Gearing up for an equipment purchase
Get the most bang for your equipment buck by first defining the issue you need to resolve and then investing in the equipment that will solve it.
Specialty Fabrics Review | July 2012
By Jill C. Lafferty
Few end product manufacturers (EPMs) are in a position to go on a spending spree these days, but they still need to replace or upgrade equipment, especially when a new piece of equipment or related software holds the potential to streamline a process, lower labor costs, make a company more competitive and improve the bottom line. Getting the most value out of an investment requires not only purchasing quality equipment but also a having a keen awareness of what a piece of equipment can do for a company’s overall financial picture.
That’s why Steven McLendon, executive vice president with Tri-D Technologies of Toronto, Ont., Canada and Atlanta, Ga., takes a consultative approach with potential adopters of the company’s ExactFlat and ExactFlat Design Studio software. McLendon’s company works with both equipment manufacturers and the end users of its “screen to machine” software, which integrates with popular CAD programs such as Inventor®, SolidWorks® and Rhinoceros® to turn complex 3-D designs to 2-D production-ready patterns, including a complete bill of materials with cost, in minutes.
“We will ask [customers] quite directly, ‘What is the business problem you are trying to solve?’” McLendon says. “How are you doing [a particular production step] today? What are your challenges? Do you feel this is an area where you should improve? Does it matter to you that you improve?”
As an EPM, Christopher Whitlow, owner of Event Resource Group, Atlanta, Ga., and partner with two additional companies, Spandex Rentals and structure | LINERS, has come to expect this kind of a partnership from his equipment suppliers. In the past, Whitlow purchased equipment from a single source, without a lot of guidance from the manufacturer, he says.
“We have since found an equipment supplier that comes to us and understands what we do in order to help us make good buying decisions,” he says. “The ability to help manufacturers find the right equipment, whether they sell it or not, is the most important thing suppliers need to do.”
Murphy’s law—if something can go wrong, it will—should be enough to encourage EPMs to approach equipment additions, replacements and upgrades strategically instead of waiting until a piece of equipment fails at the worst possible moment. Jason Bartusick of Media One Digital Imaging Solutions LLC, Garden Grove, Calif., a supplier of large-format printing solutions, lists three situations that should prompt an EPM to begin to research an equipment purchase:
- A current piece of equipment isn’t performing as it should and requires frequent repairs.
- Major technological advancements become available that can make a company more efficient, offer customers a better product and/or lower labor costs.
- A company is subbing out work to a third party, when having the equipment in-house would provide more internal control of the product and make the company more profitable.
At Denver Tent Co., Denver, Colo., the event that initiates a major equipment purchase is often winning a bid on a specific project that justifies the expenditure. “If that one project gets X percent of that machine paid, then we are more inclined to pull the trigger,” says general manager Jeff Greene.
Whitlow begins to research a possible equipment purchase whenever a constraint in the manufacturing process is discovered. “We continually evaluate our production times for each process and correlate that into real dollars for production costs,” he says. “When we find that a repetitive process can be performed by automation, we look at how many times a day, week or year we do that same process and equate the production dollars to a real ROI on the investment into automation.”
Bells, whistles and price
As price conscious as everyone must be these days, one might assume that the sticker price is the first thing a potential equipment buyer looks at. But EPMs are more likely to evaluate features first, especially if the “bells and whistles” on a piece of equipment have the potential to provide long-term savings over current processes in their shops.
Jeanine Hall Lerow of Hall Dielectric Machinery Co. Inc., Rock Hill, S.C., which manufactures customized RF heat-sealing machinery and RF welding systems, says that her company helps its customers determine what they need first, based on their specific product.
From there, equipment price can be fine-tuned, for example, by balancing manual versus automated features. “It all boils down to their production and how many parts they have to make per year,” she says.
Edward Hunzinger Jr., MFC, co-owner and president, Evanston Awning Co., Evanston, Ill., watches prices closely and usually doesn’t invest in new equipment until a piece in his facility needs to be replaced. The family-owned business keeps a wish list and sets aside cash when feasible. By doing their homework and being patient, they take advantage of times when prices drop, particularly with graphics equipment, when something they’ve had their eye on becomes last year’s model.
“We try to get our costs replaced as quickly as possible,” Hunzinger says. “When we purchase an item we follow it along in production, what work is going into it and what work is going out, how much of a profit or savings we’re making on it. The quicker it pays for itself, the happier we are.”
New versus used
Everyone loves a shiny new toy, but with little leeway in their customers’ budgets, many equipment manufacturers and dealers also offer used and refurbished equipment, frequently attaching a limited warranty.
Bartusick generally recommends new equipment for the textile market, as printing on textiles is challenging enough without having to introduce potential issues with a used printer, he says. Still, he doesn’t discount used machines entirely.
“If it’s a really good machine that doesn’t have a lot of usage on it, and we know the shape that it’s in, we will refurbish the equipment and sell it as a refurb,” he says.
One argument for buying used equipment, besides price savings, is when a shop already has several units of a piece of equipment, and adding a secondhand piece keeps a set of equipment uniform, according to Joe Friedlander, president of Friedlander Sewing Machine Co. Inc., Greenlawn, N.Y. Quality should be the number one priority, and price should be secondary, he says.
Whitlow prefers to buy new if a certain piece of equipment is the only one he will have in his facility. However, Event Resource Group recently purchased a used piece of equipment to handle occasional overruns. “We have several backup machines so that in the instance of a main production machine going down, we can continue to manufacture to meet our clients’ need-dates,” he says.
For customers of Hall Dielectric, one of the advantages of a used or refurbished machine is that it’s ready to ship, as opposed to a new machine that can takes months to manufacture. This is a good choice as long as the customer’s product isn’t so unique that it wouldn’t be a good fit for a standardized machine, Lerow says. “Everybody in the market right now wants to save time and money,” she says.
What can you do for me?
While price matters to Denver Tent, getting the most value out of a piece of equipment weighs more heavily in the company’s purchasing decisions. “We’ve done as much [budget] cutting as we can,” Greene says. “You can’t keep relying on cutting. The value is just huge to us now.”
Greene describes a situation in which an expensive part wasn’t working correctly. The part was returned for testing, after which Denver Tent would be reimbursed. But in the meantime, Denver Tent had to purchase another part, so it was temporarily out the cost of two units of a pricey part. “I appreciate where [the manufacturer] is coming from, because I think they’ve been burned in the past, but in this environment when cash flow is extremely tight, any kind of creative terms, such as net 30, would be appreciated,” he says.
Experienced salespeople with a broad knowledge of the industry, who can help customers source items such as discontinued hardware, provide the value-added support that EPMs need day in and day out, Hunzinger says. “The salespeople from our suppliers are the biggest help we have in this industry,” he says.
McLendon of ExactFlat says that the mantra within his company is that every step should bring value to all parties, which the company achieves through white papers, webinars and other educational efforts with both end-product and equipment manufacturers.
“There’s no such thing in my company as a courtesy call because nobody has time for that anymore—the person making it or the person receiving it,” McLendon says. “You’ve got to bring value.”
In the end, getting the most out of an equipment investment may depend on determining what an EPM values most in the production process: speed, accuracy, quality, labor savings or time savings. Event Resource Group is currently having a custom cutter manufactured, and Whitlow predicts the machine will provide a huge advantage in production capacities and time savings.
“Time is the one thing you only get once,” Whitlow says. “It must be used wisely.”