New vs. Used - Which Is for You?
If you’re a manufacturer looking for lower prices and equipment that is similar to what you already own, or if you are eager to automate your assembly process, you might want to consider used equipment.
For many years, original equipment manufacturers (OEMs) have sold used items ranging from assembly equipment to robots. This route has provided an economic alternative for those customers wishing to purchase capital equipment. Typically, used equipment from OEMs can be 30 percent to 60 percent cheaper than new equipment.
OEMs acquire used equipment in different ways. Many times, the machines come directly from the equipment owner. The company may have decommissioned a line and is selling off its surplus equipment. Other ways that OEMs acquire used equipment include taking trade-ins from customers, buybacks, times and material jobs (where a customer sends the machine back to be refurbished or remanufactured), auctions and used equipment brokers.
New vs. Used—Making the DecisionWhether buying new or used equipment, it is a large investment for most companies. According to ASSEMBLY magazine’s seventh annual capital equipment spending survey, U.S. assembly plants will spend $2.15 billion on new equipment this year.
But what sort of factors would make a customer buy used equipment instead of new? Of course, the first and main reason is money. A second reason might be because the customer doesn’t need new, more technologically advanced machines. And in some cases, the customer may already have similar, less technologically advanced machines. So instead of purchasing a newer machine that requires a new skills set, adding one more machine that already fits into the plant process is more convenient.
Whatever the reason, when buying used or new equipment, certain factors should be considered. Customers should always account for their plant capacity and balance this against their long- and short-term goals.
"Do you want this equipment to fill a contract that you are trying to acquire, or do you want this equipment to be on-site to bring in business or contracts for future purposes?" says George LaBon, refurbishing manager for Fuji America (Vernon Hills, IL). If the customer has decided to revamp the factory to continue to get good contracts, that’s where it might want to spend a little more money and get a refurbished machine that has a longer warranty, or it might even consider new. If it is a short-term contract, the customer may not be too concerned about whether this equipment is going to last several years.
"There are so many problems that can occur after you’ve bought a used piece of equipment. It can be really frightening to some of our customers," says LaBon. On the other hand, new equipment provides a sense of security, such as warranties and support, that might not be found with used machinery.
Joe Campbell, vice president of marketing at Adept Technology Inc. (Livermore, CA), agrees. "If you’re a high-volume consumer products manufacturer and are rolling out a new product, and if it is successful, your volume is going to double or triple over the next couple of years. So you need to buy new. You want to be assured of a long life cycle of the product lines. You want to be able to duplicate them for as long as possible. Buying something used that would run out of its total support window before the product is out of the market would be disastrous," says Campbell.
Criteria for Used EquipmentIf the customer decides that used machinery is the way to go, additional factors should be considered. Lou Pixley, product manager of the Remanufactured Div. at Universal Instruments Corp. (Binghamton, NY), suggests following these rules of thumb.
- Supplier performance and support must be evaluated while considering the purchase of used equipment. Consider the warranty, spare parts availability, installation and upgrades provided with the machine.
- Product training should be considered, along with the availability of manuals and machine documentation, service and technical support.
- Ascertain how much of the machine has been remanufactured.
- The customer should insist that all reconditioning be agreed upon and documented prior to signing the purchase agreement. The customer should also inspect the machinery before making the purchase.
- Is this a machine that the manufacturer is still building?
- How long has the machine been out of production?
- What type of environment was the machine working in?
Let the Buyer BewareMany OEMs use different terminology to describe the state of their used equipment when it is ready for resale. So what is the difference between refurbished, remanufactured or renewed?
To some OEMs that sell used equipment, refurbished equipment is generally just repaired equipment. "In our case, a refurbishment is a repair—a fix-it job. On the other hand, remanufacturing is taking it through the whole manufacturing process, which is the same process instructions and test instructions [as new equipment]," says Campbell. Cookson Electronics Equipment (Franklin, MA) uses another term to describe the state of its used equipment. "Our process falls between remanufacturing and refurbishment. We call it renewing a machine," says Doug Eidle, business manager for preowned equipment at Cookson.
