Replacing old injection presses: a careful approach pays big dividends.
When is it time to replace aging injection molding machines, and what criteria should be used in evaluating proposals from various machine suppliers? Although there may be no "right" answers to these perennial questions, a look at the experience of one molder may be instructive. The case of Precise Technology, Inc. is unusual in two regards: One is the level of detailed analysis that went into its buying decision. The other is that this plant replaced almost all its machines within a very short interval while operations continued uninterrupted. In 1992, Precise, a $25-million/yr custom molder serving medical, packaging, and automotive markets, decided to replace all 12 of its 11- to 14-year-old presses on the general molding floor of its West Lafayette, Ind., division. (Two newer, all-electric injection machines operating in a separate clean room were not replaced.) Once the determination was made to invest in new machines in an effort to improve productivity and cut maintenance costs, the molder invited five leading injection-machine manufacturers to submit proposals. That was the kick-off of a six-month, in-depth analytical process for this molder that involved input from numerous individuals in various disciplines, both inside and outside Precise Technology. Here is a step-by-step account of why the decision to purchase new machinery was made, what criteria were chosen to evaluate competing bids, and what factors ultimately convinced the molder to make its buying decision.
'THE DIRTY DOZEN'
One of three molding facilities operated by Precise Technology, the West Lafayette division was ripe for a machinery-replacement program. The plant was profitable and relatively efficient. Precise was fortunate, if somewhat atypical of custom molders, to have several long-standing customers running high-volume work; before the machinery upgrade, around two-thirds of its presses were dedicated to molding single products, minimizing mold changeovers. Precise Technology was committed to sustaining the facility's seven-day, round-the-clock operation--even if doing so meant shifting work to it from its sister plants in upstate New York and western Pennsylvania.
Averaging 8000 hr/yr per machine, the company's 10 hydraulic 375-ton and two 250-ton presses, purchased new in 1978 to 1981, were showing signs of age. In terms of wear and tear, a machine age of 14 years at seven-day-a-week operation was roughly equivalent to 19.6 years at the five-day-a-week schedule common to many custom molders, according to Precise Technology president John Weeks. In 1992, the West Lafayette facility experienced 83% uptime with the old presses. Despite the fact that some of the downtime was scheduled for preventive maintenance, the company's records indicated that the plant was losing the productive equivalent of one machine per year to downtime associated with wear and tear. Although the presses' age made for high maintenance and repair expenses, the machines had been kept in reasonably good operating condition and carried a good resale value, according to plant manager Martha May. SETTING CLEAR GOALS
Early on, Precise Technology set up a clearly defined procurement plan with specific goals. The molder would evaluate bids from five manufacturers to replace all 12 machines. (The initial choice of the suppliers was somewhat subjective, says Weeks, based on the molder's own prior experience, as well as input from other contacts in the industry.) Following completion of the injection press purchase, auxiliary equipment such as robots and conveyors would be upgraded as well. The 12 current presses would be offered to a broker for resale.
An important objective was machine downsizing--i.e., optimizing the new machines' capacities for their intended tasks, particularly for many of the long-term jobs handled at the facility. Machinery OEMs were also asked for suggestions on improving the plant layout to accommodate additional capacity. Above all, the molder's overriding goal was to make the machine replacement program a "cash-positive transaction" that would provide a 5% increase in gross margin level after cost.
Five machine manufacturers--North American, European, and Japanese--were invited to submit proposals. In order to create a "level playing field" for the OEMs, Precise Technology supplied each manufacturer with all the information it needed to supply accurate data on equipment and potential cost savings. All five manufacturers were given identical information with which to quote. Because of the importance of long-term jobs to the facility, it was critical to optimize the new presses to those jobs. To that end, Precise Technology took pains to supply the machine builders with very job-specific information. OEMs were given mold sizes; full shot sizes, including runners; material data; process sheets; average number of presses needed for each customer; and the current press list with make, model number, size, and age.
"We spent about two and a half hours with each machine manufacturer," says May. "We were very open with them and gave them plenty of time for questions and answers." Each vendor was given an extensive tour of the molding facility, and was then offered one shot to quote within a relatively short time frame. Areas initially targeted for cost savings included machine and mold maintenance, press downsizing, press uptime, energy savings, cycle-time reduction, product-quality improvement, scrap reduction, and labor savings. To varying degrees, these factors would play a part in the final buying decision. In addition, Precise wanted to tie its plant-monitoring system into the new machines' controls. The facility had installed an EPOS system three years before and relied on it for process and quality control as well as maintenance of molds and machines. Says May, "We made sure they understood that we would need sensors and would need to be able to pick up the signals for the EPOS system." MACHINE ANALYSIS
Before evaluating the OEM proposals, Precise had to decide on the number of machines that would be purchased and to which jobs they would be assigned, which would dictate the press tonnage required. A total of 13 new machines was decided on, based on the current and anticipated workloads and the assumption that the plant would continue to operate on a seven-day week.
