Volume 46, Issue 7 - August 2011

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Getting the Machinery You’re Paying For
Fabricators Have Options to Weigh When It Comes to Machinery Purchases Today
by Megan Headley

When Jim Richards, president of Total Security Solutions in Fowlerville, Mich., went shopping for a new abrasive water jet cutting system he wanted to expand his company’s capabilities. “We looked at the used equipment and the cost savings we really couldn’t justify the wear life on the machine compared to purchasing a new piece of equipment,” says Richards.

When Garibaldi Glass in Burnaby, B.C., opened its new facility in June (see page 16), it featured new tempering and heat soaking ovens, and equipment for the production of silk-screened ceramic frit, automated insulating glass units and structurally glazed components.

“The market requires the best quality and service and in order to keep up with trends and best cost of production,” says Chris Mobius, vice president of operations. “We decided to make sure we had the equipment to give us reliability and quality.” He adds, “We buy both new and used equipment regularly.”

Suppliers too are seeing mixed interest in both new lines and refurbished equipment as fabricators weigh the importance of the initial investment versus security in performance over the long-term.

Rick Dominguez of Jordon Glass Group in Miami finds “there is currently more demand for used equipment than new.” As he explains, “Everyone is looking for a bargain.”

Bob Spears, inside equipment sales representative for Salem Distributing Co. Inc. in Winston-Salem, N.C., says that the bulk of the company’s machinery sales during the past few years have been for new machines. “Every week we field calls from current customers or even prospective customers looking for good used edging/mitering machines. These seldom change hands though,” he says.

Dominguez notes, “In the relationship between price and service, more emphasis is being given to price these days. There are still several bargains in used equipment and some new Chinese equipment has hit the market at lower prices. But buyers beware of the hidden costs of buying used and spending the additional money to fix the machine or buying cheap and having little to no support in service and parts.”

That’s the catch. When purchasing used or discount machinery, fabricators in some cases may be sacrificing long-term service and maintenance for a low-cost option.

Warranty Assurance
When asked whether Total Security Solutions’ latest addition came with a warranty, Richards had to admit, “I don’t know.” But that’s because Richards has dealt with his supplier before. “The guy that I work with and I have a pretty good longstanding relationship, so anything that I’ve ever had as far as equipment if there’s a problem, he takes care of it. I have the confidence that if something were to burn out, he would stand behind it and make the manufacturer stand behind it,” Richards says.

Still, in today’s economy one can’t guarantee those longstanding partners will still be standing tomorrow. And even then, a warranty may cover only the bare minimum.

“Warranties are typically for one year,” Mobius says, adding, “it is possible to negotiate more warranty if their suppliers offer more standard warranties on specific parts. The vendors will match their parts suppliers’ warranties.”

Some used equipment suppliers aim to entice purchasers with their performance guarantees.

“If Salem sells a totally rebuilt machine, it comes with a ‘new machine’ warranty,” Spears says.

“If the equipment has been refurbished by us in-house we will offer a warranty,” Dominguez says. “But again, price seems to be such a factor that some buyers are willing to bet against needing a warranty to save additional dollars on used equipment.”

Fabricators willing to take on that risk need to be aware that there is little they can do to tie the machine’s operation to the conditions of their financing. If something goes wrong, and they’re without a warranty or other recourse, they may be left paying off a machine that’s not producing.

“Most of our machinery sales are sold on a delivered-and-installed basis,” Spears says by way of example. “The final payment is usually made payable when the owner signs off on the technician installation form at the end of the install. At this time, the local bank or finance company or the lease company is obliged to pay in full.”

When it comes time to invest, some machinery suppliers will work with customers to help find best way to finance their purchase.

Financing Options
“We work with fabricators all the time and help them make the business case as to why an investment makes sense,” Dominguez says. “Some folks pursue new equipment to alleviate a bottleneck in their current fabrication; others are looking to expand on a business opportunity. We talk to our customer to see what they are after and then make recommendations.”

Fabricators have a number of options available to them.

“Leasing is a great way to force your company to keep turning over the equipment as it ages out,” Mobius says. “What we do typically is lease equipment, as it frees up capital to do other things in the business. Leasing is a good thing, and if you look after your equipment you don’t necessarily need to end its life at the end of the lease. Leases can run four, five or even seven years and the equipment often outlasts the lease.”