You can view degrees of used equipment like rungs on a ladder. According to Pixley, basic used equipment is the lowest rung. It is the least expensive option for used equipment—sometimes costing as little as 10 percent of the purchase price of a new machine. This machine is drop-shipped as-is, directly to the new customer, without rebuild, warranty or technical support.
Its cheapness can be a pro or con. As Pixley explains, the buyer, upon receipt, must take full responsibility for assessing the actual condition and operating capabilities of the machinery.
The next step up the ladder is equipment that has undergone minimal remanufacture or a medium-level rebuild. Prices here typically range anywhere from 30 percent to 60 percent of new equipment. At the low end, the equipment undergoes a cosmetic cleaning, replacement of defective parts, and possibly a fresh coat of paint. The machine will be turned on and cycled to determine functionality. The equipment is still sold essentially as-is, with minimal warranty and after-sale support. The vendor might steer the customer toward aftermarket assistance from the OEM.
At the higher end of this segment, in what might be considered a midrange rebuild, the equipment provider performs a partial teardown of the machine. Major systems are examined, and more parts are replaced than at the lower end. However, rebuilding and replacing at the subassembly level or providing extensive upgrading or enhancements to the equipment is still minimal. Machines in this category typically sell for approximately 40 percent to 60 percent of original equipment price.
The highest level of used equipment is fully remanufactured equipment. Machines at this level typically sell at 50 percent to 70 percent of original equipment price, and are warrantied just like new machinery. At this level, the equipment is completely disassembled down to the frame and castings. All machine parts are cleaned. All damaged and worn parts are replaced with OEM parts. This not only includes parts that are not working, but also parts that the OEM has identified from its own warranty and field reports as typically requiring replacement after a certain period of time to prevent future breakdowns or degradation.
Examples of Refurbishment and RemanufacturingAccording to LaBon, Fuji mostly refurbishes machines. The company sets up the machine, levels it and powers it. All the peripherals (the items that come with the machine) are inventoried. The machine is inspected for aftermarket modifications. Engineers check the machine for the latest retrofits. Engineers then run a test board, which checks the machine for its function, making sure that all the motors and gears work. An inspection sheet is filled out. The engineers write up a report on their findings. Then teardown begins, which includes cleaning out various control boxes. Depending on the machine, it may be disassembled for the inspection. After disassembly, a parts order list is generated for that machine.
After the parts are received, the machine is reassembled using factory specifications and procedures. It is then checked using the test board and placement accuracy measurement (PAM) system. This is a built-in system in the machine that determines the Cpk, a statistical measure of the placement accuracy of the machine. That is compared against the digitizer, which is also calibrated to ensure that the machine’s internal PAM coexists with the digitizer.
After that process has been completed, panels will be repainted if necessary. Once the machine is completed, the machine is transported to the customer, where a field engineer tests it. Another test board will be assembled to ensure that the machine is still accurate.
On the higher end of the scale is Universal’s remanufacturing process. As Pixley explains, machines are bought in advance and stocked. As the machines are sold, they are configured to the customer’s applications. The machine then goes through a teardown process. All the assemblies and subassemblies go to their respective departments, and the base of the machine is cleaned and painted. Covers are sent out for repainting. As the assemblies return, and the covers, parts and new parts come in, a technician rebuilds the machine to the customer’s configuration. Once the machine goes through the complete rebuild cycle—using all the same processes, fixtures, tools and testing as with new machines—it is guaranteed to run as if it were new. From that point, it gets shipped and is installed by a field engineer.
Will Used Equipment Continue to Sell?Buying and selling of used equipment has not been limited strictly to slower economic times. However, used equipment is getting some notoriety now because of the economy. "This is a long-standing business. It hasn’t been totally driven by the economy. So when the economy gets better, this business will absolutely continue. It’s because more than half of the motivation for the business is to get compatibilitynot to save a buck," says Campbell.
However, new equipment suppliers should not worry. "First of all, to buy a new piece of equipment gives you peace of mind, and equipment that is coming out now and in the future will be more cost-efficient. It will be faster and more flexible. All those items that customers want and need will be available, and the amount of used equipment that is on the market right now will dictate that new equipment prices also be low to compete. I see a high demand for the new equipment coming out," says LaBon.