The various proposals that were submitted suggested either two or three different tonnages of hydraulic or toggle clamps. Although price was not a primary criterion in machine selection, there was a spread of nearly 2:1, from a high of nearly $3.4 million to a low of around $1.9 million. As it turned out, Precise did not accept the lowest price offered.
Rather, the focus was on choosing the best machine for the job; quality of vendor support and features of the machine and controller took primacy over cost. Wading through the numbers was a daunting task because of the differences in tonnages, standard features, and options from the various proposals, says May. In winnowing down the choices, May and project engineer Jeffrey Sciutto highlighted the claims made in each OEM's proposal that were most relevant to the buying decision. Here is a brief list of the key considerations, in order of their importance to Precise, from each OEM's proposal:
* Supplier A--Estimated energy savings of 62% (this was the only manufacturer to do an in-plant energy study); full 2-yr parts and labor warranty; free training for two people in return for each machine purchased; all freight and rigging included in quoted cost; spare-parts "package" including heater bands, oil seals, nozzle, and tool kit; quarterly service inspections; "no-oil-leak" guarantee; full machine replacement guarantee, if not satisfied, at full price for six months; spare-parts service and technical center in Chicago; extremely quiet and clean machines. The quote included seven 233-ton presses, three 289-ton presses, and three 400-tonners.
* Supplier B--Estimated energy savings of 25-30%; 1-yr parts and labor warranty; spare-parts and service center in Chicago; financing through the firm's own acceptance company; extremely quiet and clean machines. The quote included two 242-ton, nine 309-ton, and two 386-ton presses.
* Supplier C--Estimated energy savings of 8%; 1-yr parts and labor warranty; free processing school and training; spare-parts and service center in Ohio; 28% less maintenance required than older machines from the same supplier then in use. The quote included two 250-ton and 11 400-ton presses.
* Supplier D--The most expensive machine; 12-month or 6000-hr parts and labor warranty; low maintenance cost at about $3000-5000/month; start-up assistance; tech service and parts in Massachusetts. The quote included one 193-ton, five 264-ton, and seven 330-ton presses.
* Supplier E--12-month parts and labor warranty; start-up assistance and training provided; spare parts from Chicago; tech service from Ontario. The quote included six 200-ton and seven 300-ton presses.
Precise felt that Suppliers A and B had done a particularly effective job in putting together comprehensive proposals that were most relevant to its needs. Says Sciutto: "They asked a lot of questions after the tour; they were always calling to clarify a point and ask for additional information." Both vendors made nearly identical downsizing claims, an important factor for the West Lafayette plant, as well as substantial claims of energy savings. In addition, Precise managers were intrigued by Supplier A's no-oil-leak guarantee. West Lafayette had been spending $700-800 a quarter to recycle and replace the hydraulic oil in its older presses.
THE SHORT LIST
On the basis of the OEM proposals, May says, "We narrowed down the list to the two manufacturers we were really going to focus on out of the five." The next step was to come up with a detailed grading system to rate key criteria on each machine. At the same time, Precise polled several other molders on their experiences with Supplier A and B presses. Molders' names were derived from customer lists supplied by each manufacturer, as well as Precise Technology's own contacts in the industry. Precise developed a "machine survey," in which molders with experience operating the two suppliers' presses were asked to rate the control, clamp, and manufacturer support.
In December, Precise Technology scheduled mold trials at Supplier A's New Jersey tech center to determine the accuracy of its proposal to downsize the machines. While there, Sciutto took the opportunity to visit two nearby molding facilities with Supplier A presses and observe them in operation. One of the two plants had both Supplier A and B machines, allowing him to observe both side by side. The other molder backed up Supplier A's claims of low energy consumption and no oil leaks, as well as low maintenance costs.
The molding trial went well. A worn and "retired" mold that Precise Technology had used to run medical parts in a 375-ton machine with 32-oz shot size ran successfully in Supplier A's 233-ton press with 16.9-oz capacity. The mold used in the trial had been taken out of production because of flashing problems, yet the parts molded in the trial were the first that West Lafayette's inspectors had seen without flash from this well-worn tool.
Other favorable points included quiet (60-80 dB) operation, an important factor in a facility where current noise conditions were just below the OSHA threshold requiring heating protection; machine cleanliness, oil leakage elimination; easy access to mechanical systems; and convenient placement of the controls. Sciutto was also impressed by the machine's clamp control, which minimizes cycle time and wear and tear and provides the needed accuracy for tying in robots and automated downstream operations.
