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Charging For Services

We are a storage & handling distributor. Considering the unbundling of services by our customer base, how can our industry set the precedent to start charging the customer for engineering, drawings and services that we now provide for free? I realize that systems integrators have been successful charging for services. Does anyone have a model for the storage & handling distributor?
                                                                                                    
– Rod Jack, President
                                                                                                       Storage Solutions Inc. (Knoxville, TN)

Duncan Murphy: You might need to reinvent your company, because it will be hard to charge a customer for something they always have received for free. One MHEDA Board member, Ron Rechenbach, did just that. He changed the name of his company and its image in the marketplace. Without changing much about what they sold or how they went to market, they are now able to sell every facet of the projects they propose. In reality what they are providing is not much different, it is just branded and presented better.

Kevin Katona: I wish I could give a great answer, but we are in the same boat. We normally include a cost for drawings in our bids, but a lot of the work is done upfront and we don’t get paid unless we win the project. We do charge for labor to submit permits as well as mark up the permit costs. These costs are one line-item in the proposal, giving the opportunity for the customer to question the fees. Most customers are aware of the time and hassles that are involved in obtaining permits and are willing to accept the fees. If they object, we are happy to have them do the work. All these items are either line-items on our proposals or are rolled into one lump sum.

Rex Mecham: We have only been involved in the storage & handling business a short time, but I can tell you what seems to work for us. When we do engineering designs, we show the customer a bill for the drawings before giving them to him. We explain that when he purchases the product from us, the bill will be absorbed into the job and he will receive a credit for it.

Ron Rechenbach: It is extremely difficult to sell engineering, drawings and related services if you are promoting a specific product to your customer rather than a total value-added concept that emphasizes the total solution as opposed to a specific product solution. You must fully understand what your customer’s objectives are before you can recommend a solution. To discover your customer’s objective, a preliminary meeting is required. This initial meeting is usually done at no charge. After that initial meeting, the plan of action may involve charging your customers for engineering, drawings and related services by the hour or total project.

Chuck Frank: As a Systems Integrator, we have been challenged on the fees associated for engineering drawings when others provide them at no cost. Our solution has been to educate the client on Risk Mitigation. In today’s environment, we are faced with more and more lawsuits. In utilizing risk mitigation case studies, we are able to share with our clients the importance in seismic requirements, PE Stamped drawings, life safety issues, ingress and egress, etc. With the amount of work to obtain the required documentation (which ultimately protects our clients), we have received less pushback on justifying engineering cost. If required, we will share the actual cost in order for our clients to better understand that it isn’t just our cost of doing business. If we cannot bill to protect their assets, there may be no assets to protect.

Material Handling Equipment Distributors Association

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