Prodigal son: Ira Lapides returns to run his family's medical parts supply business just in time to reap benefits as the firm's niche in the industry shows rapid growth. (Small Business).

IRA Lapides still remembers his high school afternoons. He would hop on his bike and ride to his family's Chatsworth business where he would help package aftermarket parts for medical, dental and laboratory equipment.

"Instead of flipping burgers, I came here," recalls Lapides, now 40. "I never wanted to work with my parents again. I got along with my parents, but who wants to work with their parents full time?"

Seven years ago, however, Lapides wound up doing just that, leaving a high-paying but unsatisfying executive job in managed care to help run Replacement Parts Industries Inc. Three years ago, as his parents moved into retirement, he began running the business largely on his own.

Since 1995, Replacement Parts has grown by more than a third, with revenues projected to hit $4 million this year. The company supplies 5,000 customers, including repair shops and hospitals, with more than 2,000 aftermarket parts for equipment including sterilizers, infant warmers and dental drill units.

There is a demand for such parts because many older medical devices need to be serviced, and after a warranty expires, original equipment manufacturers want to push new products rather than repair old ones.

"The OEM's are interested in selling a $5,000 sterilizer, not a $25 door gasket. You have to sell a lot of $25 door gaskets to equal a $5,000 sterilizer' said Lapides, who has an MBA from UCLA.

Parts run from less than $2 for nuts and bolts, to $25 for gaskets, to $700 for pressure transducers. The company sells them around the world -- even on the high seas, where they have been installed on medical equipment on U.S. aircraft carriers.

'Reverse engineering'

Lapides father, Al, a mechanical engineer who worked in aerospace, started the company as a sideline with his wife Sherry in 1972. They knew nothing about medical equipment but had a friend who made a good living manufacturing replacement parts for butchers' equipment. Next door was a medical equipment repair shop whose owners complained they had difficulty obtaining parts from original equipment manufacturers.

The company designs replacement parts using a process called "reverse engineering," which involves examining an existing manufacturer's part and then trying to figure out how to copy it, a process that can take up to six months. Then the product is contracted out among 150 manufacturers. The company stays away from remaking patented products. (Most parts are not patented, only the machines themselves are.)

"It's almost more difficult to reverse engineer a part than to design it in the first place. I don't know all the engineering assumptions that were made, what the tolerances are," said the senior Lapides, 74.

For years, Sherry, 69, ran the business full time with no hired help, while Al, whose primary business was an executive search firm, did engineering on the side. Finally, in 1981, the company hired its first employee, and in 1985, with sales reaching $800,000, Al decided to focus full time on the business.

It grew several-fold over the next decade, steadily expanding on various locations on the same street of an industrial section of Chatsworth. The couple realized that with all the medical equipment in use they could carve a niche with little competition. Several companies buy surplus equipment parts and resell them but not many design and distribute them like Replacement Parts.

"The medical equipment service industry is a $6 billion a year industry," said Ed Sloan Sr., who knows the Lapides and runs a company in a Nashville suburb called Remedpar that specializes in refurbishing medical equipment parts. "There is an enormous amount of potential."

Same business model

Replacement Parts works closely with its customers to determine which parts are in demand, staying away from machines still on warranty and big diagnostic imaging equipment, such as MRIs, that manufacturers service under long-term contracts.

New parts are developed every month or two. The younger Lapides says he insists that quality match that of the original equipment manufacturers, since the company's survival depends on its parts. It also will try to improve parts that are known to fail a lot.

Don Rossi, a partner in ATECH Sterile Solutions, a Gardena repair shop that specializes in sterilizers, says he buys the majority of his inventory from Replacement Parts. "When we get an (original equipment) part failure that is common they will ask how they can improve it," he says.

Lapides acknowledges that the company is growing slowly, using mainly internally generated cash, but he does not want to take in outside investors because that would mean giving up control. Two original silent partners of his parents were bought out a few years ago, and Lapides now owns the company with his father.

He said that the company's revenue generation model is very simple: the more parts it makes, the greater its revenue.

RELATED ARTICLE: PROFILE

Replacement Parts Industries Inc.

Year Founded: 1972

Core Business: Designs and distributes aftermarket replacement parts for medical, dental, laboratory and hospital equipment.

Revenues in 2001: $3.8 million

Revenues in 2002 (projected): $4 million

Employees in 2001: 23

Employees in 2002: 24

Goal: Sustainable and manageable annual growth.

Driving Force: Keeping aging but valuable health care equipment operational by providing replacement parts often no longer available from original equipment manufacturers.