Supplier A offered to visit West Lafayette to perform a power consumption comparison with the current presses. The actual measured power consumption on a 375-ton press operating in the facility over a particular period of time was 30.5 kwh. The estimated power consumption on a Supplier A 400-ton press running for the same period was 10.76 kwh, a reduction of just under 65%--very close to what was estimated in the sales proposal. The potential for dramatic savings was verified during the New Jersey molding trial in which power consumption of the downsized 233-ton press that was actually quoted, running Precise Technology's medical mold over a comparable period of time, was about 7.1 kwh, a power savings of nearly 77%.
At this point, Precise Technology narrowed its choice to Supplier A (Nissei America, Inc., Anaheim, Calif.) and took another look at the proposed machines from the total cost standpoint. Precise again met with Nissei representatives to review the options on the machines and verify warranties, guarantees, training, and financing arrangements. Requests for a few minor customizing modifications were accepted by the OEM--including installation of a special chip to provide outputs for the EPOS monitoring system. Total cost of machines and options was $2.3 million, including a projected cost of adding new auxiliary equipment. To this was added the cost of the facility upgrade--what had to be done in the plant to accommodate the presses, including a new bus duct to handle the electrical requirements and the cost of hooking up each machine.
The buying justification, says May, was based on conservative estimates of the savings that would occur with machine replacement. Tangible savings could be predicted in machine and mold maintenance, energy consumption, press downsizing, press utilization (uptime), materials utilization (scrap and rejects reduction), labor, and quality. Estimated annual savings totalled $1.4 million, or close to three times the cost of annual lease payments for each year over a five-year period. Intangible benefits--the value of state-of-the-art equipment as a sales and marketing tool, noise reduction, safety, and cycle-time reduction potential--were also important factors in the justification analysis. Big dollar savings were forecasted in machine maintenance, energy, and press utilization:
* Machine maintenance. Monthly maintenance cost at West Lafayette with the old presses was about $14,000/month excluding labor, which was expected to remain the same with the new presses. With the new machines, projected maintenance costs (other than labor) are expected to drop to $3000 per month, for a projected monthly savings of $11,000 per month.
Precise attributes this drop in part to simplified and improved design of electrical and hydraulic valving on the new machines. In addition, Nissei offered a full warranty on all parts and labor for the first two years. In contrast, the older equipment was requiring frequent repairs on components that were becoming increasingly hard to find.
* Energy. Before machine replacement, average monthly energy cost for actual machine use was about $26,000 per month. With Nissei's estimated energy savings of 62%, the Lafayette facility expects to save $16,000 per month, a figure that would increase when downsizing is factored in.
* Press utilization. Estimated machine downtime over a recent nine-month period was 8800 hr. About 60% of that, or 5280 hr, was due to machine failure. (This figure was derived from the EPOS plant-monitoring system.) Reducing press breakdowns, which were becoming more frequent on the old equipment, would increase press uptime, generating more sales dollars from the same number of total available hours. Even if just 70% (3696 hr) of the press breakdown time were recouped, the facility could gain an additional $38,000 of increased revenue per month. Weeks expects to achieve 80-90% uptime.
In addition, the increased efficiencies of the new machines, plus an improvement plant layout that can accommodate an additional press, is expected to result in $672,000 in additional annual sales.
The key to Precise's cost justification is that the machine-replacement program is a cash-positive transaction. By "cash positive," Weeks means that the increased revenues from the new, more efficient presses, coupled with cash from selling off the old presses, outweighed lease payments at every point during the replacement program. "Every year that we run these new machines instead of the old ones, they will continue to return almost three times what it cost us to acquire them." He adds that West Lafayette expects to surpass its goal of a 5% increase in gross margin.
Precise Technology decided on an ambitious schedule to replace its 12 presses with 13 new machines in just four and a half months during late 1993. Installation was performed by the same in-house manufacturing staff that were keeping the existing machines and molds in production. Plenty of up-front planning was required to coordinate electrical contractors and set up automation equipment, says Sciutto. A five-week period between the installation of the first and second presses provided technicians and supervisors with a learning curve in how to operate the machine, he adds. After that, it took less than a week to install each new press. Installation of all 13 machines over 18 weeks took place without sacrificing output, although there was a necessary buildup in inventory to accommodate the change. After evaluating the results of the replacement program over the next year, Precise plans to use the same detailed cost-justification procedure to replace old injection machines in two other plants.
PRESS ANALYSIS CHART
5 = Excellent 4 = Good 3 = Fair 2 = Poor 1 = NA
* Proper control of injection velocity
* 1st- to 2nd-stage control of position, hydraulic pressure
* Process alarms
* Insulated heaters
* Plotting capabilities
* Oil-temp. control & preheat
* Eject on the fly
* Mold information storage
* Ease of operation
* Ease of troubleshooting
* Training time required
* Controller warranty
* Parts warranty
* Labor warranty
* Downtime guarantee
* Freight & rigging cost
* Resale value
* Technical centers
* Support staff
* Spare-parts cost
* Sales staff
Total Points =
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|Author:||De Gaspari, John|
|Date:||Feb 1, 1994|
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