TWENTY QUESTIONS: WHAT YOU NEED TO ASK AND HOW TO INTERPRET THE ANSWERS
10. What type of regular preventative maintenance does the manufacturer recommend? One small business owner I
know was considering switching suppliers because a com- peting supplier guaranteed that new equipment would run almost twice as fast as what the company was cur- rently using. This guarantee was a powerful incentive to switch, since increasing production was a key goal for the company and this supplier seemed to be offering a way to reach this goal. By asking this particular question, how- ever, the small business owner discovered that speed came
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at a steep cost. The new equipment was so temperamental that it required a signifi cant investment in preventative maintenance—an investment that wasn’t worth it no mat- ter how much speed was gained.
11. How long does it take to set up each machine? New equip-
ment might run three times faster than your current sys- tem, but if it also takes four times longer to set up the next job, it doesn’t take a rocket scientist to tell you that this is not a benefi cial change. You make money only when the machine is running, so maximizing its operating time is paramount. The setup needs to be simple and fast.
12. How much time does it take to train an operator? Some
equipment is challenging for new users. As a result, you incur unforeseen costs in helping employees learn how to operate machines effectively. It’s one thing if it takes a few days before someone has mastered the equipment’s operation. It’s something else entirely if weeks or even months pass before the operator has fi gured out all of a new machine’s idiosyncrasies. A consultant may be helpful in facilitating training. Even if this isn’t necessary, you still lose money if training drags on, preventing the effi cient use of the new equipment for an extended period.
13. What skill level does an operator need? Some equipment
requires enormous amounts of experience and talent, while other equipment can be operated effectively by most employees. Figure out whether a prospective purchase is closer to the former or the latter type.
14. What skill level do the maintenance personnel need? If
machinery demands a lot of care and feeding, you could end up spending more than you had anticipated. Will you need to send your staff to the manufacturer’s facility to learn how to maintain the machine, or can they be trained on-site at your facility? Will they need special tooling to do the maintenance on the machine?
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135 Capital Investments versus Capital Punishment
15. What type of power hookup does the equipment require?
Small business owners often overlook this simple question when making a purchase. Some buildings have been added onto at various points in time, and the power coming into these additions is not always the same. Older buildings are often equipped with 240 V, while newer buildings all have 480 V, which is more effi cient. If you haven’t done your homework, you end up having to buy a step-up or a step-down transformer to get the proper power to the machine. This can be an expensive mistake. One business owner had to spend an extra $10,000 for a transformer and an extra day for the electrical contractor because of this type of oversight.
16. How much will it cost to power this machine each year? The
machine manufacturer should be able to tell you what the cost to operate the machine each year will be or provide a close approximation. If you are buying used equipment, obtain the information from the identifi cation plate on the machine. It should tell you how many amperes the machine will draw and what voltage is required. Given this information and your cost of electricity per kilowatt hour, an electrician can calculate the approximate cost to oper- ate a piece of equipment.
17. How long does the manufacturer plan to keep making the
piece of equipment you’re purchasing? Of course, they may tell you that they’re going to make it for the next 100 years, while in reality they’re already planning its replacement. Ideally, suppliers will be honest with you, since it’s in their best interest to keep you as a customer.
They should tell you that you have the option of waiting for a year to purchase the next generation of machine or of purchasing this one now at a sizable discount. It’s also a good idea to network within your industry and read your trade publications, since word may leak that the
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machine you’re planning on purchasing will be phased out soon.
18. What type of warranty comes with the machine? A mini-
mum of a one-year warranty is necessary. You may be aware of the axiom that if a new car is a lemon, you’ll discover this fact during the fi rst year. The same principle holds true for most types of machines.
19. Can you buy an extended warranty? You always want to
push the envelope as far as you can. If you can convince the manufacturer to extend the warranty for additional time, take it. It’s a negotiating point. If you have an equipment supplier who won’t budge on the price, try to bargain for an extended warranty.
20. What kind of lead time do they promise once the equip-
ment is ordered? More to the point, what is their delivery guarantee, if any? One small manufacturing company received the largest order in its history, and it recog- nized that it had to make a capital investment to meet the continuing requirements of this new customer. The owner considered all of the issues and questions discussed here—except for this one. As a result, the company waited with increasing frustration and anger as delivery was delayed for six weeks. During that time, the owner threat- ened and begged to no avail. The supplier made all sorts of excuses, but whether these excuses were legitimate is beside the point. This small business owner never asked about lead time or delivery guarantee, and this essentially let the manufacturer off the hook. The small business was fortunate enough not to lose its large new customer, but the owner did have to offer a number of discounts to that customer to make up for the delay.
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137 Capital Investments versus Capital Punishment