Strategy August 22, 2016
Equipment: Replace or Repair?
Every inch of your screen-printing shop needs to be a profit center.
As any business owner knows, square footage cost can be a major expense for a business. Every inch of space needs to contribute in some way to producing a profit. Depending on where a business is located, the cost of space may be so prohibitive that the ROI for each piece of equipment taking up that space must be carefully calculated. This also allows for opportunities when a machine goes down and needs repair. When facing a repair that may be costly, it is always a good idea for a shop owner to take a look at the possibilities offered by replacement – and to do the calculations to determine whether replacing existing equipment or purchasing new is a better option.
There are several things to consider when determining the ROI of a particular piece of equipment. One is whether or not the equipment is working at full capacity. A machine that’s working at less than full capacity may be taking up more space and using more power than is necessary. To contrast, a machine that’s working over capacity may be holding down production numbers by failing to keep up with the required amount of production. The ideal is to have a machine that can meet the highest production demands while taking up the least space and generating reasonable power costs.
Another item to consider is what can be done with the now unused space if a piece of equipment that formerly occupied that space is downsized. Additional space can be used to house a machine with other capabilities, or to set up stations for services that weren’t previously offered. Let’s suppose, for instance, that a shop did screen printing, but had never done sports jerseys because there was no space for a numbering or lettering location. If the shop had a large oven needing repair, but instead decided to go with a smaller, newer oven with the same capacity, but a smaller footprint, the shop could then turn the now unused extra space into a station in which the staff could produce jerseys. The shop not only maintains, but increases its production capacity and also obtains the ability to enter a new market.
Feel the Power
The high cost of electricity is something that’s a constant battle for almost every shop. Many newer brands of equipment are designed to consume less power while also taking up less space. Suppose, for instance, a shop has an oven in need of repairs that is a 480V, 85A, with power cycling 50% of the time. Let’s also suppose the oven is larger than the shop really needs, given its production load. With local electrical rates, the cost to run that oven is $5 per hour. For a full year, the power bill for that machine alone will be $9,800.
Now, imagine that the shop owner decides to install a new oven that is more size and production capacity appropriate. This oven is a 250V, 85A oven, with the same consumption of power, cycling 50% of the time. The cost to run the new oven is $2.50 per hour. For a full year, the new oven will cost $5,000. Adding the new oven saves $5,000 a year.