CNC Machine Tools News

Lowest purchase price vs. lowest life-cycle costs

For manufacturers overseeing major capital investments, understanding the true cost of a purchase can be difficult. This is probably why most prefer to simplify their purchasing decisions by basing it on the bottom-line price alone.

While purchasing based on bottom line price alone makes sense – it fosters a very serious problem: It fails to take into account the total cost of ownership across the full life-cycle of an investment.

pitfalls of lowest costs purchasing

Focusing on a machine tool’s sticker price fails to give manufacturers the entire picture.

Understanding total life-cycle costs for machine tools can be a difficult task, even for experienced manufacturers. Consider the scenario of a customer that discovered they were losing 4 litres of coolant per machine per day as wet chips carried it out on the machines’ part conveyor belts. With 14 machines using coolant that can cost over $10 per litre, those costs might be invisible on a day-to-day basis, but at the end of the year, they can balloon to over $200,000. This is a part of the total life-cycle cost for a machine tool, which also includes such costs as the downtime during spindle rebuilds, waiting for a spare part, machine power consumption or the cost of annual machine maintenance.

For a more effective approach, the total life-cycle cost of a machine should be calculated as the purchase price plus all other costs associated with running and maintaining that machine minus the machine’s resale value. This last factor acts as one of the only ways to reduce the life-cycle costs of a given purchase after installation, and in the world of manufacturing, it can make a significant difference in the actual price of owning a machine tool.
Consider a budget-friendly machine tool that costs, for example, $100,000. Many manufacturers would resell that machine after 5 years to invest in new technology and expand capabilities. After five years of use, that machine might be worth around $20,000, which means its total life-cycle cost was $80,000. There are typically two reasons for such a low resale amount. One is that the machine wears out in a shorter amount of time, and two is that there is a lack of parts and technical support.

Conversely, that same machine shop might opt for a more expensive machine, perhaps a high-performance model that costs, for instance, $150,000. At $50,000 more than the previous example, some machine shops would balk at the high upfront costs. But with a significantly higher resale value of $75,000 because the machines last longer, the five-year cost of ownership is only $75,000. Calculated this way, the more expensive machine is actually more cost-effective.

If the $150,000 machine also offers faster cycle times, greater throughput and increased durability, the costs may plunge even further. And when paired with service packages that reduce downtime or training opportunities that push your workforce forward, it becomes very clear that focusing on a machine tool’s sticker price fails to give manufacturers the entire picture.

In addition to the faster cycle times, greater throughput and increased durability of today’s higher quality machine tools, there are several other contributors to life cycle cost that also impact lowest cost per piece. These include the elimination of unplanned downtime and the reduction of scrap and rework. Machine speed – in terms of faster programming, tool changes, acceleration/deceleration and pallet changes – also contribute to lower cost per piece, as do multi-tasking capabilities. Multi-tasking machines help lower costs per piece by eliminating the need for multiple machines and operations, which in turn reduces necessary tooling, setups and fixturing.

Mazak have dedicated themselves to maximizing customers’ returns on their machine tool investments. Whether it’s developing a new method to recapture coolant or building machines with Done In One part processing that also retain their value through years of use, Mazak’s goal has always been to empower customers and help them achieve financial success in a globally competitive industry. And by taking advantage of these properties in five-year cycles of machine tool purchases and sales, these customers have discovered the most effective way to keep life-cycle costs as low as possible.

Related story: Tecalemit – celebrating 80 years of success

When questioned about the reasons behind choosing another Mazak, David Livingston Tecalemit’s General Manager explained:

“We found our existing Mazak machines to be reliable and accurate over very long periods of continuous production with minimal downtime, and we have been able to depend on John Hart to provide timely service, support and spare parts to suit our demanding production timeframes, so purchasing another Mazak just made sense.”