Film-Tech Forum ARCHIVE: The ethics of buying parts directly

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Posted by John Walsh (Member # 168) on 01-03-2004, 10:55 AM:

The topic about manufacturers being closed during holidays made me think of another question: What do people generally think about ‘bypassing’ a projection equipment manufacturer, and buying parts directly? For example, buying a platter motor from Dayton rather than from the platter manufacturer.

It’s obvious that if theaters always bought directly, projection manufacturers would go out of business. On the other hand, consider that the standard markup from projection manufacturers is 3 to 3 ½ times the original price for something easily obtained from Grainger, or an electronics distributor, etc.

I think most people here would agree that parts are very expensive, specially nowadays, since the theater industry recovering from the 3-4 year old major economic downturn here in the US, although I certainly not blaming projection equipment manufacturers. Their price in necessary to keep operating.

I’d be interested in what people think of this. If you’d like to share your opinion, consider the following scenarios; With all cases, remember; easily available parts are marked up 3 to 3 ½ times;

-A projection equipment manufacturer who provides a product where parts rarely go bad, and provides good support (always has the part you need; provides good technical support.)

-A projection equipment manufacturer who provides a product where parts often go bad, but does provides very good support.

-A projection equipment manufacturer who provides a product where parts rarely go bad, but has very poor support.

Posted by Randy Stankey (Member # 64) on 01-03-2004, 01:06 PM:

I wouldn't hesitate to buy a part directly, like in your example, from Grainger.

Like you said, it's cheaper and can be had quickly. As a matter of fact, if you're willing to pay the fee, you can have in-stock parts available 24/7.

Second, buying parts directly lightens the load from the projector manufacturers having to supply easily available parts and allows their people to concentrate on helping the people who really need it.

Posted by Greg Mueller (Member # 17) on 01-03-2004, 01:08 PM:

I guess my opinion on such a topic would depend on the manufacturer. On my machine tools I have frequently tried to buy direct from the manufacturer. For example, the machine tool manufacturer wanted $22.50 for a carbon brush for a motor. Typically these can be bought at a motor repair store for 1/10 that and I'm pretty certain that the machine tool manufacturer can buy them for less than retail. So they are not just interested in a normal mark up, they are screwing their customers. If this is the way a manufacturer wants to play the game then can they (or anyone else) blame the consumer for trying to find them cheaper? It will also have a lot to do with any decision in the future on what brand to buy when I buy new machine tools.
So I guess for me customer service extends itself to not screwing the customer on replacement parts. This type of poor customer service makes the decision for me automatic.

Posted by Oscar Neundorfer (Member # 458) on 01-03-2004, 01:26 PM:

Parts are more costly from manufacturers. It takes money to purchase and store parts, and the cash is tied up in inventory, so the cost of money is also factored in. I have no problems with my customers buying readily available parts elsewhere than from me if they like, and especially when time is of the essence to effect a repair. On several occasions, I have told people to go to their local equivalent of Radio Shack and pick up a TL074 IC or some other part that is common. However, some parts are proprietary and can only be obtained from the manufacturer.

Also, I would hope that the original equipment sale has netted the manufacturer some profit. I don't know about other manufacturers, but I am not in the parts business, I make and sell equipment. I am more than happy to fill my customers' needs, and if that need is a part, then I will certainly sell it. But don't feel bad about going somewhere else either.

I see no ethical dilemna here. You bought the equipment, it belongs to you, and you have the right to do with it as you please, including buying parts where you can get the best deal.

Posted by Bobby Henderson (Member # 840) on 01-03-2004, 01:38 PM:

I suppose another question to be raised is one dealing with customer service. If you have a pretty good relationship with a dealer bypassing them might result in less customer service in troubleshooting problems, etc.

My day job is working in the sign industry and we sometimes have to deal with a similar problem with items like electronic message centers or even sign cabinets. Our markup on a LED-based electronic message center is not very much, certainly not double or triple the price. Still, if someone chooses to "go direct" he should not expect us to offer any free technical support such as coming out there and getting the thing installed, connected and launched or serviced if something breaks. Our markup covers all of those things. We also sell enough LED displays that we'll get tough on a supplier if they bypass us. We used to sell lots of Time-O-Matic message centers, but when they allowed one of our cut rate competitors to give away the things at cost we shifted totally to another supplier. It has now been years since Time-O-Matic has sold any message centers into the Southwest Oklahoma and North Texas market.

