September 2008 – Equipment Procurement
Producers and manufacturers talk about the decision-making process during a slower economy.
by Mary Foster, Contributing Editor
With the economic downturn and its affect on construction spending, it would be a logical assumption that many producers have put equipment purchase plans on hold. But surprisingly, producers seem to be doing what they’ve always done when it comes to equipment purchase decisions, typically following their long-term equipment replacement plans as they work to maintain long service life for their existing machines. And while factors outside their control – such as fuel costs and government regulations – have had to become part of the strategic methods applied to equipment procurement, producers rely on their dealers and manufacturers in much the same way as they have for years.
Replace or repair?
The biggest question producers face when planning for capital equipment purchases is whether to stretch a machine’s life as long as physically possible, or purchase a new machine that ultimately employs newer technology for better production and efficiency.
Paul Campbell, executive vice president of Wheeler Machinery – a Caterpillar dealer based in Salt Lake City, Utah – says companies that have planned replacement cycles in place are continuing to follow those cycles. As chairman of Associated Equipment Distributors (AED), Campbell is in a unique position of being able to see how equipment-buying habits across the country have changed or remained the same in recent months.
And Nashville, Tenn.-based Rogers Group, Inc., seems to fit Campbell’s proposed model. Cameron Druyor, director of equipment operations for Rogers Group, says, “We are pretty much keeping with a rolling five-year replacement plan. There are always exceptions, but for the most part, the way we see it is that equipment purchases will have to happen, regardless of the economy.” Druyor explains that like many large producers, his company has enough production facilities that, if it becomes clear the equipment is not being utilized enough in one location, it can be moved to another location. This is especially true of rolling stock and portable plants. Also, site acquisitions bring additional equipment into the mix and allow fluctuations to equipment purchase plans. “But as long as we keep our utilization up, we’re not changing our buying strategy as a long-range tool,” he says.
That said, aggregate producers have always worked to extend the life of their machines as long as feasibly possible. “It is also our normal business strategy to try and run our equipment as long as it is cost effective to do so,” Druyor adds.
Dick Brannigan, Certified Equipment Manager (CEM) at John R. Jurgensen Companies, based in Cincinnati, Ohio, and president of the Association for Equipment Management Professionals (AEMP) agrees. John R. Jurgensen is a third-generation, family-owned, vertically integrated business group with aggregate and hot-mix asphalt facilities. “We keep our equipment a long time,” Brannigan notes. “But the ability to keep it running efficiently is important. We often look at manufacturers’ certified rebuild programs as one way to extend life while maintaining availability. We constantly strive to achieve the longest lifecycle through good preventive maintenance compliance, repair before failure, and component rebuild by a reliable warranted distributor.”
An important factor in the repair-versus-replace decision is the ability to track maintenance and costs over the lifetime of the machine. This is especially important with fuel costs rising as quickly as they have. Druyor says Rogers Group has become extremely conscious of fuel efficiency during the past couple of years. “We do a five-gas exhaust analysis on our equipment that prompts us to do necessary repairs that help keep our equipment running as lean as possible. We also regularly do an oil analysis for the same reason,” he says. “A benefit is that we’ve discovered our equipment tends to live longer when it runs leaner.”
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