Understanding the Elevator Industry – The elevator industry seems like a tough nut to crack. They tend to keep to themselves with their own language and their own priorities. They do not even like to talk about anything beyond your need for them. And so far the cloud of mystery is working pretty well. Motivations remain obscured. The technical jargon overrides any conversation. The result is the construction industry remains beholden to just a handful of providers. This is despite the elevator being a rather simple product. One box going up and down inside another box.
But can it really be that simple? It is more complex than that for sure, but the obfuscation by the elevator industry does not help their reputation.
In this blog post I am going to uncover just a few truisms of the elevator industry from the inside. In that way you will understand them or us better. Then you will be able to make more informed decisions regarding vertical transportation. So, here’s the short list. They may shock you and shake your current understanding of the elevator industry, but here they are. I will write about each in more detail below:
Now let me be clear, I am not passing judgement on the ethics of elevator companies. It is just important to understand the industry better. Our hope is that this will allow you to make better choices on your next project.
For most manufacturers, when you buy the product it ends the process. You have what you want. They have what they want (in the form of payment). Both go separate ways unless there is a problem. Not so in the elevator industry. It became apparent early on that there is a ton of money to be made in maintaining elevators. Also, as the product improved over time, it became even more profitable. The parts became more reliable and standards improved. The maintenance contract was born.
To substantiate that point, Otis in a recent SEC filings said, “New Equipment and Service, which, for the year ended December 31, 2019, contributed 43 percent and 57 percent of our net sales, and 20 percent and 80 percent of our total segment operating profit, respectively.”
Did you get that? That means is that new equipment or elevator sales while important are no where near as profitable as the maintenance contracts. Why does this matter? Because selling a type of elevator that maximizes profitability in the maintenance contract is the goal and not necessarily what you need.
One real quick example. In a low rise project often the most cost effective and best functioning elevator is a hydraulic unit. Of course that depends on several factors. Yet people have been upsold and bought a traction unit (one with ropes) when one is not needed in the least. The cost of the maintenance can be three times as much for the traction unit.
Understanding that can change perspectives on the unit required. And there are many other factors that can be influenced with that knowledge. One certainly would take more time to consider the maintenance contract and care less about the up front cost of the unit.
An often overheard phrase regarding elevators is whether parts and components are proprietary or not. Proprietary in the elevator industry does not generally mean what it does in most other industries. Proprietary components outside of the elevator business usually indicates something special. It is something that sets one product apart from the others. Or it can mean something they want to keep secret from the competition.
Not really the case with elevators. The purpose of “proprietary” parts in the elevator industry is not to hide some special trade secret or technology. After all it is just a box that goes up and down in another box. It is to prevent the building owner from hiring a different company to maintain the elevator. As mentioned above that is where additional profit comes from. If proprietary parts did not exist, any elevator technician could service any elevator regardless of brand. Proprietary parts primary purpose is to keep you locked in. Unlike most any other product, you just can’t buy a different elevator once the one you picked is in place. They have you and they know it.
Never shackle yourself to an elevator company by using proprietary parts. Ever. There are alternatives.
Have you ever been to a factory? I have had the pleasure of touring all sorts of manufacturing plants in my life time. From sausages to automobiles I have seen it all. In those facilities it is much like what you imagine. A product starts out in a simple form traveling down a line. During the trip components are added or processes completed. At the end, like magic, a brand new car rolls away or a delicious link of smoky pork sausage is made table ready.
If you are thinking about saving time and trimming costs, the traditional elevator cannot be your solution. Why? Because your jobsite just became an elevator factory.
That process is not what it looks like for big elevator companies. They do produce some components, but in real terms they are bundlers of other companies parts and pieces. They crate them, ship them and cobble them together on site. But the elevator is not manufactured at all, and the parts they actually make are limited. Believe it or not elevator companies have admitted that the real “manufacturing” takes place at the jobsite. The parts for all elevator companies come from a very limited pool of actual manufacturers.
It would be like ordering a car from Ford but instead of a drivable vehicle its like getting a crate delivered with all the parts. Then, they would send a crew to assemble it in your drive way. That is how traditional elevators are created.
This is important because a “quality” sales pitch is nothing more than that unless there is a different process all together. All elevator parts are largely the same and where they differ, they still have to meet the same rigorous standards. Could you imagine the quality issues and interruptions if your car were assembled in your garage? It really is crazy.
Why does that matter right? Really, why does it matter where the manufacturing takes place? It matters because that explains why it takes so long for an elevator installation. Also, if you are thinking about saving time and trimming costs, the traditional elevator cannot be your solution. Why? Because your jobsite just became an elevator factory.
If you choose a traditional elevator company, you will be a lot better off mentally if you just accept the way they do things. Then resign yourself to handing your site over to them until they are done. Things cannot change because the process does not change. You will never be able to hurry a project or even predict a completion date through the traditional elevator company. Believe it or not they have been installing the same way since before the Civil War…our Civil War…in the US. No other industry has moved that slowly regarding innovation.
Why are there delays? Because for the elevator to be assembled, you have to have the right factory conditions and all the necessary parts at your jobsite. One missing part can mean days of delays. If the building gets too cold the elevator crew leaves. This all slows down the process and gives little room for real improvement and no control.
The reason you have lost control of your project is it is now a manufacturing factory for an elevator.
This is usually where you would find the pitch. I have made a compelling argument now I just need to close the deal right? Wrong. At Modular Elevator Manufacturing we know the MEM Elevator System is a much better alternative than traditional elevators, but we also know that acceptance will not come overnight.
The traditional elevator companies are engrained in the construction industry. We know this! So although we care about sales, we care more about the long run. Education is the key. We need to simply inform people as to why things are as they are. Over time we will be viewed as the solution we are and we are willing to accept that. In the mean time we want to be a part of the discussion, a resource and able to give important elevator industry information. We are hoping to bridge the gap between the construction industry and our industry that will lead to better processes, innovation and installation. Our better way through modular elevators will win you over eventually. The MEM Modular Elevator System is actually factory produced and have tons of benefits, but we know recognition of that comes with time.
However, if you want a tour of our facility just click the button below. You can also request a quote if you have a project in mind. We would be glad to supply you with thumbnail numbers.
Elevators play an essential role in modern infrastructure and are often taken for granted. Reading this actually helped me gain a deeper appreciation for the technology and engineering that goes into creating safe and reliable elevators that we use every day.
Thanks for the comment and kind words. An informed marketplace is always best for the industry. Often you hear complaints about the elevator, the timeline, costs, etc. and if there was more understanding those complaints are more easily addressed.
Thanks again.