It can be tough to make a living in the custom sign manufacturing business. So if someone wants to bypass you then you have to take a stand on principal to make the "bypass" happen completely. A customer can burn himself going it alone. Needless to say, we absolutely refuse to install or service any clip art sign products by companies made only of fly-by-night salesmen like Signtronix. We're screwing ourselves if we do otherwise.

Posted by Ian Price (Member # 14) on 01-03-2004, 01:41 PM:

I make an effort to buy from my Cinema Supplier (American Cinema Equipment). He supports me by attempting to get us the best price. I support him by buying all of my parts through him. He has a vested interest in seeing that we are a healthy business with good presentation. I have a vested interest in seeing his business healthy because he proffers advice and can be counted on responding to an emergency.

I had to turn down an offer from a friend who wanted to sell me Xenons for the same price as ACE or slightly better price simply because I feel the need to support ACE as I know they will be there for me when I need them.

Posted by Mark Gulbrandsen (Member # 72) on 01-03-2004, 02:03 PM:

Actually when I'm repairing something I always try to keep the cost down for my customer as much as possible, but I won't jepordize quality in any respect in order to do that. There are many ways to keep costs lower, sometimes by going direct with the manufacturer, or even with that manufacturers vendor as I have done with DTS parts many times. Lets fact it $300.00 for a DTS ATX power supply is highway robbery as is having to do a $300.00 repair/ exchange of the D to A board in a 6D when all thats usually wrong is that the 30 buck DC convertor for the analog stage has failed. DTS will not supply that part to theor dealers but their vendor will so we stock them. I feel the same way about the Strong Platter motors and most all lamphouse blowers and such. Save your customer where you can, he will appreciate it alot in the long run. And when it comes to platter motors 98% of them are repairable at least once anyway so your customer can get double the life out of any given motor.

One thing I dislike and I feel is very wrong is that manufacturers sometimes go around their dealers and make huge sales directly to the theatre owner. All of you dealers out there have experienced this at least once. Not only does this most likely cause a seperation of the dealer that could be doing the warranty work but it also can causes poor future relations as well. Dealers should always be kept in the loop if even only for warranty and after the fact service.

Mark

Posted by Manny Knowles (Member # 1171) on 01-03-2004, 02:33 PM:

Are dealers protected such that they cannot be circumvented by the equipment manufacturers?

Posted by Mark Gulbrandsen (Member # 72) on 01-03-2004, 03:09 PM:

Some vendors like JBL have dealer contracts that eliminate alot of this. There is nothing from preventing say a projector manufacturer that doesn't have a dealer agreement from buying everything from the other equipmnent vendors that for some reason seem to acomodate them and then re-selling it all to a theatre. This sort of thing happens alot.
Mark

Posted by Greg Mueller (Member # 17) on 01-03-2004, 03:32 PM:

In one instance I ran into a road block when I identified a small gear motor and tried to buy it from the manufacturer rather than the machine tool builder. The machine tool builder wanted many hundreds of dollars for a gear motor which cost $150 from the manufacturer. The manufacturer declined my purchase saying that the motor was built as a proprietary product for the machine tool builder.

Posted by Sam D. Chavez (Member # 1841) on 01-03-2004, 08:35 PM:

I'm with Mark on the need for manufacturers to keep the dealer in the loop, particularly if the dealer provides real service.

This sometimes has strange consequences however.

AMC was after me to sell 350 analog readers direct. I refused and eventually sold them through MTS. I got paid some, but now the lawyer for the MTS bankruptcy trustee wants all the money back from everyone who received any payments in the last 90 days of MTS's existence.

I would do it the same way again but I am aware that no good deed goes unpunished.

Posted by Mark Gulbrandsen (Member # 72) on 01-03-2004, 08:47 PM:

Sam,
Am really sorry to hear that you got stung by them, thats a pretty bug chunk of dough t have hanging out there. When I closed down my buisness I was told by my accountant to pay off everyone slowly so the Bankruptcy trustee did not recall any of the payments. It turned out that he was right. I paid off all the small companies first and then what ever was left went to the big guys, then several months elapsed before my attorney filed. It worked out better or everyone involved to say the least.

