The best solution at the lowest cost - not a machine.

The prospective purchaser of woodworking machinery is kicking tires at a trade show. He walks up to a CNC router and asks the booth staffer, "What does it cost?" It's often the first question exhibit personnel hear.

Understandably we have to think about cost. It is cost that drives the need for change in the first place when we begin looking for the best low-cost solution to our production problems. "I don't want to buy light bulbs," according to Bill Derup, GM Purchasing Director. "I want to buy luminary hours, because it costs me more to have the guy get on the ladder to screw in the light bulb than it does for the light bulb." No one can tell you in a brief trade show exchange the cost of this solution compared to the economic benefits it will provide.

Before you ask, "What does it cost?" you have to know what production problems need to be solved through acquiring a CNC router. Without a thorough understanding of the expectations for this equipment and production efficiencies which could result, almost any quote will sound too high. You may then be tempted to buy a used machine at a "great price" which you hope will meet all your needs and requirements.

There is a considerable difference between "initial low cost" and "lifetime low cost." So before you can determine the lowest cost, you must identify the problem a specific machine will solve for you:

* You need to increase productivity without increasing labor or floor space.

* You recently landed a contract with a very upscale furniture store that demands "near perfection" quality in the finished product.

* You recently had a significant business upsurge and have increased to a two-shift operation seven days a week. Downtime is critical to you.

* You just opened a woodworking business. As a first-time buyer, you are looking at machinery that would best enable you to enter the marketplace and begin building business equity.

Approaching the second phase

The second phase of your purchase strategy is to seek out possible suppliers who can provide the machinery solutions you are looking for. It is critical to avoid narrowly defining your specifications or requirements before you talk to a potential supplier. Your supplier will help you create these specs as he goes through the economic and technical justifications for the solution he is proposing. If suppliers bid against already formulated specs, you will end up with "solutions" that are not specifically tailored to solve your particular production problems.

When you buy machinery in today's marketplace, you are buying the supplier as well as his solution. You are forming a business partnership with the vendor - his analytical ability, technical expertise, service support credibility and creativity in problem solving - as well as the machine he delivers. You should visit the vendor's business establishment, meet his team and get a feel for how concerned he really is to find solutions tailored for your specific needs.

A supplier who seeks to help create a total solution for you rather than just selling you a machine will want to know the details of your manufacturing methods, product mix, existing facilities and how the machine will fit into the existing process, additional support equipment that may be needed, and other resources (such as operator training) which may be required. In fact, he should help you define aspects of your production problems and help you formulate a generic solution before talking about a specific machine.

Group involvement is critical

Before you can make the final decision about the best solution for your operation, you will need to involve all your team members who will be affected by the decision. The new machine may require changes in material purchases, offer new possibilities to product designers, reduce product costs or impose tighter design parameters on production personnel and the engineering department.

Your team, as well as supplier representatives, should help fine-tune the solution you are striving to achieve. This will lead to better understanding of your needs and stronger support because your vendor helped create the solution.

At this stage you will have enough input to formulate your criteria and prioritize requirements. You can now bring in suppliers to quote on specific machinery, software and support. You are no longer buying a machine, you are making a comparison between several total solutions and deciding which business partner will help solve future production problems created by the marketplace.

Make certain to base your purchase decisions on the accounting perspectives of today's business practice. Traditional cost justifications, based on a simple return on investment or labor savings, do not tell the whole economic story. Many companies require a payback in 12 to 24 months. Executives may make a wrong decision if this criteria is taken as gospel. Another error is using direct labor costs offset by depreciation (non-cash expense) to calculate the payback period and therefore judging "for" and "against" the purchase of a machine. Traditional accounting treats inventory as an asset like capital equipment. Inventory is a cost and should be so noted in the cost justification.

As you work with your team, other categories of savings should be examined: material, standardization, tool inventory, floor space, etc.

There are also intangible savings: the capacity for flexible and efficient use of machinery which will enable you to introduce new products quickly. Changing marketplace style and taste has shortened product lifecycles. Flexibility gives you a competitive edge with your customers.

The process of buying a total solution is much more complex than buying a stand-alone machine. But in the final analysis, it is the least costly solution for the economic benefits gained.

Stan Bigelow, president of IntrerAct Inc., of Barkley Springs, W. Va., has been conducting business and communication skills workshops for service professionals for more than 20 years. He publishes a monthly newsletter for Custom Service Specialists and their Managers. He can be reached at [phone].