IIAR

BY: ANDREA FISCHER

The move towards lower charge has spurred demand for products like standardized package systems that promise solutions to at least some of the industry’s biggest problems. But exactly how those products will develop, and who will take them to market is yet unclear.

As contractors, manufacturers and end users begin to answer those questions, a new model is evolving with the potential to reshape relationships that have long defined how business is done.

“The single biggest issue facing package systems is not the technology, it’s the business model. That will determine how this industry will translate the technology to the end user,” said Gerard Von Dohlen, President of Newark Refrigerated Warehouses. “These systems work for end users, and the demand is there, it’s the adoption of a new model that will determine whether or not the industry is successful in meeting that demand.”

“We’ve been using low charge packages for a while now, in fact, we’re packaging pretty much everything,” said Bob Czarnecki, Program Manager of Refrigeration for Campbell Soup Company. “We design our own packages and have them built. I’m using packages on every job I do and I’m doing that industrially.”

Czarnecki added that most of Campbell’s package systems are centralized, designed for minimum charge and range in size from 75 to 600 tons of refrigeration.

“Very few companies are manufacturing standard packages, I would much rather buy a catalog package than design my own,” he said. “It’s an evolving field with a lot of different players and all these things are up in the air. Everyone is looking at this. The industry needs to develop full [package] ranges to meet different needs.”

But where and how the variability of those different needs will be addressed in an industry that has traditionally demanded highly customized approaches to design remains to be seen.

For proponents of natural refrigerants, plug-and-play style systems seem the obvious choice to replace synthetics in new commercial markets dependent on traditional HVAC contractor service arrangements.

But for large industrial applications, where package systems have not yet evolved to meet the capacity and cost thresholds that would make them attractive to a critical mass of customers, the industry is still reliant on a traditional design build model.

Between those two extremes, two seemingly conflicted forces are at work. The demand for project customization is strong as ever. But the need for product standardization is growing.

While project design has traditionally remained the realm of the industry’s contractor base, equipment suppliers are beginning to see the opportunities to design full ranges of standardized packages.

“Complete package systems have a great potential to be a disruptive technology for the industrial refrigeration market,” said Kurt Liebendorfer, Vice President of Taneytown, Maryland, equipment manufacturer, Evapco, Inc. “Manufacturers are taking on package systems for the food and beverage industry,” where they haven’t before.

Typically, package systems have been engineered after a customer specifies a project, he said. “But we’ve spent a year-and-a-half engineering them to 100 percent. Now we’re asking ‘What’s your application and how does it fit your need?’ It’s the difference between building a custom engineered package to fit a particular job and pre-engineering a family of products to fit industry-wide.”

While total product line standardization may meet at least some of the demand for package systems, there is also a growing reliance on design build contractors to apply standardized design in more specific ways, which could lead to a model that depends more heavily on semi-customizable package products, said John Collins, Industrial Sales Manager for Zero Zone Inc., a Waukesha, Wisconsin-based equipment manufacturer.

“The market is changing, and the expectations for manufacturers to change with it are high,” he said.

Collins added that his company has focused its efforts on providing semi-customizable packages based on a standard design platform. “We have developed our system concepts over decades of experience serving the commercial sector with synthetic refrigerants,” he said. “Commercial equipment manufacturers are now expected to provide natural refrigerant solutions in markets that haven’t demanded them before.”

One of those solutions, he said, is readily available pre-engineered equipment packages using small charge technology designed for ammonia and CO2 .

“The systems we have running with natural refrigerants show that they are a real solution for retail and other commercial applications. These customers expect an engineered system that operates with minimal user interface, and does not require on-site maintenance staff,” said Collins.

Minimizing user interface and on-site maintenance takes a high level of communication between engineering and customer groups, he added. “That is not high-tech but it will always be the key to successful projects. The need for highly qualified contractors is a critical part of this picture. End-users are focusing in-house resources on their core business functions and are looking to consultants and contractors to handle most other technical and operational issues. With the shortage of engineers and designers in our industry, a standardized package system is a good solution.”

As companies that are not manufacturers assess their role in the design, distribution and service of prefabricated package systems, the degree to which they will be customizable is emerging as a defining factor in decisions to adopt, or not adopt a new business model.

“We design, build and install systems in-house because we’re very particular about where we want these systems installed and operated as we want to be able to control the design criteria associated with that,” said Eric Brown, President of Peachtree City, Georgia, design build contractor, ALTA Refrigeration. “We design and install systems that meet our customer’s specific needs while trying to maintain consistency and reliability.” Brown said ALTA’s packages are built based on several models the company has designed and currently maintains, and added that it would be unlikely that ALTA would use other package systems on projects.

Brown said ALTA, which also builds large central industrial ammonia systems, has developed a package that uses a synthetic refrigerant to meet the demands of its distribution warehouse customers.

“We see design build constructors as being the closest thing to package designers,” said Brown. Despite the standardization available “you can consider everything in our industry custom to some degree. Reputable design build constructors are the closest to the demands of the project, so they’re the best choice to come up with the design and carry out the installation of a project.”

Evapco’s Liebendorfer echoed that sentiment, pointing out that many contractors will prefabricate system design. “Contractors have long been involved in designing custom package systems because field built systems are very labor intensive. So packaging for them has been an option on specific projects, to deal with labor and cost issues in the field.”

While manufacturers may be taking on a greater role in package development, the proliferation of catalog-type systems also presents new opportunities for contractors, he said.

“We have a heavy reliance on contractors to install the package systems and provide service and maintenance. However disruptive the new packaged solutions are to them, this is how we go to market with 90 percent of our customers. Helping them become a part of that adoption is essential to everyone’s success.”

Liebendorfer said standardized package systems in general will carry with them new service and maintenance requirements that manufacturers will depend on contractors to help them meet.

“We’re committing heavily to refrigeration contractors. This path will not be a success without them,” he said, adding that his company is launching a service partner provider program to support its package product offerings.

Nevertheless, contractors will likely avoid such a service model despite a greater demand for standardized packages, instead taking projects that make greater use of their design capabilities for clients, said Walter Teeter, CEO of design build contractor Republic Refrigeration in Monroe, North Carolina.

“I don’t see the average contractor taking on a role that is strictly service provider for a manufacturer. The majority of the design work of the industry is being done by the contractor base. As long as they have business doing something else – like design and field installation work – they will not be in that role.”

As more and more companies enter the market for package systems, the variety of standardized systems available, and the opportunities to support their design, maintenance and installation will grow, said Derek Hamilton, Business Development Manager for San Francisco, California, package manufacturer, Azane Inc.

“There are a variety of systems out there already, and more and more companies are using them to enter new markets in different ways. Along with that, there will be different levels of contractor involvement needed to support those systems, and varying levels of involvement in their installation,” he said. “I do think that the advent of package systems is going to change how contractors as well as manufacturers operate on these types of projects, but we’re in a phase at the moment where the industry is learning about what that will look like.”

Meanwhile, end users will be watching – and waiting – for a model to emerge that can deliver the kind of standardization that will help them reduce charge, address a growing shortage of engineering talent and allow them to focus more on their own core business, rather than the business of refrigeration.

“I need big packages, small packages and everything in between,” said Campbell’s Czarnecki. “Every design build contractor will make you a package, but that’s a one-off project. The question is what companies are out there making [standardized or standardize-able packages], and the answer is not that many.”

“The bottom line is that package systems are the prevailing technology for us,” said Newark’s Von Dohlen. “They will help end users who are not in the refrigeration business to get out of it, and focus on our core business.