“Financing is always a benefit with regard to cash flow,” Dominguez says. “Cash is always king, and companies need to evaluate the cost of financing versus the return on investment for the machine they are looking to purchase. Certain virgin markets for tempering furnaces, for example, offer great opportunities in profits that need to be accounted for when determining the duration of the loan.”

Unfortunately, as Spears points out, “Financing capital investments is a difficult matter these days. We do see sales that are financed through local banks, self-financed from within the company making the purchase, and also through several lease companies.”

Mobius says that, in some regards, now is the time to seek bank financing for an equipment purchase.

“It is easier now than many years ago as there is a lot of money available to businesses. Interest rates are at their lowest and getting a return on capital is not what it used to be when interest rates were higher,” Mobius says.

Spears, on the other hand, offers one piece of advice when it comes to getting financing: “Good luck.

“We have had more potential sales delayed or lost due to customers not being able to finance equipment. No matter what we hear from our administration or the banking community, it is very difficult for a lot of customers to get financed,” Spears says. n

 


5 Tips Before You Buy

A piece of machinery can be a big investment, and knowing exactly what you need will prevent it from becoming a big regret.

1. Examine Your Needs. Total Security Solutions knew it wanted to find a simple way to add value for its customers. “For us it was a next step in looking at how we could expand our product lines and capabilities,” says Jim Richards, president of Total Security Solutions. “We were looking at the possibility of having to outsource some of these capabilities. We were looking at ways we could add more value for our customers.”

He recalls, “We were doing a lot of fabrication by hand with power tools and other tools. We use a hard rigid ballistic fiberglass in a lot of our products, and we were cutting it on a granite saw and then doing the fabrication with different kinds of bits and blades. We were looking to bring that all under one piece of equipment.”

Richards notes that the new machine has helped fill out product lines in the company’s aluminum and steel departments and beyond. “Also, we’re also using more and more of ballistic glass-clad polycarbonate, and that allows us to stock sizes that are common sizes. Then if we get one off, or somebody would want a hole or a notch, we can just throw that right up on the water jet and do that fabrication right here in-house—rather than having to order a custom piece from the manufacturer and telling somebody that they’re going to have to wait 4 to 6 weeks to get this piece.”

2.Research Your Options. For a large investment, company representatives will want to take their time researching all available options. Chris Mobius, vice president of operations for Garibaldi Glass, says the biennial glasstec trade show in Düsseldorf, Germany, allows him to do just that in one easy venue (see December 2010 USGlass, page 64, for related article). “All the major equipment suppliers attend. This gives us the chance to look for new and innovative pieces coming to market and get a sense for who is in the game for each type of equipment,” he says. “Once we do our own research, we like to contact companies that own the equipment and pay a visit to see the machines in operation and speak to those who use it.”

3.Ask Your Supplier. In making your purchasing decision, fabricators can be well-served by asking suppliers for their insight.

“We go through our machinery files and view stacks of correspondence as we work with the customer trying to determine the very best fit for them,” says Bob Spears, inside equipment sales representative for Salem Distributing Co. Inc. “Sometimes it is for a smaller unit, or a different style machine, and sometimes it is for that used piece of equipment.”

4.Set Your Expectations. Mobius says Garibaldi has developed documentation that assists them in purchasing machinery. “We have developed a ‘request for purchase’ document that lays out many of our expectations in advance,” he explains. “[It includes] everything from the standards the machine must meet to testing criteria we need in order to sign off. I strongly suggest looking at previous purchases for any items that have been involved in the purchasing and installing equipment through to how you expect to test it out prior to final payment approval,” he adds.

5.Get to Know Your Machinery. Most machinery suppliers will offer training on the new equipment following installation and advice on regular maintenance.
Richards says the supplier of his new water jet line spent as much time training people as he did machine installation.

“It took probably 2 ½ days to set up and then they spent 2 ½ to 3 days training,” he says.

“It was pretty easy.”

“We tend to design our own training plans that include more than typical training offered,” Mobius says. “We include our maintenance and engineering needs along with how to make the machinery as productive as possible, along with the simple training. Special products can also require custom training and discussion to ensure the machine is capable from the start.”


Megan Headley is the editor of USGlass.

 


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