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Rethinking equipment purchasing strategies

Traditional thought about investing in equipment was upended in 2020. How will the pandemic lessons factor into equipment purchases in the future?

Feature | June 1, 2021 | By: Jeff Moravec

Gilman Gear in Gilman, Conn., pivoted from making sporting equipment to surgical gowns during the pandemic. Here, employee Colton Fuqua pulls off gowns as they are being cut by an Eastman cutting machine. Photo: Gilman Gear.

Of all the adages that could be applied to the past year, “Necessity is the mother of invention” may be the most appropriate for the fabrication business.  

Fabricators, and the equipment manufacturers that supply them, learned more about pivoting than they probably ever wanted to know. The conventional wisdom of thinking strategically about equipment purchases over a longer term and paying attention to ROI often took a backseat to decisions that were made simply to keep the doors open. Business choices were made because they had to be made, not (always) because they were desired.

In 2020, new lines of business for many fabricators—such as personal protective equipment (PPE)—resulted in expenditures on new equipment to meet the intense volume required, retraining staff, and sometimes hiring new staff. But if that’s what it took, so be it, many fabricators decided—even though there was the worry that when the pandemic eased, they could be stuck holding the bag, retooled to manufacture products no longer in high demand.

Neil Gilman, president of Gilman Gear, a sporting equipment pioneer and manufacturer in Gilman, Conn., knew early last year that with most sporting activities shutting down and the state’s governor threatening to close “nonessential” businesses, his company could be forced to lock its doors if it didn’t make some radical changes. 

By the time summer was over, “we’d basically reinvented the company,” Gilman says.

The biggest piece of that was a contract with Yale New Haven Hospital and the state of Connecticut to make surgical and isolation gowns. But it could only be done with a substantial investment in new equipment. Gilman bought more than a dozen serging and cover stitch machines, allowing the company to go from making 180 gowns per week to 10,000 per week (where it remained as of early 2021). 

As part of Gilman Gear’s work making PPE during the pandemic, employee Consuelo Perez assembles an isolation gown using a Juki serger. Photo: Gilman Gear.

The right decision

Gilman Gear faced another production obstacle at the outset, though—trying to cut material on a table by hand, which allowed only 40 layers (or 400 per day) at a time. But before he got the checkbook out for another piece of new equipment, Gilman dusted off an Eastman cutting machine that had been mostly unused since being purchased to cut football tackling rings four years earlier when the market was hot for that product. 

Without making a major investment, Gilman could cut 350 gowns per hour (2,800 per day), which made the pivot well worthwhile.

“If we didn’t have that machine, we would not be in this business because we wouldn’t have been able to make the gowns fast enough, and the lead time to get a new machine was too long,” Gilman says. “We had to respond immediately.”

In Gilman’s case, he had been an established customer of Eastman Machine Co., which made the serging machines (as well as the cutting machine). But what about those fabricators who lack established relationships with equipment suppliers?

“The web has enabled all of us to tell a lot about products,” says Jeff Sponseller, executive vice president at Miller Weldmaster, which makes fabric welding machines in Navarre, Ohio. “Our research shows that by the time a customer calls, they are 70 to 80 percent educated.” The result is more knowledge in less time, with less expense—and the ability to make the right decision about equipment the first time. 

Many of Eastman Machine Co.’s customers were able to take advantage of the versatility of Eastman equipment to shift to new markets that opened up to meet new demands in the fight against the pandemic. Photo: Eastman Machine Co.

“I think a lot of our advantage may be the knowledge base that we have online,” says Sponseller. “For example, we have a lot of ‘how-to’ videos to help explain the technology. We focus a lot more on telling than we do selling. By focusing on the education side, it makes it easier for potential customers to reach out.”

Miller Weldmaster sells a large portion of its products to enable better automation, a major selling point for today’s fabricators, but he says the company always has to be aware of certain sensitivities.

“Sometimes the purchase of a machine is significantly less than what the cost of labor would be to produce the same products, but you have to be careful about how you explain that,” Sponseller says. “Let’s say you go in someplace and say the machine could help them eliminate five people—but the owner might say, ‘Two of those are my kids!’ No, you say, it allows them to work on higher margin products and frees up more people to get more done.” 

Sponseller also sees the company’s broad customer base as a real strength, particularly in markets like that of 2020. “For example, we sell a fair number of machines into the sign industry, and some of those customers don’t have a lot of work right now,” he says. “So that part of the industry is down, but any of our customers making home products—especially what I would call discretionary products, from RVs to awnings, seem to be doing pretty well.”

Mason Miller of equipment supplier Miller Weldmaster demonstrates the creation of a paddle board using drop stitch fabric with the T300 hot air welder. The company saw some of the markets that use its equipment slump during the pandemic, but other markets grew. Photo: Miller Weldmaster.

Preparing to flex

Eastman Machine Co., based in Buffalo, N.Y., also benefited from a broad product line and diverse markets, which allowed the company to stay open when much of New York was shutting down any “nonessential” manufacturing, according to Trevor Stevenson, Eastman vice president. 

