Investing in Equipment: Look Before You Leap

by: Brian J. Marder

It’s time to invest in machinery!

There are a multitude of scenarios that have driven you to this conclusion. Perhaps this is something you have thought about in the past, but now the decision has become unavoidable. But where do you start? And what should you look for?

Upgrade or Stagnate For whatever reason, you have concluded that there is no looking back. You must invest in upgraded machinery. All of the reasons in the list below are good indicators that it’s time for a change.

  • Your competition is upgrading – you should too.
  • Your customers have been requesting a service or product from you that you cannot currently provide – so they go elsewhere.
  • Your customers are installing machinery that is competing with yours and you must get something better, faster, or more versatile – or your customers will no longer need you.
  • It is taking too long to makeready your equipment, slowing production time for your customers’ work.
  • You have been spending too much on maintenance and repair – or worse, you can no longer get parts for your machinery.

It is amazing to me how this exercise has become an anomaly or a special event for many companies in our industry, especially for smaller or privately-owned companies. The fact is you have chosen and continue to choose to be in a machinery intensive enterprise. You cannot exist without bookbinding machinery in your plant. Upgrading your machinery should be an ongoing process and standard operating procedure for your business.

How do you begin the process of exploring the addition of new machinery? Do your homework. Talk to your customers, talk to your employees, and talk to your competitors. This is a time for due diligence on your part.

I strongly recommend that your machine operators be included in the process and that their valuable input is considered. They will take a certain amount of ownership in the process that will be invaluable. When the machine hits the floor, your operators will have pride in their decision, confidence in the operation of the equipment, and a unique increase in morale that is priceless.

New or Used: That is the Question During this exploratory process, you need to decide whether to buy new or used. The biggest difference in buying a used machine compared to new is time. Used machines are unique and are subject to sale at anytime. Once sold – they’re gone. New machines, on the other hand, are available at your convenience. There may be some improvements or enhancements available over a short time, and the price will most certainly be higher the longer you wait, but the machine that you had originally planned to purchase will still be available. So if you have determined it’s best for your business to purchase a used machine, there is no need to call on a dealer until you are ready to “pull the trigger”.

The second, and most obvious, difference in buying a used machine compared to new is price. A substantial savings can be had if you do your homework. Recognize that with used machines – there are no bargains! A machine that on paper seems to meet your requirements and is being sold for a very low price will almost always require additional expense on your part. The price of used machines is based on current market value, and because of the internet, this is a very accessible bit of information. As for new machines, prices from the major manufacturers have never been higher. Most machinery today is manufactured in Europe. As of this writing, the exchange rate of the Euro against the U.S. Dollar has never been stronger.

But the most significant difference in buying a used machine compared to new is technology. All the major manufacturers are designing machinery to minimize the reliance of an experienced operator. The number of people with experience and skills to operate bindery machinery is diminishing in this country, and the wages of experienced operators are too costly in Europe. It makes sense to design machinery that is “user-friendly”, requires less experience to operate, and sets up quickly. Add to that the capability of machinery to communicate with each other, and you can take advantage of the latest technology in bindery machinery. Or you may choose not to embrace the new technology. Reliance on software upgrades, electronics, and machines that utilize more cost effective composite material instead of metal may not be for you. If so, you have to buy a used machine. Generally speaking, a used machine will be classified as “As Is, Where Is”, “Reconditioned”, “Refurbished”, or “Rebuilt”. “As Is, Where Is” simply means what you see is what you get. No party has made any effort to modify the condition of the machine in any way. Do not expect it to be cleaned up or have any normal wear parts replaced. “As Is, Where Is” implies that the burden of the condition of the machine is entirely your responsibility. “Reconditioned” or “Refurbished” implies that the machine has undergone a thorough inspection, normal wear parts have been replaced, and parts necessary for the correct operation of the machine that were damaged have been repaired or replaced as needed. “Rebuilt” is one of those terms that is easily abused. To “rebuild” a machine implies that it has been taken apart down to its castings. All parts have been inspected, and if they show any wear are usually replaced with new ones. If the part is no longer available and cannot be manufactured, those parts are repaired. To actually “rebuild” a machine may require more effort than it took to manufacture the machine originally. There are only a few people who can truly rebuild a machine, and that short list includes the original manufacturer. So be careful about this classification.

