The Lead Time for Critical Capital Equipment Takes Too Long (6 of 6)

Company owners and senior executives face a large strategic worry: the increasing unpredictability of future market needs and stability. That concern causes deep uncertainty when facing large capital investments in heavy equipment.

Ordering complex equipment, which involves long lead times, has become a more risky financial and time-consuming proposition given the current market disruption and recovery. The more complex the machine, the more cash is involved, no matter what the purchase terms are. Such a big decision obviously entails a serious price tag in dollars and time. Ordering a new machine can stretch out to 12, or even 18 months in some cases. Who knows what the future holds in 12 to 18 months, when (or if) the machine finally arrives?

On-Time Edge works with heavy industrial, complex, and deep bill of materials manufacturers who fabricate and machine their own metal pieces. Discrete manufacturers might consider purchasing, let’s say, CNC machining equipment, a boring machine, a lathe, or a multi-axis machine that performs multiple operations on a single workpiece. Complex manufacturers, however, are not our only customers. We also work with mid-sized companies who must deliver a product on time without excessive overhead and contingency costs.

Whatever the industry, we help our customers think creatively to avoid pulling the trigger on ordering expensive equipment, especially before it is needed.

Hope Is Not a Strategy. Promises Are Not Execution.

Hope is not a strategy; nor are promises made under duress. First, take a cold-light-of-dawn look at demonstrated capacity, not theoretical, not promises, and certainly not promises from well-intentioned employees making claims without all of the facts. It’s all too human to overpromise and under-deliver.

Drop-dead critical variables in deciding whether to purchase additional equipment are the need to use realistic delivery times and realistic capacity metrics. Be sure to use the demonstrated capacity to calculate your load versus capacity, as opposed to a theoretical or a non-demonstrated capacity. For example, if you develop a range of different products, it's particularly difficult to estimate the duration or the consumption of capacity for each critical piece of equipment for all those products.

Get the visibility, the hard facts to make well-founded decisions. You need to record and carefully review the demonstrated time of consumption relative to your capacity. You have to be realistic with your own expectations and what you can produce. This rigorous analysis is a critical component of being a reliable company that delivers on time. We can help you do this investigation.

Creative Ways to Increase Capacity before You Sign a Purchase Agreement

Given the risks involved, here are some creative ways to increase capacity and to eliminate the bottlenecks in your production process. Consider these flexible alternate solutions, if you haven’t already: 

• Maximizing the shifts during which current equipment is used
• Minimizing setups which leads to workflow optimization 
• Cross-training employees on specialized equipment to man a second shift or a third shift 
• Exploiting advanced planning scheduling tools that On-Time Edge promotes and implements

The Outsourcing Option, But Be Warned

Outsourcing without tight management of priorities for the subcontractors is a proposition with risks all of its own. If you go with an outsourcing solution, instead of ordering the large complex equipment yourself, you need to manage your subcontractors or sub-vendors extremely tightly. The burden, no matter how good their intentions, will be on you to give them an exact schedule to follow. You must negotiate with them a certain number of hours dedicated to your products—measured, monitored, and modified only with mutual agreement.

Don’t throw the assignment over the fence and expect them to deliver on time. A new level of management of your subcontractors is required, which would include, sorry to say, micromanaging them and their priorities as if they were inside your four walls. Remember, you have a promised delivery date to your customers to fulfill.

A Creative Cost-Saving Case in Point

A recent large customer, not a traditional manufacturer, judged that in order to keep up with demand, they must buy a new unit sortation machine to the tune of about $1.5 million. (Unit sortation devices are huge carousels attached to chutes—100 or more in this case—to load retail products onto assigned pallets to be shipped to specific stores.)  

By conducting preventative maintenance and optimizing the sequence of products that ran through the unit sortation equipment, we were able to free up 20% of capacity on each of four unit sortation machines. The happy result: no need to buy a 5th machine and significant dollars saved, not to mention a better on-going bottom line.

Before you buy that big expensive piece of equipment, please talk to Scott McMartin.

– Michel Babineau

Contact:

Scott McMartin

VP Business Development

717.516.5252 (o) | 717.884.1325 (m) 

scott.mcmartin@otedge.com

OTedge.com