Tuesday, April 27, 2010

Seven Deadly Sins of a New Equipment Purchase; how to buy your next press and be happy about it…

From being involved with the printing industry for now almost 20 years I have seen a lot of purchases go bad. Most of the time I was the guy that had to operate the new toy in hopes that it would magically bring in the "motherload" and pay off all of the other poor purchases before it. Now I am on the other end of the stick trying to help owners maximize their next purchase so that they can maximize their production and profitability through the shop.

Traditional printers have been very good at finding used presses and making due. But in this new world of digital printing and automated systems each owner has to become a better buyer. Many times the next purchase is not going to be a used piece of gear but something that fills a gap and brings him/her closer to the overall vision of the business.

In an age of globalization and increased competition on a regional and national level companies are being forced to make sure that each purchase they make is in fact the right one. As systems become more interdependent and "connectable" to our workflow and information systems we are increasingly becoming aware that each purchase is critical to the overall success of the shop. Purchases that may have taken a phone call now are taking 6 months or longer. Since we cannot just start over we find that most shops started off traditionally buying a piece of equipment for a particular task or customer. Now each purchase needs to be taken into consideration so that eventually we can "plug" them all in to an automated manufacturing system. Between "Green" and "Lean" there is a lot for the printing entrepreneur to learn and master.

From being on both sides of the fence these are the 7 most common mistakes that I have seen made by printing professionals and their production management when looking to make a new equipment purchase.

Sin #1 Not knowing the nature of the orders being taken and the needs of the customer base
  • Many owners when asked are not sure of the nature of the jobs being brought in or how many jobs are being sent out. It is critical before buying a new piece of equipment to have a comprehensive understanding of the current jobs being taken in.
  • Understanding the customer base is very important to. Most owners will tell you that they are generally a "commercial printer" but when you take a closer look they tend to have a clientele that leans one way or another. Knowing who your customer is and what they need will help you look at your equipment palette to know where you are lacking.
  • Knowing how many deals are being lost and why. Are you losing to price or because you are outsourcing and are not competitive? Are you losing due to antiquated equipment that is not in line with today's practices? Most of today's presses are automated, you may be able to save money buying a press that isn't but lose to your competitors because your set up time is 4x longer. In today's short runs if it takes you longer than 15-20 minutes to set up your job you are already losing.
  • As jobs are being completed it is always a good idea to hand deliver some of these to get a pulse of what changes may be taking place in your customer's requirements. Some shops do not have dedicated sales staff or customer service representatives, so it is imperative that the owner do these deliveries to ensure he/she is in touch with changes going on inside of their customer's organizations.
  • Take your best customer to the equipment demo and run one of their jobs on the new device and ask them, "Is this what you want?" If the sales person can sell them you are possibly looking at a good acquisition.

Sin #2 Not keeping up with the industry economics and technology advancements
  • Printing is a complex and ever changing industry; the closer you are to your clients and competitors the better you will be able to make decisions.
  • As the industry evolves it becomes more and more digital and automated. Do not let the technology slip away from you. You must stay on top of what is going on and not rely on someone else in your organization to do it for you. Be proactive it's your business so drive it!
  • Technology brings advancements that can fill holes in your product offerings, streamline your workflow, and increase your profitability & productivity. Make it your business to know what is out there and keep a list of questions ready for anyone that wants to talk to you about equipment.

Sin #3 Buying a piece of equipment based on the payment with no plan
  • You would think this one would be a no brainer, but many times companies will make decisions solely on the monthly payment and have no plan on how to implement the new acquisition.
  • Look to your equipment vendors for help, lean on the top 2 or 3 choices in your area and ask them for ideas. Many times manufacturers have invested hundreds of thousands of dollars into industry experts to devise plans and give advice to their customers on how to maximize their investment. Most companies that value your business will offer plans on how to best utilize your new "potential" investment.

Sin #4 Buying on relationship only and not looking at the company behind the relationship
  • This happens equally as often; you know the sales rep so you forget to investigate the company behind them. True sales reps are a bit migratory like pressman and other positions on the floor, but more often than not sales people looking for a job get sold on grandiose ideas of their new employer and may not know what they have gotten themselves into before it's too late for them and you!
  • Make sure that you are dealing with a reputable dealer or direct manufacturer branch. Take the time to get references and look into what level of service that they are willing to offer and guarantee.
  • When dealing with a dealer or authorized reseller make sure that the company you are dealing with is solvent. The contact may be for 3 or 5 years but they need to be around to honor it! Getting service after they go out of business may be a lot more difficult than you think! Companies do not like taking over service on equipment that they didn't sell and could charge you exorbitant fees to go through and bring the machine up to spec.
  • When making a large acquisition take the time to review what you think you need and take the time to sit down with each of the reps from the companies that you are considering. Walk them through the plant and explain what you need to get done and why. Don't leave out anything you think is material, good reps have worked in the industry and are students of the business.
  • Good sales reps are truly entrepreneurial and have valuable ideas. They are walking in and out of shops all day long and may have valuable ideas on how to improve your operation as they have seen what has worked and failed in other shops. On the other hand it is not wise to buy from a rep that has not walked the walk. People pushed by greed will say anything.
  • Relationships are good and many times they keep you away from bad purchases and untimely deals, just always remember to do your research. Don't think that a relationship is a pass to not do your homework!

