Diamond Tool Refit
The modern construction industry uses concrete extensively. Utility piping, and in the case of industry, process piping, must penetrate the concrete structure. In earlier times the practice was to predictively form openings during the concrete forming process, leaving holes for later installation of pipes. This, however, provided no easy solution to later alteration of facilities.
Furthermore, the techniques for forming openings before pouring concrete created their own problems. Sleeves installed in vertical forms for walls often shifted out of the desired location during the pour. They often were accidentally filled with concrete rendering them useless. Similar problems manifested during floor pours.
The solution to these problems was the invention of the concrete core drill which, with the advent of diamond bearing cutting surfaces, yielded an advantage by reducing the amount of labor it takes to create each hole. In addition, post-pour locating of holes is highly accurate, especially where high rise buildings are concerned. The first hole is located at the top floor of the building, cut, and a plumb line is shot to the next lower level where the process repeats. Concrete core drilling is a significant specialized contracting business in the construction industry.
Cores are also cut in roadways to destructively test the material of the pavement both in newly built roadways as well as predicting the remaining life of aging pavements.
A concrete core drill has a back plate that has a large nut welded to it at the center. A hole passes through the back plate at the nut in order to allow lubricating and cooling water to trickle through. The body of the core drill is a hollow mild steel tube of appropriate size, thickness, and length. The working end of the core drill has diamond bearing curved segments brazed to the barrel. The core drill is mounted on an electric or a hydraulic motor. The diamonds in the segments abrade the concrete with the resulting cuttings carried out of the cut by water as slurry.
The diamond bearing segments are sacrificial, wearing both in height and thickness with use. The wall thickness of the barrel also wears immediately adjacent to the segments. There is usually a loss of about half an inch in length during the refurbishing process.
Historically, those in the business of core drilling have returned worn out core drills to the manufacturer in order to refit them with new diamond bearing segments. However the value of returning the most commonly used sizes, that is 3", 4" and 6" core drills, has a weight to value ratio making it cost more to ship, using commercial services such as UPS, than the savings allows. As a result, sizes smaller than 12" diameter have historically been scrapped when they no longer function as intended.
We have calculated that:
1) Scaling the operation to pick up and deliver larger quantities of core drills by private truck makes such handling affordable when compared to the cost of shipping core drills one at a time via common carrier.
2) Mixing the small core drills with larger ones yields a product blend which distributes the costs across a range of sizes which, from a space standpoint, can be nested or telescoped one inside the other, minimizing the amount of space required.
3) For this phase of development, our market areas are the Chicago/Milwaukee corridor, the Detroit region, and the Minneapolis, St. Paul, and Rochester region. Each of these market areas is roughly equidistant from Iron River. Each is about a good day's drive by truck, making pickup and delivery feasible.
We have established our pricing such that a contractor will have about 20% savings as opposed to buying new high quality core drills. We will offer door to door service for any order resulting in billing in excess of $3000. That's equivalent to approximately 20 core drills of 6" diameter. Larger core drills have more diamond bearing segments, so ultimately, with a mix of sizes, the minimum order profitably securing door to door service will approximate 10 to 12 core drills.
In most instances our business is COD. There will be no bad debt since our contracts stipulate that failure to redeem refurbished product will immediately make it forfeit and available for sale to others. The only appreciable difference between a refurbished core drill and a new one is paint that is destroyed at first use.
In the Chicago marketplace in recent years, the total purchase of core drills has been in the range of $ 1 million. This is based on Encotech Construction Services of Glenview Illinois annual purchases divided by their market share. General contractors using their own personnel to core holes is not included in this study but that's estimated to be an additional non-targeted market adding approximately 5% to the total reported. Low volume operations of that sort tend to use low price core drills of no interest to Diamond Tool Refit.
In our study we found that approximately 90% of the small core drills can be refitted with new diamond bearing segments approximately 5 times. There is, however, a 10% reduction due to damage by the user corresponding to each potential refit iteration. Small owner-operator firms experience fewer damage losses.
On this basis, the available refit income for Chicago becomes 1 million times 90% reusable times 80% cost vs. new times 50% (half replaced by new annually) times 75% market share yields $270,000 annual sales to the Chicago marketplace.
Without extensive research, one can reasonably predict similar performance for the other two market regions, resulting in approximately $810,000 annual sales using 2007 dollars for this particular operation. However, additional strategies are contemplated which will increase this total.
Once the refitting operation is suitably established, we expect to undertake manufacturing new core drill bits, which will more than double our sales since that business will not be limited to the three market regions mentioned above. Concurrently we anticipate additional business refitting larger core drills from other regions where commercial shipping is a viable option because the value to shipping cost ratio is favorable. In this, we will be competing with manufacturers who are in the high overhead cost region in California, providing us with a pricing advantage.
Achieving our ideal business targets will provide employment for no less than 15 individuals at the five-year point considering May of 2007 as a starting point.
We have, to date, devised tooling and techniques to perform the work in an efficient manner. This has been done in "borrowed spare space" in an active machine shop, owned by one of the principals in this business. The borrowed space is not suitable as a permanent home for Diamond Tool Refit.
During the development phase we have tried a variety of approaches and created a manually operated low cost machine that continues to evolve. We are using manual mechanical indexing to position the replacement segments on the barrel and oxygen acetylene heat for brazing. Future automation improvements will improve on the amount of time presently required to complete the tasks, but this manual operation is sufficiently profitable to assure a viable business.
To date, this business has been funded out of pocket by the principals, William J. Vajk and Eli Heikkila. I anticipate that there will be a period during the growth of this business that revolving loans may be needed. We order diamond bearing segments only to the extent that we have immediate use for them and make payment taking advantage of all available discounts. Quality segments manufactured in the USA are available quickly after an order is placed. Warehousing of segments is not anticipated. The operation is currently housed at Lake States Engineering, 977 Lally Road, Iron River, MI 49935.
Below is the ad I have placed in Northland Publishing's "Summer Guide." The photo shows a 14" core drill mounted on our dedicated machine near the end of the refitting process. I have included this as illustrative of the central process of the business as it presently exists.
Revised by William J. Vajk on 26 April 2007
