Negotiating Equipment Prices and Reducing the Amount of Investment
In this article, I will talk about "Negotiating Equipment Prices and Reducing the Amount of Investment". When you're in production engineering, you gradually get to know the price of equipment. In my case, thanks to the expansion of my company's business, I have had many opportunities to invest in equipment. So in this article, I'll share some ways to negotiate prices when purchasing equipment.
Purpose of reducing capital investment
It can be hard to notice if you're busy with the task at hand, but making room in your project's budget will make it easier for you to do your job later on.
Reasons to save capital investment
The capital investments by production engineers are large, multi-million dollar investments.
There are a number of reasons for reducing investment.
For example, by lowering costs, your company can reduce the price of the products and services you offer to your customers. In this way, the company will be more competitive.
If you have more room in your budget, you can use the extra money to other things. This includes shop floor improvement activities and plant infrastructure.
The better the work environment, the more productive you'll get.
From a operational level perspective, each project has a fixed budget, so when unexpected problems or other issues arise, unexpected costs may be generated. If you reduce your capital investment and make room in your budget, you can handle these unexpected situations with no problem.
Price reduction is a criteria for measuring the competence of production engineers
In my experience, the right equipment price is proportional to the ability of the engineer.
This is because if you look at the specifications of the equipment, you can get an idea of the approximate price. This is because an experienced production engineer can estimate the components of the equipment, assembly man-hours, debugging man-hours and risks.
In other words, if you buy equipment that is more expensive than necessary, you are either lacking in your work as a production engineer or you are slacking in your work. Anyone can purchase expensive equipment. Ideally, you should be able to maintain productivity and equipment quality with minimal investment.
How to reduce investment 1) Use a simple structure at the concept stage
While it is out of the question that equipment drawings are not attached to the quote, a low-cost structure should be adopted at the schematic conception stage to lower the capital investment. The basic idea is to use simple structure.
Increasing the size of the equipment can also increase costs, so you also need to look at whether it is unnecessarily large. It should also be reviewed to ensure that there is too much safe margin for the required cycle time. This consideration should be done well in the mechanical design stage.
Let me give you one case study. This is a story about the purchase of equipment for welding process. Supplier estimated six welding power supplies costing over $10,000 for each. However, when I simulated the operation of the equipment, there was a possibility that we could handle with three units.
I was confident in my decision, but my supplier saw it as a risk for cycle time requirement.
In the end, we decided to manufacture the equipment with six power supplies. And if it was possible to do so with three units after verification upon completion, we would change to three units. When it was completed, we found that it could be handled with three units.
At the time, that welding power supply had a lot of uses in many equipment, so we decided to keep the other three units as spare parts or use them for the next new project.
This has helped me to save a bit of money on my next project.
How to reduce investment 2) Understand the approximate price of each component
If you buy a number of equipment or spare parts, you will be able to know the price of each component. For example, the following items.
- Multi-Axis Robot: $15,000
- PLC: $2,000
- 2-D Code Reader: $600-2000. *Depends on capacity
When you're trying to negotiate the equipment price, you look at the details of the quotation. If you know the approximate price of the component parts, this negotiation is easier. If you don't have a good sense of price in this area, you can try to get a quote for the parts alone. This will give you an idea of whether the price of the equipment is reasonable or not.
Some products may have special pricing for large companies. In this case, the total price is less expensive if you buy it yourself and supply it to the equipment supplier than the equipment supplier buys it at market prices.
How to reduce investment 3) Have a negotiating content and options
First of all, negotiating a price without content, as is often the case in Japan, does not work. The practice of bringing out the upper management and negotiating the price is nonsense. If you can't offer something of win-win relationship that benefits the supplier, such as negotiating price through volume effects or down-specification, you won't make progress. If you don't have any ideas for lowering the price, you should assume that you can't negotiate.
The next step is not to put the other party in an advantageous position when negotiating a price. Keep two or three suppliers to choose from, and negotiate with them with a strong enough attitude that if they can't offer a price you're comfortable with, you'll order to another company.
RELATED) Lowering capital investment requires technical skills
RELATED) The concept and benefits of standardizing mass production equipment