To Replace or Service Automation Systems: That is the Question

December 122016
To Replace or Service Automation Systems: That is the Question

By Bill Lydon, Editor, Automation.com

Downtime. The devilish word that flares up far too often in today’s industrial environment. Because of this, many vendors, industry analysts, and consultants focus heavily on supplying services, predictive maintenance, and other methods to keep manufacturing running smoothly and avoid the disastrous downtime. For cost and efficiency purposes, most of those vendors will try to do this with already existing automation systems and manufacturing equipment. This may be a prudent decision in some cases but it does beg some questions:

  • How much service should an automation systems and manufacturing equipment require to perform efficiently?
  • How should users evaluate the tradeoffs between maintenance investments (internal and outsourced) vs replacements with more valuable and reliable solutions?

This becomes a lifecycle cost analysis that may not be obvious without solid evaluation.   These decisions are complicated, especially when new equipment capital investment and maintenance expenditure decisions are made by separate groups with unique capital and operating budgets.  In many of these situations important tradeoff decisions are not made, and their company remains plagued by costly downtime, or worse.

Aging Industrial Equipment

The average age of industrial equipment in the U.S. has risen above 10 years, the highest since 1938, economists at Morgan Stanley report.  In a majority of these cases, users should be analyzing whether it makes sense to spend money on more automation and maintaining old machines, or is it time for rip and replace.  This is a complex issue that was brought into focus for me personally, when I toured a company that builds large complex assembly machines.  The president of the company showed me a few machines, each about the size of a two-car garage, that were transported to his factory for major maintenance and upgrades.   He told me the transportation and major maintenance was very expensive and, for about 80% of the cost of typical major maintenance effort, his company could have provided new, more efficient machines.   The problem, for this particular company, was that these old machines had not been completely depreciated in the user’s financial system.  Accounting was dictating manufacturing investment based on old methods, and the company’s bottom line suffered.

Product Advances Impact Service

Making the decision to replace older systems and equipment can be an expensive one, but it can also directly impact service costs and improve production efficiency. 

An instructive case study from the copier industry illustrates how new designs can have a positive impact.  Xerox dominated the United States copier market and, as many of those old enough will remember, these copy machines required regular service by field technicians to clean, adjust, and maintain operations.   The Japanese company, Canon, decided to enter the US market, but did not have the Xerox-style service infrastructure in place so it was forced to think more creatively.  In early 1979, Canon focused on developing a radically new copier with the major goal of being as close to maintenance free as possible, so as to not require regular servicing.  Conventional thinking believed that product costs needed to increase in order to improve reliability, and, conversely, that service requirements increased when cost was reduced.    Canon formed a team in order to resolve this contradiction between reliability and cost.   The team discovered that 97 to 98% of copier service problems were related to the drum and its surrounding mechanisms.  These findings led the team to create a new copier design which took the troublesome drum and these mechanisms, and contained them in a replaceable cartridge that users were able to change, and simply discard, after making a certain number of copies.   Canon’s efforts resulted in the creation a copier that was essentially maintenance-free, at a significantly lower cost, providing major cost benefit to both the companyand the end user, who no longer had to pay for regular service

This was such a dramatic change in the industry that when Canon came to market with their new printer in the 1980s, Xerox was convinced that Canon dumping product at below cost, in order to undermine the Xerox U.S. market share. Sure of foul play by the Japanese company, Xerox did a teardown and cost analysis of a Canon copier, in order to build a case, to the US Department of Commerce, that Canon was dumping products. The end goal was to have a punitive tariff put on Canon’s competitive products. Imagine the surprise when Xerox learned that not only had Canon designed a less expensive and more reliable copier than they, but they were also selling it at a healthy profit.

Lesson Learned: Users need to evaluate new and innovative offerings for superior solutions.

Strategic Management Decisions

It is vital for today’s companies to take a broader view when making automation and manufacturing equipment decisions. Using a “silo” method, where the divided company departments independently make decisions, based on their own needs and budgets, leads to potentially disastrous communication gaps, which results in the overall company needs not being met.  The obvious objective, for any player in the industry, is to be a competitive manufacturer. A unified organizational effort to answer these cost-analysis questions, and reduce the overall downtime, can help get your company to that industrial end goal.

Related Articles

MORE ARTICLES

VIEW ALL

RELATED