Evaluating the Offering

The inquiry examples for production equipment in Chapter 2 draw responses that can vary for content and concept all over the map. The buying organization’s evaluation and recap of the various offerings must be summarized to provide focus on the bottom line--in other words, the cost effect on the product to be produced over the life cycle of the product. It is a given that before getting that far, the approaches being considered are viable and capable of producing pieces to the required specifications at the required rates.

Initial purchase price is a major factor and the most visible one, but by no means the only one. Typically, budgets for capital equipment purchases are established for specific new product programs. The path of least resistance for evaluators is to use initial price against budget numbers as selection criteria without a realistic value put on operation and other factors.

There are several other factors that have a cost impact on the parts to be produced: the ongoing cost of perishable cutting tools and their holders; the frequency of and time to change tools; the cost of other perishable components; the number and type of operators required; the hardware and software robustness (reliability/maintainability); projected preventative maintenance and repair costs and downtime (lost production cost); floor space consumed; material handling; and loading and unloading requirements. The cost of these factors plus the equipment purchase price and its installation costs translated into cost per part produced over its forecasted production life is the real bottom line for comparison. All of these factors can vary widely in the various solutions offered.

It’s possible that one supplier can offer a viable approach with the least hardware and thereby, it is the least expensive alternative initially. However, the other factors in their operation could make the parts produced more expensive than that of a more expensive initial purchase. It is difficult to comprehend how the auctions that are currently being used can properly consider all those factors.