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Time for a truce between sustainability and price

For Warwick Taylor of HVAC supplier S&P Coils, it is critical for business success as well as for the future of our planet that we abandon the mantra 'price is king'. Ian Vallely reports
Time for a truce between sustainability and price
There is an inherent dichotomy between the sustainability and the price of HVAC equipment and this, says Warwick Taylor, is a crunch issue for HVAC suppliers because, if it's mismanaged, it can have a potentially devastating impact on their business.

Mr Taylor, UK managing director of Leicester-based specialist manufacturer and supplier of heating and cooling equipment, S&P Coil Products (SPC), explains: 'Everybody demands equipment and designs that are energy compliant and meet the relevant regulations. Of course, that makes sense. However, we are finding that we will do a lot of work down that road and then, when it comes to order placing, the customer may say 'we can't afford to do it that way so let's do it the old way'. That might be cheaper, but it isn't necessarily green or sustainable.

'I think this is a widespread challenge faced by the industry and it may take government action to back up their carbon reduction strategy with a bit of financial muscle. It is all well and good the Government having a zero carbon target by 2050, but I don't believe they are going to hit that without biting the bullet and put in the incentives they originally promised.'

He points out that suppliers - like every other player in the building services sector - have businesses to run and need to make a profit: 'If we invest heavily in new products that no-one can afford to buy then we are on a hiding to nothing.'

Typical customers for SPC's products are consultants and contractors and, for Mr Taylor, each must wrestle with their own specific challenges: 'What we are finding is that consultants want more help than ever before with design. I think the driver for that is that many are employing fewer people to save costs. Many companies have gone through a trimming down exercise and we quite often see consultants doing the job of four people.

More involved in design
'On top of this, they may now find themselves responsible for the whole project rather than just the heating and ventilation element. The result is that there is a requirement for manufacturers like ourselves to get more involved in design - we have to accept that consultants need more help.'

Mr Taylor insists that he is not suggesting that consultants want manufacturers to do their jobs for them: 'But I do believe the line is getting blurred between what we can offer as advice and what the consultant would expect from us.'

Contractors, he says, have different challenges to tackle: 'What they want is higher flexibility and lower pricing. As a manufacturer we have to respond to their demands for short lead times and cheap prices.'

In fact, he confesses that 'cheap' is the wrong word in this context: 'I tend to reframe it as value-for-money. While some equipment may appear cheaper, will it cost you more in the long run? You need to factor in things like installation, warranty, reliability, quality, after sales support, and so on.'

Despite the different challenges they face, both consultants and contractors share the need for solid advice and that, says Mr Taylor, is where enlightened and progressive manufacturers really win out: 'Because we know our own products inside out, we can employ value engineering. If, for example, a consultant or design and build contractor has erred on the side of caution and over-engineered the system, we might be able to suggest alternative, less expensive products.'

Critical supporting role
So, it is clear that manufacturers and suppliers have a critical role in supporting consultants and contractors. But what about the challenges that suppliers themselves face?

The biggest business issue confronting Mr Taylor's company is how to maintain an appropriate balance between high service levels and tight cost control. He explains: 'We are known as being a premium brand supplier, but how do we keep that up when we are continually being squeezed on price and having to cut cost out all the time? Our design team and technical department come at a price and the only reason we are able to offer the service we do is because we have these people on our payroll.

'I would say that what differentiates us is first, customer relationships, secondly, technical excellence, support and flexibility, and third, price.'

SPC is doing several things in its efforts to maintain this position. The first is to continue to invest in machinery: 'Two years ago we spent £325,000 on a bespoke tube manipulation machine to make continuous serpentine bends on our coils and radiant panels.

'This year we are looking to spend £750,000 on more machinery, including a new press and an expander, to make our processes more efficient and effective. That will drive our cost base down and we would look to pass that saving onto our customers.'

Nonetheless, SPC is making these investments not so much to save money as to protect its business. Mr Taylor again: 'We manufacture coil type products and want to keep SPC at the forefront of that technology. We are able to ensure quality and consistency in all our products by reducing waste, guaranteeing accuracy and enabling greater quantities to be produced with the machines' ability to work round the clock.'

Mr Taylor's company has also taken the decision to invest in information technology, covering all aspects of the business in Dubai and the UK: 'So, for example, we have invested in material requirements planning systems to improve our manufacturing processes and in customer relationship management software. We are driving towards the situation where we can offer a customer experience that is beyond the expectation in our industry. So we continue to invest in our market.'
18 June 2012


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