If purchasing a used machine, don’t forget that you also will have to dismantle, remove, and transport that machine. Make sure that the person who dismantles the machine is the very same person who installs it. He knows what wires need to be attached to the correct terminals and where all the small, but important, parts are packed. To ensure that your machine will operate as you expect, hire an experienced professional to handle this part of your investment.

Inspections and Demonstrations

Of all the classifications of machinery, “As Is, Where Is” implies the very lowest price possible. This is a great opportunity to get a valuable machine for an excellent price. But I strongly encourage you to have someone knowledgeable inspect the machine before you purchase it, so that you can make a well-informed purchasing decision. Make sure there is a sufficient loading dock, adequate equipment available to move the machinery, and note the utility requirements. If you do not have anyone in your employ who can inspect the machine, make the investment to hire a professional consultant.

If the machinery you plan to purchase is a substantial investment or highly sophisticated, your contract should include a clause that the deal is subject to machinery inspection, and allow for a refund if the inspection is not positive. That inspection also should inform you of the correct application of the machine – what are its capabilities and what is it specifically designed to produce. Again, you should employ a professional to inspect the machine.

Purchasing a new machine requires a more straightforward strategy than buying a used one. Call in several of the representatives from the major machinery manufacturers and they will make a presentation to you on what they believe will best meet your needs. Best of all, you are assured of the latest technology and the support of a large organization.

Ask for a demonstration of the machine you are considering. You may request to see one in a “real operation”, but that may not always be the best environment for the demonstration. Visiting the manufacturer’s demo facility is the best way to go. Yes, it is a controlled environment, but you will have the opportunity to see the machine perform exactly as it was designed to perform. You will meet and speak with technical and support personnel from the manufacturer who can answer your questions better than anyone. Most importantly, you will begin to develop a valuable relationship with these knowledgeable people.

Here’s a secret! Machines being demonstrated at trade shows provide an excellent opportunity to purchase a new machine. They have been finely tuned, usually include some important options, and are the very latest version. The manufacturer has a tremendous incentive to sell it so the machine does not have to be shipped back to a warehouse. You also have a special opportunity for publicity as the manufacturer will place a sign on the machine naming your company as the “Sold To”. And perhaps the best part, for at least a few hours, is that you will be treated as a VIP. Make sure your machinery salesman takes you out for a nice dinner. (I would recommend Smith & Wolensky’s.)

If you have met with more than one vendor, and find yourself confused, call in a consultant as a third party to explain what the new machinery vendors are trying to sell to you and explain the benefits of that machinery for your application requirements. One of my cardinal rules is to establish a plan and stick with it. When you determine what you need, don’t be influenced by forces to change the course of your strategy. I recently worked with someone and we both determined the specifications and specific model of the machinery he required. We even considered new machinery. However, in the end a financial package offered by one of the vendors persuaded him to go with their machine instead of what was objectively determined from research. Did he make a bad decision? Time will tell.

Investing in a new machine sends a positive message to your customers and employees that you are investing in your business! Many of your customers are quite knowledgeable about the machinery that is available. Informing them that you have purchased a particular saddlestitcher or perfect binder – new or used – may be enough information to reconfirm their choice of business partner. Making a capital investment in your own company will enhance the level of confidence your customers will have in entrusting their business to your company.

Brian Marder is president of Marder Machinery, specializing in the marketing of used bindery machinery. Marder also is the president of Bindery Consultants, providing advisory and consulting services for the bindery and finishing industries. Marder has spent almost 30 years representing two of the foremost manufacturers of bookbinding machinery in the world. He also is a graduate of Rochester Institute of Technology, School of Printing. For further information, e-mail brian@mardermachinery.com, call (732) 972-8500, or visit www.mardermachinery.com or www.binderyconsultants.com.