Today’s equipment is ever evolving. Innovation has indeed added more complexity than ever for the building components industry. Capital expenditures should be planned and calculating rather than intimidating and emotional. There are several key steps entrepreneurs and businesses should consider to narrow the search for capital equipment purchases.
Identify current needs, current limitations, future needs
Making a list to identify the current needs and the future expectations of the business can help keep thoughts focused. Focusing on the business plan as whole is instrumental to success. Creating a micro business plan around the new equipment contributes to the corporate business plan as a whole. Business plans available online are extremely helpful in narrowing the search. Is it high production need, or a specialized production need? Does market volume fluctuate? Could the process be outsourced? Can the service be marketed to multiple customers? Once your goals are established, then you can begin to research industry offerings
Compare the industry’s product offerings
New equipment versus used equipment can often be a personal choice. The criteria determined by the preset goals will frequently dictate automated versus manual processes. Industry publications and advertisements can help identify key players and product offerings from industry experts. Some vendors may offer broader product ranges than you may realize, so websites will show what they have available and are a great source for up to date information.
Ask for demonstrations and request referrals
Viewing the equipment in person can often improve the project’s success. Sales staff tend to overlook smaller details that may be cumbersome for a specific company. When site visits are not an option, always speak to a reference. Candid conversations about the longevity, service, and support will further contribute to the overall success.
Assess equipment and installation costs while considering the transition period
Having been in the equipment industry for nearly 30 years, I know some customers may be caught off guard by the costs that can be associated with the installation and transition costs. Inquire about the vendor’s responsibilities and the customer’s responsibilities. Ask plenty of questions. Interview the references they have provided. Rarely will a corporation be at full capacity on day one. Preplanning and working extra hours can go a long way with customers as production will likely be slower at startup.
Financing and the source of capital
Is it better to pay cash, lease, or finance? Talk to the accountants, they can advise on the benefits of each. The building components industry is a bit unique. For truss equipment, some plate companies finance a portion of the equipment into the nail plate costs. This may have some distinct advantages but it may have some disadvantages too. Corporations don’t like to lose money and it’s not free. Have someone in finance or the accountants explain the costs. Understand both the short term and long term ramifications to any contract. Make certain the business plan’s long term and short terms goals match up with contracts that may limit the corporation’s abilities.
Consider training options
Training will slow the production process if you are replacing equipment. Even the addition of new equipment will hamper production. When training multiple shifts, if possible, overlap their schedules as they feed off of each other prompting questions and shortening the training timeline. Be prepared, if production files are needed, have them ready! While production will take a hit, focused training sessions are ideal. Again, plan for operators and key staff to offer slower production rates. We often train the supervisor, which has limited value. It is always recommended to train both staff and supervisors at the same time, but then let the operator lead. Once the trainer leaves, the operators need be comfortable and up to speed, since the supervisor has other responsibilities and will not be able to commit all of their time to one process.
Service contracts and total costs of ownership
Undoubtedly, post-sale service is continually overlooked and will affect overall success and the production capacity of the business sector. Rarely am I questioned about our service contracts or post sale service, even though that is one of the most important aspects to our business and the success of our customers. Long term success depends on the “uptime” of each machine. How do you minimize “downtime”? Again, plan for it! Service contracts can strategically minimize the downtime. Having a routine maintenance program will help minimize that downtime. However, expert knowledge is the absolute best option.
A proper service contract will:
- Document inspection of the equipment
- Establish a baseline given the age
- Note deviations from the norm
- Document maintenance performed
- Establish a new baseline
- Recommend future maintenance items
- Recommend parts to be held in your local inventory
- Review the improved efficiencies
- Require an approval signature.
The men and women who perform service contracts are trained professionals and will know what has failed and, more importantly, what will fail. They likely spend more time in a month working on the same equipment than your local staff does in a year’s time. While the company pays for the expert knowledge, it is greatly rewarded annually in uptime hours. Planning the downtime is far less intrusive on daily production. What takes four hours or three days over the phone can often be accomplished in an hour with highly trained staff. Furthermore, the catastrophic downtime can often be avoided with an annual or bi-annual service contract.
So what equipment should have a Service Contract? Is it needed for every piece of equipment? The answer is: it depends.
- 1. Is it software driven: Yes.
- The skills required to troubleshoot all aspects of the equipment is likely beyond the capability of most maintenance staff. They need knowledge in software, electrical, electronics, and mechanical.
- If you’re lucky, they have the ability to troubleshoot two of the above four.
- You’re blessed if they troubleshoot three of the four.
- Four out of four is virtually impossible to find and they should be one of the highest paid in the company.
- 2. Is it precision: Yes. Let’s use a manual component saw for example and assume production running.
- Prompt the operator with open-ended questions
- Is the saw functioning properly?
- Is the saw cutting precise?
- What does the saw not cut properly, and why?
- What are your top 5 recuts and why?
- How often does this happen?
- How much time is this costing you?
- What problems does it cause for you?
Now follow the cut timber to the build tables and ask the similar questions. It is likely the answers will differ, at least slightly. Once the data is gathered, calculate your monthly or annual loss due to the inefficiencies. Remember, calculate the “Opportunity Costs” as a service contract is optional.
- 3. Is it instrumental for production: Yes.
- This time, calculate the lost revenue due to downtime. If this has been the case in the past, you’ll likely have a rough guess of how many hours of production you will lose.
- Have you sent staff home due to equipment failure?
- Has staff been pushing a broom endlessly?
- How will missed production deadlines affect business?
Service contracts are an ever-growing sector of our business. The increased demand to minimize downtime for our customers is a top priority. Whether it is new equipment or older equipment, the company you choose will affect your business long term. Not only should they be able to offer you service up front during the sale, they should be able and willing to offer you service well into the future.