Greg,
Christie does this with their Bodine Motor parts. The odd thing is if you can find out the OEM Bodine part number somehow they will gladly sell it to you.
Mark

Posted by Scott Norwood (Member # 30) on 01-03-2004, 09:07 PM:

Personally, I don't see an ethical problem with buying standard off-the-shelf parts from other vendors. As was mentioned earlier, the customer owns the equipment and should feel free to do whatever he wants with it. One minor snag might be liability concerns, however. If one buys a platter motor from the platter manufacturer and the motor is somehow defective and causes the rest of the platter to disintegrate into a puddle of molten metal, then the platter manufacturer is ethically (and probably legally) required to replace both the defective motor and the platter, since the motor was sold specifically as being suitable for use with that platter. If the motor had been purchased from another source, then that vendor would only need to replace the motor and the customer would assume the risk for the loss of the platter. Of course this situation is extremely unlikely to actually occur, however the customer does assume a small risk when purchasing parts from third-party vendors, and the manufacturer has every right to deny warranty service on the product if the need for a repair is caused by the use of third-party parts.

The relationship of the customer and his equipment dealer is a different issue. If the customer values the relationship, then it probably does make sense to pay a bit more for parts in exchange for convenience and good customer service.

Posted by Michael Schaffer (Member # 1204) on 01-04-2004, 03:48 AM:

How can they want that money back? Wasn`t that sale completed before the dealer filed for bancruptcy?

Posted by Tim Reed (Member # 137) on 01-04-2004, 09:01 AM:

Sam, how can they go after completed transactions retroactively? To heck with that lawyer, it was a done deal. Tell him you already spent the money. [Big Grin]

Posted by Matt Zeiner (Member # 1914) on 01-04-2004, 12:23 PM:

If I can get it cheaper, I will. Period. There are some manufacturers of Cinema equipment that offer no incentives to dealers to buy from them - they offer no discount on parts - MSRP = Dealer cost. Screw that. My customers have a hard enough time paying repair bills, and we have a hard enough time making those repairs profitable without obtaining discounted parts. Our in-house repair services provide faster service than any manufacturer is capable of, and our customers value that. We would have to suspend that service or up our rates if we bought parts directly from most manufacturers.

Posted by Sam D. Chavez (Member # 1841) on 01-04-2004, 08:14 PM:

There is definitely case law regarding "preferential payment". It is intended to cover situations where some vendor gets paid and no one else does. In theory the money all gets recalled and the judge pays everyone an equal share. In this case, Merrill Lynch (who put the deal together to buy out the previous owners) was the only secured creditor. MTS went chapter 7 and the assets were sold. Merrill Lynch is short several Million $$ so any money retrieved will go to them with nothing left over.

There is a defense to this and I believe they have to prove that payments were preferential. Since the letter was sent to just about everyone it can hardly be called preferential.

It will be a long grind before anything happens.

There is an English expression about "The Law is an Ass". This was quoted in the movie "Oliver" about the fact that the law presumes that a man is in charge of his wife. The man responds that if the law supposes this, the law is an ass!

One thing for sure, logic is not the answer when it comes to this law.

Posted by Steve Guttag (Member # 268) on 01-04-2004, 09:21 PM:

First off...I don't agree with John's claim that parts are so expensive...sure you can find aburditees but in general...the spare parts or parts cost compared to the operation is pretty reasonable. Sure an Intermittent will set you back over a grand but then again...how many screens is that spare good for? You can always have the bad one rebuilt to as good or better than new. So lets say you put $5000 on the shelf in each complex in spares for a typical complex of 12 screens...you are at just over $400 in spare parts/screen...that isn't too tough. These are certainly hypothetical numbers since each case will be different based on screen-count and equipment. How much money is put into spare xenon lamps on the shelf per complex...those are true consumables (but less costly than the cases of carbons of yesteryear).

You compare that however to yesteryear where virtually every part needed was in the booth to service the two projectors...it is far less costly today to maintain a theatre in real dollars due to economy of scale.

As to where to source parts...Ian has it right..from you dealer. Support those that support you...everyone wins. If you supply it yourself...then put it in yourself.

From a dealer's point of view...I will source the parts from where it makes sense to source the parts. Sometimes it is money driven, sometimes it is quality driven.

