Plavecsky's Ponderings By Jim Plavecsky
by Jim Plavecsky
August 13th, 2015

Five Things to Consider When it Comes to Equipment Investment

As we approach the peak selling months in the fenestration industry, now is the time to analyze long-term equipment needs and begin making decisions regarding investments for 2016.

As orders approach peak levels, the next few months will reveal to door and window manufacturers which areas in their manufacturing process need to improve in the next few years in order to supply our customers with the highest-quality products with the shortest lead times. All this needs to happen at a cost that leaves the manufacturer with a targeted profit percentage.

There are five main things to keep in mind when considering new equipment purchases.

  1. The Right Orientation

The orientation of new equipment is a key consideration, because it impacts valuable floor space and production flow. We are now going through the same floor space shortages that European companies have dealt with for decades, which spawned the development of vertical equipment. That means vertically oriented equipment is becoming increasing popular in North America. As door and window companies expand into new product lines or vertically integrate by manufacturing components that were previously outsourced, floor space becomes less available. Companies should analyze the profit levels generated per square foot of factory space in each area of the plant and seek to maximize dollars profit per square foot consumed. Consider outsourcing components which generate less profit and replace that operation with a more profitable use of that particular section of the plant.

  1. Degree of Automation

Degree of automation is a second critical factor to consider. One of the biggest complaints I’ve heard in recent times is the shortage of skilled labor. It’s becoming a real issue. Manufacturing jobs are repetitive, which can lead to workers’ compensation claims. Conditions are hot and during the summer months, safety can be a concern. Wage rates can be challenging, especially in areas offering jobs in oil and gas exploration. Their rates are much higher than those typical for this industry. All of this also leads to high levels of employee turnover, which can affect quality assurance. Employee training programs are stretched to the limit. Suddenly, the price tag of automation doesn’t seem so high when stretched out over the next five years, with paybacks and improvements coming in all of these areas.

  1. Should You Buy Software?

Software integration is the next area that can impact a business significantly. Investing in automated equipment opens up the possibility of integrating this part of the manufacturing process. This can help handle your order entry, inventory control and synchronization with other fabrication processes within the plant to streamline the overall manufacturing process. By cutting out paper, you improve lead times and production efficiency. The bottom line is this: it can enable a company to produce products of higher quality, faster and at a lower cost. It’s a win-win. Many companies get sticker shock when they look at the price of software, but the long-term impact on the future success of the organization can be enormous.

  1. How to Finance

Financing is the next thing to consider. The used-equipment market is not what it was a few years ago, when it seemed that there was an auction almost every month. The price tag of automated equipment and sophisticated software can be substantial. Cost must be spread out over the coming years in a fashion that allows the company to leverage the value of these new purchases to achieve maximum performance and growth, while taking advantage of every possible tax savings. In some cases, equipment leasing might make sense. Aligning the company with a strong and smart financial partner is absolutely critical. These days, finance firms offer tools to help analyze all of these factors while acting as a valuable consultant. Take advantage of the tools and expertise that these partners offer.

  1. Finally, Lead Time

Lead time is the last critical element to consider. Fenestration equipment is becoming increasingly sophisticated, and there are many options that come into play to tailor each machine to the individual needs of a company. These machines are not stock items and take months to build. Along with the shortage of used equipment mentioned earlier, new equipment orders are surging, so lead times of three to five months must be factored into the purchase decision and planned for accordingly. Now is the time to be looking at decisions if you are planning on installing the equipment during the slow season, which is what most plants seek to do in order to minimize disruption to the manufacturing environment during the busy production months.

So these are the factors to consider for companies looking to improve their stake in this market. It’s a critical time. Our industry has emerged from the downturn stronger than ever with the survivors becoming smarter. Because of that, we’ll experience a never-before-seen level of competition in the years ahead, and companies will be challenged to the core. The smartest and the strongest will take the lead. Will you be one of them?

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