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MANUFACTURER & DISTRIBUTOR of Mecal Products in North America
Applicators, Presses and Spare tooling for the Wire Harness industry

Price, and Cost of Ownership

Price, and Cost of Ownership 

We have all made a purchase before in our lives, and have all weighed the options, features and reputations of different brands.

A good example of this would be buying a new car. You’ve determined you have a need for a new car. You come up with a list of features you would like it to have.Then you have compared those features to a variety of options that come with a variety of prices. You know what features you want and what features are crucial. You might be willing to pay a little bit more if you want a nicer model, something with less miles, or want it to have more power and speed. But would you pay for a vehicle that you knew would require more maintenance? Have poor fuel economy? Are we really saving anything if we have to jump through hoops and keep making repairs in order to get it to where we want it? In the same manner we try to get the best product for the lowest price in our personal lives, we try and do the same things at work.

We’ve all heard the terms “price” and “cost”, at a surface level these words seem to be very similar. Explicit costs are ones that have already occurred and have a clear dollar amount. Therefore they are easy for our purchasing and accounting departments to record.

Implicit costs, may or may not happen, are not always foreseen, and are not always easily recorded. To continue using a vehicle as an example, the amount of time lost by having to take a car to the garage for repairs, as opposed to going to see friends or family. Our explicit costs are whatever the mechanic changes us. The implicit costs is the lost time with friends and family. With everything we do we want to maximize our productivity, and lower our costs.

When buying a new press or applicator for new production, or replacing an older piece of equipment you might follow similar procedures as mentioned above. If by chance you don’t, it could potentially cost you time, and your company more money months down the road with broken equipment, delayed lead times, and with missed ship dates. By opting to save a little bit of money on the front end and purchase a cheap applicator there will be costs associated with ownership that are almost completely unavoidable, especially with the likelihood of failure. The costs associated with applicator failure are unforeseen, incalculable and usually cause a chain reaction, affecting all aspects of the business. The possible effects are losing customers, losing employees, as well as longer hours at work to compensate for repairs and order recovery time.

With the stress of ensuring customer satisfaction, maintaining employee morale with sufficient work and appropriate work, as well as keeping upper level management happy, how much trust do you have in the cheaper applicator?

Understanding project requirements and expectations are key components for making equipment purchasing decisions. A clearly defined scope-of-the-project will allow you to answer several basic questions related to you purchasing activities.

  1. What is the necessary date for project completion?
  2. Will this be a one-time project vs. one-time project with the possibility of repeat vs. ongoing?
  3. What is the confidence level for the technical specifications to be achieved?
  4. How many units are required for project completion?
  5. What are the manpower obligations, i.e. current skilled labor vs. project specific training?
  6. Will the wire termination cycle be manual vs. automated?
  7. What is manufacturing’s current inventory and availability of applicable equipment for the project?

These are all basic questions that most decision makers know. However, to think about how each answer effects others is crucial. Making a decision with newer employees might look different than if you have a seasoned crew. For example, you might opt out of buying 3 spare kits for 1 with a more experienced crew.

For decades miniapplicators, in one form or the other, have been on the market for wire termination. With a variety of options, buy vs. lease, payment terms, delivery, reliability, tooling, quantity discounts; how does one person make sense of it all? Start by examining the true cost of a single wire termination, “Cost per Crimp”. There are several factors to identify equipment needed. Such as, number of crimps required for project completion, miniapplicator costs, and consumable tooling/maintenance costs. Consider these factors, it is possible to clearly determine which equipment is the correct choice for your project.

Case Study

The numbers below reflect average time and profit lost from tool/equipment failures to receiving replacement parts and repair. An assumed 5-day loss of production is the best case scenario.

 

Operation

Time Lost

Cost of Time

Troubleshooting

1 Hour

$20.00

Quoting

8 Hours

$160.00

Purchasing

8 Hours

$160.00

Logistics

1 Hour

$10.00

Expedited Shipping

N/a

$100.00

Operators Wage

40 Hours

$10.00

Replacement Tools

N/a

$348.00

                   Total:          58 Hours

$1,198.00

So when a piece of equipment goes down, and is inoperable, it’s possible to lose 58 hours of production, or roughly $1,198.00 or more! Evaluating your companies possible loss from equipment failure will help make decisions on what equipment to purchase and how much of it. 

A common philosophy adopted by Mecal by Starn, on scrap/unsatisfactory work, is that it takes 3 times the budgeted amount, which essentially will cost you 3 times as much.

So when we have lesser quality equipment or scrap parts; we lose the original time spent manufacturing a part, the time spent doing rework/fixing the equipment failure, and the time we could be doing something else.

MBS Samtec Part Number Cross Reference Sheet

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