For instance...lets say a projector manufacturer uses a low grade import bearing and we have found a higher grade made in USA bearing...when we sell a part we are selling our quality too (especially since we are probably doing the repair too). Like others we have industrial supply contacts that, in some cases are quite similar to the equipment manufacturers.

While we are on bearings...should we stock P-3368 and BG-259 bearings in separate places? They are the same bearing (in terms of size and grade)...or the Christie feed-finger bearings (I don't know the Christie number but it probably doesn't end in -001 since it is outsourced). The only difference in the Christie bearing and the BG-259 or P-3368 is the duty type...the Christie is much more light-weight so it can spin much more free. We can source both bearings from the same place and know what it will be down to the brand, country of origin and grade.

Now there are other cases where getting the cheaper part price wise is more expensive. Lets say we are making a parts order from Strong and we know we can obtain a widget from an other supplier for couple dollars less. What do you do about freight? The incremental increase in adding it to the Strong order is unmeasurable as opposed to the $10 freight bill to obtain a one-off order. So, did the savings of less than $10 really save you anything? Not in the above example.

Yet other examples are when a manufacturer modifies a stock part...it may be cheaper to by the part direct but when you add in the time and hassle of doing the mods in-house...it may or may not be worth it.

In short, there is no cut and dried answer as to where to source parts. What the equipment manufacturer normally has is convienence...just spout out the part number and it normally shows up.

Then you have wonderful companies like Wolk...they sometimes are the only one making a part that the original manufacturer stops supporting. Sometimes this 3rd Party supplier has a better part too (though not always).

One thing I've found is that all suppliers have bad batches too. Heck, I've even received 1000s of feet of "twisted" speaker wire (from Carol...not an off-brand) where it came in ruler straight....everyone seems to have had a bad day or two in 2003.

Steve

Posted by Jeff Taylor (Member # 443) on 01-05-2004, 11:10 AM:

Good sentiment, Tim, but pre-filing payables fall into a general creditor pool, and must be settled equitably with the approval of the court--you absolutely cannot pick and choose, nor can you satisfy some claims in full and others in part. It's got to be on a equal percentage basis for everyone.

Posted by Tony Ratcliff (Member # 1196) on 01-05-2004, 12:16 PM:

I've actually run into situations where it is CHEAPER to buy from the dealer than the manufacturer.
Case in point was a video modulator I bought recently during my day job duties.
I traced down on the internet the model I wanted and called the manufacturer. They quoted me a list price, but then refered me to a dealer in my area. The dealer's price was MUCH cheaper, plus I got terrific service from a local company I didn't even know existed.

I think the same is true for theatre equipment. It may even cost a little more to buy your parts, etc. through a dealer / repair tech. But then you are building a relationship that will pay off when you get a major breakdown on a Saturday night.

Posted by Michael Schaffer (Member # 1204) on 01-06-2004, 11:58 PM:

Sometimes things get really ridiculous: A few years ago, we needed an Imax platter deck for a location in Berlin. The shipping costs were enormously high. I don`t remember the exact figure, but it was a substantial 4-digit amount. We found out that was because the platter deck was manufactured by Kinoton in Munich (just 8 hours or so from Berlin), shipped to Imax in Canada, then shipped back across the Atlantic to Berlin. We were OK with buying the deck through Imax, but they just wouldn`t let us have it shipped directly from Munich to Berlin. It cost a lot of persuasion and many phone calls to make that happen. Great customer service for a product that in itself isn`t all that inexpensive.

Posted by Sam D. Chavez (Member # 1841) on 01-09-2004, 01:32 AM:

I had a similar experience to that cited by Michael but with Showscan. At that time their audio systems were based on Dolby CP 200's.

Showscan would not allow the franchise holder to contact Dolby for replacement cards. Added to that, they would charge the franchise more than the full list price. A real gouge!

Posted by Michael Elam (Member # 788) on 01-09-2004, 04:19 AM:

Let's don't forget, often,like buying from Christie they don't have the part in stock, they backorder more than they ship, if you can't depend on them to deliver than what is your next step?
Buy some where else. I've waited on backorder items from Christie as much as 6 months, and YOU have to remind THEM on a regular basis you are waiting! [Eek!]