and always keeps them on hand.
The Future of Repairs
In all these cases, the end-user still purchases additional equipment from the OEM, either new or pre-owned, but buys his parts using other sources. If the markup had not been so substantial, they would not have looked for alternative suppliers but would have tightened their relationship with the OEM.
Do you think they will shop around more when they need additional equipment in the future? And do you doubt that spare parts prices will be considered when acquiring new equipment?
So, even if the right to repair is not usually connected to repair parts, you can be sure that your customers and prospects feel that these two items are connected. Monitor spare parts sales per active machine; see if this ratio is dropping, and if it is, take appropriate action.
About Middlesex Consulting
Middlesex Consulting is an experienced team of professionals with the primary goal of helping capital equipment companies create more value for their clients and stakeholders. Middlesex Consulting continues to provide superior solutions to meet the needs of its clients by focusing on our strengths in Services, Manufacturing, Customer Experience, and Engineering. If you want to learn more about how we can help your organization create service policies that are fair to your customers and your shareholders, contact us or check out some of our free articles and white papers here.