What does the thought of a broken card reader bring to mind? Angry consumers, stacking cars and lost revenue as customers drive off to the competition.
Suppose that broken card reader is out of warranty. What do you do? “In that case, it’s more cost-effective to use remanufactured parts,” suggested president Mike Fagerberg of Don's Maintenance Service in Greeley, Colo. The company services fuel retailers in three states and, he said, “My customers can get the same key pads and card readers for 35 percent less. And we can usually get the product they need within a day, which saves them time and money.”
Sales of factory reconditioned products—from computers to cameras—are big business. But the use of remanufactured equipment in the petroleum industry has been slower to catch on. Nevertheless, fuel marketers are starting to realize there is a difference between buying used and refurbished equipment. The one comes “as is” and the other has been remanufactured.
“In the current economy, those who previously bought new parts are now considering refurbished,” said president Rick Byanski of PPI-DurEquip in Fort Wayne, Ind. Compared to 2002 when the company was founded, he said, “We’re now reaching more customers who used to shy away from remanufactured products. Today they have a different perception of what remanufacturing means.”
Tom McGee, president of PMP Corporation in Avon, Conn., explained the value of remanufacturing with a simple analogy. “If the alternator on your six-year-old care becomes defective after 75,000 miles, why buy a new part for $600 when you can have one rebuilt for $400—and get the same warranty?”
Every remanufacturing company offers different warranty and service programs, but McGee said his industry has come a long way. PMP Corporation itself was founded in 1950 to provide remanufactured components for service station pumps. Over the years its product line has grown to include printers, cash drawers, meters, computers and other equipment.
At RDM Industrial Electronics in Nebo, N.C., a remanufacturer of petroleum and car wash electronics, marketing director Kristen Waddle observed, “Operators are even more concerned today about protecting their profit margins” and are seeing reconditioned parts as a cost-effective alternative. And Johnna Meysman, general manager at the Denver branch office of ESCO Services, said, “Retailers have discovered they can keep equipment running for a few hundred dollars, versus several thousand to buy new.”
Why the big price difference between new and remanufactured products? Since petroleum industry equipment is often highly specialized, said Meysman, “Original equipment manufacturers have limited competition and can dictate the price.”
Yet in the current down economy, remanufacturers, such as ESCO, are having some success in turning the tables. Petroleum marketers can do more than replace worn-out parts with refurbished products. “You can buy refurbished products to completely replace dated or obsolete equipment,” Meysman said. “We can source your previous system or a comparable system, remanufacture it and provide a warranty. Then you can buy the replacement equipment from your installer at a fraction of the cost of buying new equipment from the OEM.”
Meysman cautioned fuel retailers to make sure that remanufactured older equipment is compliant with environmental regulations in their markets. On the other hand, she pointed out, “Remanufactured equipment has a positive environmental footprint. It's another way to recycle and to keep this equipment from entering the landfill.”
Although some remanufacturers offer technical support, continued Meysman, “Using remanufactured equipment means you won’t have factory support readily available. But if you use a reputable installer, most of them are well versed in the systems they sell and can provide you with adequate support.”
Mike Fagerberg is one of those installers. He agreed that fuel marketers should work with installers they trust. For one thing, in the 40 years since his father founded Don's Maintenance Service, the company has learned to identify trustworthy remanufacturers. “When I have to go out on a call-back, we all lose time and money,” he said.
As equipment ages, Fagerberg explained, “Everyone is looking at their bottom line. The budgets just aren’t there to buy new. So people are making due with what they have. They’ve been receptive to remanufactured parts because they know that they’re getting the same factory-type quality, while saving up to 60 percent.”
In fact, RDM's Kristen Waddle argued that replacing defective parts or equipment with remanufactured items can sometimes be better than buying new. Products that have recently come onto the market lack a proven track record. By contrast, she said, “With remanufactured equipment, we conduct preventative maintenance by repairing components that we know have a high failure rate. A lot of OEMs will repair items, but they just fix what’s broken. But our products have been tested in real-world environments.”
When added to savings that typically range between 30 and 80 percent, added Waddle, the purchased of remanufactured equipment allows retailers “to extend their profit margins without sacrificing quality.”
As PMP's Tom McGee explained, “When a device comes in to be remanufactured, we don’t just try to fix the defect and repair it. We look at other worn parts and try to get the item to perform better than new. We analyze why the equipment was taken out of the field and then find ways to make it last longer.”
Remanufacturers, such as PMP Corp., can work with retailers who are being compelled by the current economy to close locations. “If you have to close stations for economic reasons and not because of defective equipment, you can cannibalize the equipment and use it in the stations you still have open,” he said.
Just as retailers must ensure the remanufactured older equipments meets environmental regulations, warned McGee, they must likewise check for compliance with payment card industry (PCI) requirements. “Buying remanufactured equipment doesn't make sense if you need technological upgrades,” he admitted.
On the other hand, PMP enabled a number of retailers keep their old mechanical fuel dispensers going last summer. As gasoline prices skyrocketed, McGee recalled, “We helped many of our customers keep up with those prices.”
For his part, Rick Byanski of PPI-DurEquip sees an opportunity for remanufacturers to help their customers with PCI compliance. “We’re offering a PCI solution both as a retrofit kit, as well as a remanufactured product with a PCI solution in it,” he explained. Nevertheless, though interest in both options has been high, “We’re not getting a lot of orders because everyone is first waiting to see if the announced compliance deadline will hold.” PPI uses pin pad solutions from VeriFone to meet the PCI certification requirements.
Yet Byanski's foray into PCI compliance illustrates the progressive stance of many remanufacturers. As he explained, “There are a few in the industry who offer used or 'as is' equipment, and others who will sell at different levels of refurbished. But we don’t sell at different levels. Our products are completely redone, stripped down, and put through extensive testing. When a dispenser leaves us, it’s like new.” PPI provides not only a warranty, but also provides extended warranty and even leasing options.
Remanufacturers have their limits, however. They can accommodate small quantities for immediate needs, Byanski said, “But if you need a particular model, big-quantity orders are hard to complete unless the order is spread out over time. Or if you want a model we don’t have, then we have to find it in the field. Or if you special needs, we might not have the correct model.”
All told, though, Byanski believes that most marketers can meet most of their needs through remanufactured products. “It's certainly an option to check out,” he advised, “and an option that an increasing number of fuel retailers are using.”