“In a year like last year many of our customers’ businesses started to shut down and needed our help to repurpose their machines to meet new market demands,” Stevenson says. “What is remarkable about our machines is if you buy one for your standard application, you can use it for almost anything. Last year we had a lot of customers pivot into cutting PPE, and our sales and service team was there for them to assist in that change. We received a lot of calls on how to get prepared to cut this type of material.

“The machines are quite flexible, and it doesn’t take a lot to change them to cut different materials,” Stevenson adds. “Usually, it takes a simple tool change to completely adjust to new materials.”

Eastman is not alone in stressing the benefits of versatility in equipment. 

“We’re known throughout the world for quality and durability,” says Andy Arkin, strategic account manager for Zund America Inc. in Milwaukee, Wis., the North American headquarters of the Swiss maker of cutting systems. “But probably more important to the customer base is its versatility. You can have one cutting platform that can do a large variety of things just by easily changing out the tooling.”

In fact, says Arkin, the equipment’s flexibility was especially helpful for companies that had to make a quick pivot from printing graphics last year, as trade shows and other signage locations were shut down. “The world of the commercial printing industry was just flipped,” says Arkin. “Many of those customers who may not have dealt much in fabric at all found themselves all of a sudden asked to make face masks or cut face shields. The good news is they had the hardware in place ready to do it.” 

Zund America, a Milwaukee-based maker of cutting machines, was doing up to 10 demos a week before the pandemic hit. It switched to doing live video demos to help customers learn about its machines, such as this high-powered rotary tool for high-speed cutting of textiles and composites.

Sustainable market?

The question after 2020, of course, is how much of the PPE business remains with those companies that rose up to meet the challenge, no matter how it might have disrupted their normal operation. 

“We weren’t looking at ROI for the new machines,” says Gilman. “We were responding to a national medical emergency and trying to keep our employees.”

Now the market is being “flooded” by foreign PPE, and despite what companies like Gilman did, he says, “it’s impossible to compete against cheap imports.” The answer, according to Gilman, is a federal provision like the Berry Amendment that would mandate that when the federal government purchases PPE that it carve out a certain percentage for domestic manufacturers.

Otherwise, he says, some fabricators who met the challenge this time may think twice next time about pivoting away from their original product to address a national medical emergency, especially if it involves expensive equipment purchases or production line retrofitting.

“We’d like to sustain this new PPE business because we make a quality product and it’s used to protect the health and safety of our frontline medical workers,” he says. “And it’s created new jobs in our factories at a time of massive unemployment. We also consider what we are doing a matter of national security because the U.S. shouldn’t be dependent on foreign imports during a worldwide pandemic.

“But who knows what will happen,” Gilman concludes. “It’s up to the state and federal government to recognize this valuable manufacturing capacity and to protect it.” 

Jeff Moravec is a freelance writer based in Brooklyn Park, Minn.

SIDEBAR: Conserving working capital through equipment financing

Barbara Griffith, president of SCL Equipment Finance, has seen countless business cycles, but like everyone else, she’s never seen anything like the COVID-19 pandemic. COVID changed a lot of things, she says, but business in the U.S. has been resilient, especially for those who have watched their money.

“Businesses that had a hard time staying open usually lacked an adequate amount of working capital,” Griffith explains. “All the people I interviewed this past year were still in business because they had conserved working capital.

“Businesses need to look at not just what they need today, but what they need tomorrow as well, expecting growth in their companies,” she continues. “The sale of U.S. manufactured products is growing and that growth is strong. The world wants our manufactured products.” 

Right now, with interest rates relatively low, companies should be looking at what they can do to automate and improve efficiency, she says. “Equipment produces an income, and as it does so, it should pay for itself,” she explains. 

“If you take a $100,000 piece of equipment and you’re going to pay $2,000 a month for five years and that equipment is going to reduce your overall expenses and operations, you can keep that $100,000 within your organization for working capital,” Griffith says. “When a company purchases the $100k piece of equipment and finances it, they have then conserved working capital.”

SIDEBAR: With travel limited, equipment manufacturers find new ways to communicate

Doing business face-to-face is the tried-and-true way for buying and selling manufacturing equipment. Trade shows and demos in the home factory are especially valuable when you’re selling products that don’t exactly fit in a briefcase.

That’s all well and good—until a pandemic hits and travel is shut down.

“We were doing five to 10 demos a week,” says Andy Arkin, strategic account manager for Zund America Inc. in Milwaukee, Wis. “How do you accomplish that when nobody can travel?”

The lack of trade shows has been a big issue as well. “Trade shows allow us to travel to the customer efficiently and for them to be able to put their hands on the machines to see what is a good fit,” says Jeff Sponseller, executive vice president at Miller Weldmaster, which makes welding machines in Navarre, Ohio. “Not having them has hurt.” 

Still, he says, a quick pivot to live video meetings and conferences—as bumpy as the introduction to the technology for many might have been—seemed to provide something of a substitute. “There are also virtual demos, webinars, etc.,” Sponseller says. “At the same time, trade shows are always going to be critical for us. We just may rethink some of how we do them and what other ways there are to reach the customer.” 

Arkin agrees. “The technology available today to do live demos by video is amazing,” he says. “We’re now able to do it just as if you were physically there. Coming out of the pandemic, I believe that more than 50 percent of our demonstrations will be done that way. It just saves so much time for everybody.”

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