For manufacturers overseeing major capital investments, understanding the true cost of a product or service can be difficult. This is probably why most prefer to simplify their purchasing decisions by basing it on the bottom-line price alone. While this approach theoretically makes sense – a dollar saved today is a dollar to spend on more tomorrow – it fosters a very serious problem: It fails to take into account the total cost of ownership across the full life cycle of an investment.
Understanding total life-cycle costs for machine tools, for example, can be a difficult task, even for experienced manufacturers. Consider the scenario of a customer that discovered they were losing a gallon of coolant per machine per day as wet chips carried the used fluid out on the machines’ part conveyor belts. With 14 machines using coolant that can be over $25 per gallon, those costs might be invisible on a day-to-day basis. At the end of the year, however, the total can balloon to upwards of $150,000. This is a part of the total life-cycle cost for a machine tool, which also includes such costs as the downtime during spindle rebuilds, waiting for a spare part, machine power consumption or the cost of annual machine maintenance.
For a more effective approach, the total life-cycle cost of a machine should be calculated as the purchase price plus all other costs associated with running and maintaining that machine minus the machine’s resale value. This last factor acts as one of the only ways to reduce the life-cycle costs of a given purchase after installation, and in the world of manufacturing, it can make a significant difference in the actual price of owning a machine tool.
Consider a budget-friendly machine tool that costs, for example, $60,000 over a typical five-year financing plan. For many shops, the five-year cycle also serves as a way to keep integrating new technology and expanding capabilities; after you pay off a machine, you resell it and use the funds to purchase new machines. After five years of use, that machine might be worth around $12,000, which means its total life-cycle cost was $48,000. There are typically two reasons for such a low resale amount. One is that the machine wears out in a shorter amount of time, and two is that there is a lack of aftermarket support.
Conversely, that same shop might opt for a more expensive machine, perhaps a high-performance model that costs, for instance, $100,000. At $40,000 more than the previous example, some shops would balk at the high upfront costs. But with a significantly higher resale value of $50,000 because the machines last longer, the five-year cost of ownership is only $50,000. Calculated this way, the more expensive machine is actually more cost-effective by a significant amount.
If the $100,000 machine also offers faster cycle times, greater throughput and increased durability, the costs may plunge even further. And when paired with service packages that reduce downtime or training opportunities that push your workforce forward, it becomes very clear that focusing on a machine tool’s sticker price fails to give manufacturers the entire picture.
In addition to the faster cycle times, greater throughput and increased durability of today’s higher quality machine tools, there are several other contributors to life cycle cost that also impact lowest cost per piece. These include the elimination of unplanned downtime and the reduction of scrap and rework. Machine speed – in terms of faster programming, tool changes, acceleration/deceleration and pallet changes – also contribute to lower cost per piece, as do multi-tasking capabilities. Multi-tasking machines help lower costs per piece by eliminating the need for multiple machines and operations, which in turn reduces necessary tooling, setups and fixturing.
At Mazak, we’ve dedicated ourselves to maximizing our customers’ returns on their machine tool investments. Whether it’s developing a new method to recapture coolant or building machines with DONE IN ONE® part processing that also retain their value through years of use, our goal has always been to empower customers and help them achieve financial success in a globally competitive industry. And by taking advantage of these properties in five-year cycles of machine tool purchases and sales, these customers have discovered the most effective way to keep life-cycle costs as low as possible.