Sin #5 Buying for today and not looking out for tomorrow
  • Be aware of what is going on in your shop and don't let equipment decisions be put to the last second.
  • You know your lease expires in a year, then it is time to start looking; waiting till 2-3 months out is a disaster waiting to happen. You have spent all your time running your business and dealing with issues how are you going to get caught up in 2-3 months. Most contacts have odd requirements know exactly what you need to do to notify your current vendor upon lease end.
  • You know you have a customer that needs short run digital but you're not currently doing variable data so you short change the system with a built in controller. Know the industry trends, look at what is going on with your customers do not get caught off guard in a 3 or 5 year lease for jobs that require a reconfiguration of equipment you have already purchased.
  • Things are constantly changing look for equipment that is versatile and can grow with you. Look for equipment that may not be the cheapest but that might outlast the lease.

Sin #6 Buying equipment based on hardware specs alone
  • It is easy to get hung up on the science of it all. Whatever you do look at each equipment purchase in light of the other equipment in the shop and the systems that you have in place or may put into place. As JDF and Cip4 become more widely used you will want all of your equipment to be able to participate in the automation. Do not let the fact that someone else's equipment is 5 pages per minute faster or $50 dollars cheaper a month discourage you from looking at the big picture.
  • Implementation process, be sure to know what is involved and do not get caught off guard. What seemed cheaper and better was only if you did a bunch of things on your own that could cost you a small fortune like install special environmental controls or create a separate room for the device.
  • Ensure that you have a clear understanding on how your operators are going to get trained, support after the sale and ongoing training.
  • Substrate Flexibility. Yes it's fast and yes it's cheap but if you can only print on 1 brand of paper that is 3x more expensive than your competition then it's not worth buying! Don't just stop at the equipment; look into everything that will go into the system.

Sin #7 Biting off more than you can chew; not all deals are created equal
  • Everyone wants the lowest click charge, but what people do not seem to ever understand that it is better to hedge your bets than to bet the farm. If you are only doing 60,000 don't vouch for 100,000, set your monthly at 50,000 and pay the overages. Sometimes companies will do a cost per copy but many times the rates for them are quite a bit higher than setting a reasonable base and paying overages when needed.
  • Understand exactly what your responsibility is toward the servicing of the new system and how your operators are going to be trained and kept current.
  • When looking at your needs plan 3 to 5 years out. Depending on your financial situation don't get caught up in keeping up with the printer next door. On the other hand don't under buy because you are not willing to take the time to plan and execute a plan to afford the right equipment.
  • When moving into a new area or product offering, look at the strata of the equipment for that arena. Typically there are light production, mid and heavy production devices in all areas of the shop. If this is your first step in an area make sure to make the distinction and know what volumes are needed to support each level of equipment. Look hard at what you have "in hand" and what you can readily access through your current customer base. If you are boarder line step up to the next level now but put into action a plan to get you to a sustainable level quickly. If you are well below what you need to enter the arena with your own equipment look at used or "rental" equipment if none exists look to your fellow printers that are not direct competitors to you and work out a deal, they have payments to make as well!

All in all printers are becoming better buyers all the time. With experience being the best teacher many of the best buyers have made a few mistakes along the way. Unfortunately some of those mistakes make have cost them a shop or two. In today's economic environment it pays to be a student of your business and reach out to those that can help.

Today most manufacturers have representatives that do not do the end selling but can offer technical advice and offer suggestions. Taking advantage of these people can be a valuable asset in looking into a new equipment purchase. Most Sales Reps for "big iron" production equipment understand the financial metrics that are required to make a piece of equipment profitable. Asking is free so don't be shy when digging for information.

Treating your sales person with respect and as a person goes a long way when the chips are down. Many reps need a poke or two to keep them jumping but they will work much harder when treated as professionals. Don't buy what you think is a good product from someone that cannot help you. The rep that is sent out to you is your connection to the company.

Sure there are 1-800 numbers and online this and that but the flesh and blood being sent out to service you is what you will know from the company you choose. Your experience will be based on their ability to get you connected to the resources inside of that organization. Almost all manufacturers of production products have some great people but depending on the area you are in you may not have access to them. Make sure you have met the service personnel and the sales management so that you have plenty of touch points to keep your boat afloat!

Pirate Mike

This is a bit over simplified, but I am going to produce a series that will look at this process in depth, but for now enjoy!

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