Used Machines: Approach with Caution

Good deals can be found at auctions, but some homework and on-site inspection are key
By Mike Biffl, Stürtz Machinery Inc.
May 14, 2010
FEATURE ARTICLE | Operations

Is it more economical to refurbish an existing piece of equipment, buy something used or purchase a new machine with the specific features needed? That question comes up frequently these days—often spurred by an upcoming auction. Unfortunately, equipment auctions have been all too common with the closing of many window and door operations over the past few years. On the surface, low-priced deals on used machinery at shuttered factories sound great, but there is another side to the story.

Some manufacturers have found out the hard way; the current condition of a used piece of equipment is not always readily apparent. It can have an enormous impact, however, on the cost of retooling the machine.

Understanding costs
Manufacturers usually have a pretty good idea about machines used in their own factories. If a machine has provided reliable service over a period of years, it has already paid for itself and the cost and need for retooling is usually understandable. Plant supervisors and personnel know its maintenance history, as well as its expected performance and general working condition. With that information, as well as some fairly straightforward cost estimates for refurbishing or retooling to meet current needs, a manufacturer can usually make a sound decision about what to do when it comes to its own used machines.

Equipment available at auction, on the other hand, presents some unique challenges. A machine acquired at auction has provided its useful life to someone else. The initial investment is typically much smaller than a new machine, but there can be problems when an auction buyer wants to put the machine in service on its own product line. Some equipment may only require replacement parts, but a vinyl fabricating machine bought from an auction house is typically not tooled for the specific window or door the buyer is manufacturing. In addition, the buyer generally cannot see the machine powered up and cycling to make sure everything works properly. Many auctioneers only have the information provided to them by the eager seller of the equipment. The typical description is “the machine was running full production right up to the end.” If all the machines were in fact running full production, however, it is doubtful that an auction would be taking place.

As a machinery manufacturer, we have taken in several of our older machines for rebuild in the past couple years. Most were purchased at auction. Many of these were in decent condition and required fixturing, new cutting tools and some programming. However, a number of them that we were told “just needed some updated programming” were so far gone that they could not be salvaged without an exorbitant investment far exceeding the value of the potential usefulness of the machine. So, how does a buyer go about getting a “good deal” on a used piece of machinery?

Personal Inspections
The one thing that is common among the machines that were not worth salvaging is that the buyer was assured that the machine was in good working order but never saw it powered up. In some cases, the problems with the machines would have been impossible to detect without seeing an attempted machine cycle. Some of the machines, however, could have and would have been avoided if the time was taken just to see the machine prior to bidding.

The online auction process may be fine for collectibles, but it is the worst way to purchase a piece of production equipment. A photo on a Web site will not show any issues. Obsolete computers and other electronics, broken tools, missing parts, water damage and other problems that our shops have encountered with these auction deals would all have been readily apparent if someone had taken the time and expense to see the equipment firsthand. By taking the opportunity to inspect equipment personally, a manufacturer is relying on someone who generally has no knowledge of the equipment and just wants to clear a building out as quickly as possible.

The dangers of buying machines sight unseen are evident these three photos of a machine shipped in for a rebuild.  The wiring was a jumbled mass that made tracing problems and diagnostics very difficult and time consuming
The computer control unit was padded, but not secured before shipping.  It was swinging about freely during transport.
More damage was caused by a heavy electrical transformer thrown in on top of the tooling bridge prior to shipping.

Granted, the state of the economy over the past few years has made travel somewhat of a luxury. However, it can save a lot of money in the long run. In most cases, the machinery being auctioned has not been used for a significant amount of time. In many cases, parts have been scavenged. What seems like a great deal on the Web site can be an obvious waste upon personal inspection. So, how does one avoid a bad deal?

Homework
The most important thing a used equipment shopper can do is some homework. By talking to the original manufacturer of the equipment, the potential buyer can usually determine what it was previously used for, find out about any inherent issues with that vintage machine and get some broad idea of retooling costs. If the window producer can provide technical drawings of the products to be manufactured and a list of necessary features of the machine, the original equipment manufacturer can provide a pretty accurate cost and timetable for making the upgrades—assuming the machine is in good working condition.

 

Keep in mind that in most cases, additional parts that require replacement are found during the rebuild process. A cost estimate is exactly that, an estimate.

Still, this kind of homework enables a window manufacturer to eliminate many machines from consideration before ever traveling to see the equipment. In many cases, the machine in question is not capable of what the end user wants to do with it. Other times, the capability can be added but the cost is significant and may expose what initially appeared to be a “no brainer” purchase as a poor investment. If a machine is available for ten cents on the dollar, assume that the rebuild cost is going to be far more than the machine cost.

Once the manufacturer has an idea of what a machine can or cannot do, and has decided it may be a good option, it is time to go see the equipment. All auctions—whether they are on site or online—offer an inspection time. It is in the best interest of every potential participant to attend the inspection and closely look over the equipment the manufacturer is interested in with someone who is well versed in machine maintenance and operation. This will allow those personnel to spot any potential deal breakers before the manufacturer has committed to something.

Assessing the Options
In the end, the process of buying a used machine should not be that different than buying a new machine. Although someone else has already “paid the depreciation,” they also have had the opportunity to run the machine into the ground. Rather than buy an old machine with features that are luxuries and not really critical to a company’s manufacturing process, it often make more sense to spend a similar amount of money on a new machine without all the bells and whistles. A used feeder saw with notching and routing assemblies will cost more to purchase and rebuild than a simple cut saw. Paying the extra money does not make any sense. Too many times, people are enamored with a low price up front only to find that the retooling costs are more than they budgeted. In some cases, a machine moves from one place to another only to sit and gather more dust. At that point, even a great deal often gets resold at a loss.

Manufacturers need to consider all their options. Research the true cost of the rebuild. Make sure the equipment to be purchased fits the company’s manufacturing operation and philosophy. At that point, a machine that can be refurbished to a point of reliable, efficient operation can be a good deal and it can be in the manufacturer’s best interests to go that direction.

It makes sense, however, to consider a new $100,000 machine, compared to an unknown, used machine for $25,000 plus another $25,000 to $30,000 in retooling cost that may or may not last five years. The new machine can make much more sense long-term. Everyone wants a good deal today, but the best deal is one that still looks good a few years down the road.

 

 

 

Mike Biffl is national sales manager for Stürtz Machinery Inc., the supplier of cutting, fabrication, welding and corner cleaning equipment for vinyl window production. Based in Twinsburg, Ohio, the company sells new equipment as well as refurbishing and retooling older models of its machinery for its customers. Biffl welcomes comments and questions at mbiffl@sturtz.com. More information is available at www.sturtz.com.