May, 2001. / The Elevator & Parking Systems.

Most of the building owners would see how well the maintenance service has been done.
The elevator performance could be measured by both the building owner and passengers.
The total number of elevators in service in Korea reaches around 180,000 units or above at the end of 2000.
Even if the volume reached significant figure to compensate for elevator suppliers with long term profit, the major suppliers and service specialties are not so well awarding of their objectives what is worthy of both parties.
We can make a deep market review of elevator service sector to find a right direction where we are going for and what we have to set up an action plan.

Many a different types of maintenance services in Korea

There has been three different types of maintenance services in terms of service provider.

1) Manufacturer's maintenance (60%)
Maintenance service is carried out by the supplier or nominated maintenance sub-contractors. High ranges are generally done by direct labor of supplier. Much of the low range elevators are maintained by the maintenance sub-contractors.
Sub-contractors' maintenance services may not be of the official contract but widely accepted deliberately.
In case of sub-contractors' services, the replacement parts are supplied by the manufacturer who is the main contractor. Sub-contractors provide all the maintenance services on behalf of main contractor. They are maintaining the elevators what they provided and installed.

2) Maintenance specialty(38%)
Maintenance specialty provides all the replacement parts and labors as a service contractor. They are maintaining all the elevators in operation. Most of these maintenance specialties are small sized consisted of 20 ~ 100 technicians.
The major problem of their services are the supply of replacement parts which are not normally sold to any maintenance specialty by the manufacturers. Printed circuit board is the most critical parts for them to supply or repair.

3) Owner's self maintenance (2%)
Building management office is doing maintenance service by themselves. Service technicians may have been worked at the manufacturer or service department, so that they are capable of maintenance services. Many of this owners' self maintenance are shifting to manufacturer's service or service specialty.
Manufacturer's maintenance services have been increased its share recently. Manufacturer's services are more reliable than service specialty anyhow.
Maintenance specialty service has long been resulted from the localized service practice. Installation and maintenance was the core business at the early beginning of Korean elevator industry.
None of the materials was manufactured by locally, but by imported. It is around 30 years to supply complete package of elevators since local suppliers started the component production of equipment.The maintenance of high rise buildings is mostly given to manufacturer's service contract. 22% of high rise is maintained by maintenance specialty of which ensure the qualification.
Owner's maintenance is getting lower. They could not meet the tangible service against sub-contracting of maintenance.
And another reason to appoint a maintenance specialty is free from difficulties of parts replacement or repair of electronic devices. The owners are also budgeting the fixed maintenance cost.
On the other hand, the residential elevators are not maintained by the building management. The residential elevators are relatively easy to service, and service specialty may haveadvantage to both the labor cost and operation cost.
The maintenance specialty normally offers the building management much lower service contract against the major players.
The practical service for low rise has been implemented by the service specialty anyway.
The free maintenance periods of low rise elevators in Korea had been generally furnished for 3 months after handing over to client.
The elevator suppliers provides routine maintenance and emergency call back response within this free maintenance periods.
The regular service contract shall be made upon expiry of free maintenance period with 1~3 years product warranty periods valid whether the client may not aware of what they have rights to claim the trouble against supplier.
Many of the new elevators have been serviced by the small service specialty with low service contract sum proposed.
The major players have lost a lot of new elevators in service due to high labor and operation cost for maintenance.
Even if most of the building owners or tenants were reliable to the manufacturer's service, there has been many cases where owners choose the service company by negotiable bid upon expiry of free maintenance period.
The maintenance of residential elevators in Korea may be neither profitable business nor worst case form the marketable point of view. As shown on the above graphs, the high rise service is profitable for manufacturer's service because of less competitors. But low rise service is much less profitable because of several competitors available to meet the service requirement.
The service contract is normally made by the building management office in any case of new service contract or continuous service contract.

Decision criteria for elevator service

It may have an decision criteria to evaluate the service contractors. The building owner observes the service company's service proposal in addition to the acceptance of contractual conditions. The major concern is the price for all type of buildings. The high rise building concerns about the brand reputation and price level.
On the other hand, the residential buildings and factories are more concerns about price. The service capability is one of the evaluation terms to decide for office towers and commercial complex where few service competitors exists. The labor and material costs are the key factors to the service cost.
Most of the service specialty has more strength in labor and operation cost against the manufacturer's service cost. The price competitiveness is the most important factor to get award of service contract. The most difficult factors to evaluate the service performance from the owner's point of view.
The service performance and capability may be intangible to evaluate and measure.
The objective evaluation has not yet been done for the selection of service contractor.
The proposed documentation and sales activity may be the major measurement to evaluate the service contractor. As a owner's point of view, the price may be the major concerns for the budgeting of building management.
Much of the service contract of residential buildings may hardly meet the BEP to survive.
These service contractors might seek a solution to compensate the loss of service costs.
The high material cost to replace, unnecessary payable repair and unnecessary replacement may be incurred in addition to the fixed budget of building management.
The lowest tenderer for residential elevator service shall be nominated as a successful service provider no matter how they can meet the service cost.
That is the question what could be the reasonable solutions to satisfy for both service company and the tenants. The duration of service contract is mostly a year. And it may have some disadvantage for keeping stable service and budgeting.
The long term service contract might keep the common benefits and interests to satisfy both parties. The increasing numbers of service specialty impacts on Korean service market eroding its profit margins fighting by price cut.
The service specialty may not keep the service contract steadily no matter how they achieved good job with technical basis and services.
However, the service contract could be easily substituted with the strong competitor who may not be confirmed its qualification but price competitiveness.
The owner may face the same situation being leapfrogged by substitute service specialty every year. Two or three years service contract shall keep the stable services and budgeting of those elevators, such that ensures the reliable performance of elevators.
The service warranty can only given to the building owners by long term service contract.
The service contractor should guarantee the elevator performance and parts replacement for a contract period.
We always doubt that how the service contractor guarantee their workmanship, inspection, testing, parts replacement, and adjustment of the equipment. The most important things are the common interests and reasonable understanding what they are aiming for.