When looking at new machinery, don't let sticker shock get in the way of your competitiveness
—Sponsored article by Blue Chip Leasing
Because we’re now at the beginning of the tradeshow season, companies are starting the process of sourcing new technology.
Visiting these shows and looking at new technology and services can be quite overwhelming because there’s always plenty to see and many experts to speak with.
It can, however, be a very productive use of time. When a manufacturer is looking at a new piece of technology, for example a multiaxis CNC lathe or a 5-axis machining centre, the first issue that always seems to arise is sticker shock.
When I worked for a machine tool distributor, I found when we were offering a high-end piece of equipment for sale, it was best to get our prospective customer in front of a machine.
The beauty of these shows and open houses is that buyers can gain an understanding of what is really being offered because they can see and touch the machine while it’s up and running.
Tradeshows and open houses are also a good opportunity for shops to re-examine how they create parts. A shop owner may find a new piece of equipment that will allow them to process their parts in a much more efficient and profitable manner.
Also, if shops are currently leasing machinery, they can arrange a trade-in with the seller. In this scenario, we as the lender will take the amount owing, say $80,000; add what the trade-in value is, say $90,000; and subtract that from the new machine cost (say, $200,000).
Look at monthly cost
If high prices seem daunting, it may be better to examine the purchase based on monthly payments, rather than the price tag.
Once the thinking moves into this type of evaluation, the sticker shock of buying new machinery may not entirely vanish, but it can be minimized significantly because the focus becomes configuring the machine to maximize efficiency and profitability, and not finding one that fits into the budget.
A real-world example is buying a CNC lathe with live tools, but avoiding the model with a sub-spindle simply because it costs more. In monthly terms, it may only be the difference between paying $975 instead of $1,450 per month.
The time and effort buyers spend trying to negotiate a better price can be spent instead on finding the most efficient manufacturing system. The most successful clients I have are the ones investing in new technology.
They are sharp, forward thinking companies that recognize the need, for example, to upgrade to a multiaxis CNC lathe because they have work that needs to be both turned and milled. Adding a single machine that can complete the part dramatically increases both capacity and efficiency and, in turn, the bottom line.
Other clients have purchased a 5-axis machining centre because the setup time for machining a part on a 3-axis machine was killing their profitability and not allowing them to quote competitively. In both cases, the business decision to upgrade was easy, particularly because the funds did not have to come from their working capital or bank operating line.
Ken Hurwitz is senior account manager with Blue Chip Leasing Corporation, an equipment finance company in Toronto. Ken has years of experience in the machine tool industry and now works to help all types of manufacturers either source or tap into their own capital to optimize their operations. Contact Ken at (416) 614-5878 or at via email. Learn more at www.bluechipleasing.com
This column originally appeared in the April 2017 edition of Canadian Metalworking.
The article is part of the Financial Management Success Centre, showcasing strategies to access working capital, reduce costs, and leverage the value of shop floor equipment.