Inflation. It’s the thing on everyone’s mind, and some say it’s out of control.
It’s a big topic, but inflation isn’t that hard to understand. It represents a loss of purchasing power as the cost of goods and services goes up. But it’s important to understand that inflation isn’t something like a natural disaster that just “happens.” It’s made up of many individual decisions.
Imagine you live on an island. Outside your door, there are two seafood restaurants. They’re right on the coast and get their fish directly from local boats that go out each morning. The third restaurant on the strip specializes in steak. It has to ship its food in from hundreds of miles away.
As the cost of gas goes up, so does the cost of shipping the beef. So, the menu prices go up.
Costs haven’t increased for the two seafood restaurants, but their prices go up anyway.
Long story short, when costs go up for some businesses, they raise their prices. When other businesses see prices going up, they also raise their prices. Inflation starts with a real change in the situation, like a spike in oil prices, but it ends with rising prices in industries totally untouched by that change.
Across the U.S. economy, inflation was at a 40-year high in March. Look closely and you’ll notice that a lot of these are based on “after the fact” justifications that don’t have much to do with the real cost of doing business. So, you might wonder what the future holds for the remanufacturing industry.
Will remanufactured commercial compressors skyrocket in price?
Let’s take a closer look.
In Remanufacturing, the Underlying Cost Factors Are Different
Inflation is a risk any time there’s a major shock to the global economy – and there’s been plenty of them over the last few years. Just as things were starting to look up when it comes to the COVID-19 pandemic, the war in Ukraine has further stretched global supply chains to the breaking point.
This all sounds like bad news for businesses that rely on commercial compressors.
After all, compressors are a fixed cost – you can’t do without them. No matter if you have a commercial refrigeration system or a large commercial HVAC, the right temperatures depend on your compressor. When nothing less than the best will do, companies look to remanufacturing to control their costs during a time of uncertainty.
Luckily, there’s less to worry about in remanufacturing than in many other industries.
If you are ordering a brand new commercial compressor from an OEM-affiliated wholesaler, you can already expect to see prices jump by hundreds if not thousands of dollars. Not only that but many wholesalers are deeply backlogged. Even in the best of times, the ordering process often takes months.
On the other hand, a good remanufacturing team can deliver what you need faster and at a more attractive cost.
In fact, there is no reason to pay substantially more for a remanufactured commercial compressor today than you would have paid six months or even a year ago. That’s because remanufacturing relies far less on transatlantic shipping than many other heavy industries do, when it comes to the cost of the compressor itself, not shipping.
At Compressors Unlimited, we help keep costs under control in a variety of ways:
1. Stocking Up on Replacement Parts
Replacement compressor parts are not always easy to come by. With our strong OEM and after-market relationships and frequent purchases, we stock up on the key parts our customers are likely to need when the costs are low.
It’s never fun to discover that the one part you need, which may be less than an inch in diameter, is back-ordered for months. You can be sure that when the Panama Canal was out of commission, some compressor parts were on those vessels! With us, you rarely need to worry about those disruptions.
And that means fewer price fluctuations, too.
2. Making Use of the Core Exchange
The core exchange is the backbone of our sourcing approach for the commercial compressors that we remanufacture. Every remanufacturer has a core exchange process in place, and we also get a variety of compressor cores from our customers. By sending us your core, in itself helps drive down the cost factor.
Our experience gives us access to a number of indirect sourcing options that can be effective for further cost reduction or getting hold of parts that are otherwise hard to come by.
Choose the Right Remanufacturing Company Means Inflation Won’t Touch Your Compressor
Inflation is a fact of life, but it doesn’t change the value of a remanufactured commercial compressor. Choose the right source and you will get the equipment you need for less, 100% ready to meet all your performance and environmental standards for years to come.