2016……Wait….What?!?!

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Issue #09198 - January 2016 | Page #30
By Carl Schoening

That was my reaction when I realized last week that 2016 was right around the corner. Well, actually I hit a stark realization around the middle of December when I had a birthday and could not figure out how I got here. You know, to this place in time. It seems like yesterday that I was a hairy legged punk kid racing around on my motorcycle. But, that is another story.

So, sitting at my computer to write this article, I started thinking about how we all got to 2016. The last 10 years had a little of everything. We were all riding high when economic disaster struck. Then came the lean years where we all tried to figure out why we bought that last brand new piece of equipment instead of looking at good used equipment…..oh yes…..I remember…..we were riding high…..making money….letting ego get in the way of sound business decisions…….that’s it. Then we all focused on pulling in the reins and worked hard at staying in business. We learned how to do much more with fewer people. Everyone became more productive and more knowledgeable about their business. Instead of making money by accident we became experts in cost control. We all learned how to manage debt service and how to make a profit in the toughest of times. Then as things started to come back economically we would not let ourselves be deceived. We were absolutely going to be more cautious. We were going to maximize efforts with existing equipment and be certain that we needed more before even looking at a purchase. Could we squeeze another board foot of production from existing equipment? So, here we are.

In speaking with a number of equipment manufacturers and salespeople I have learned a great deal. One of the things I learned is that I have a friend that must be an equipment savant. He called it way before anyone else. He said, “Look, everyone has been holding off on buying equipment. When the economy stabilizes the first equipment to be purchased will be saws. They are all using older technology and they will want to get more productivity with a newer saw.” He was correct. First, all of the used saws left the market. They sold out quickly. A lot of good solid used equipment went overseas. It didn’t take long before orders for new saws started piling up. All of my friends in the saw business tell me they are 9-18 months out on saw deliveries. I know, right?......it sounds absolutely insane. My “savant buddy” explained his thoughts further by saying, “Pressing equipment, like gantry systems, will last a while longer, if maintained properly.” That is true. Most pressing equipment will outlast a saw. But, now that we have some positive growth behind us, component manufacturers will start looking at upgrading presses and other production equipment. Finding the right equipment is the primary concern.

In the past we all witnessed companies automating simply for the sake of automation. They didn’t really improve their throughput, they just automated and capacity remained static. A lot of companies automated before the downturn and took on a pile of debt. This forced some of those companies out of business. They couldn’t manage the debt load when the economy moved in a negative direction. I place a lot of the responsibility on slick salespeople that didn’t evaluate the need of the manufacturer. They were simply making a sale. Of course, the buyer must take some responsibility as well. Evaluate your need. Do you really need the most automated, most expensive piece of equipment? What is the return on investment? Can you reduce labor with the new equipment? Will the new equipment increase productivity? Do you have other bottlenecks that limit your productivity? These are all questions that must be asked and answered before deciding on any purchase. That goes for buying new or used equipment.

There are a lot of very bright people out there working as consultants that can provide an objective outside perspective. Yes, it costs money to have consultants provide an evaluation and recommendation. But, it could be far less expensive than overreaching on a piece of equipment that isn’t going to provide the result you are trying to achieve. Reach out to your key people internally and ask for a solid reason for a new piece of equipment. Also, use your relationships with key suppliers for their opinion. If they have the best interest of your business in mind they will give you good solid information and not try to simply make another sale. Many of your suppliers have worked on both sides of the industry and have experience that could be very helpful in evaluating needs.

So, there we have it. How we got here and how we should move forward. Move deliberately. Move cautiously. Make investments in your business carefully and with as much input as you can. Be certain that if the economy takes a step back (as it most surely will) that you have your debt structured in such a way that you will be able to remain in business and profitable. It all sounds pretty simple. Make a sign and post it in places you will see it every day. The sign should be simple. Mine simply says, “Think”. Those of you that know me must be wondering about that……now, about that motorcycle story…..

Carl Schoening

Author: Carl Schoening

VP Business Development, Eagle Metal Products

You're reading an article from the January 2016 issue.

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