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,”
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
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,”
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.
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
“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.
“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,”
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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