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Lowest Lifecycle Costs vs. Lowest Price

dan janka President and CEO Mazak Corp.
By Dan Janka President and CEO, Mazak Corp.

For manufacturers overseeing major capital investments, understanding the true cost of a product or service can be difficult. This is probably why most prefer to simplify their purchasing decisions by basing it on the bottom-line price alone. While this approach theoretically makes sense—a dollar saved today is a dollar more tomorrow—it fosters a problem. It fails to account for the total cost of ownership (TCO) across the full lifecycle of an investment.

Understanding machine tool TCO can be difficult, even for experienced users. Consider the scenario of a customer that discovered it was losing a gallon of coolant per machine per day, at a cost of $25+ per gallon, as wet chips carried the coolant out on the machines’ part conveyor belts. With 14 machines using coolant, the cost of lost coolant could reach more than $127,000 per year. This is a part of the machine tool TCO, which also includes such costs as downtime during spindle rebuilds, waiting for spare parts, machine power consumption, and annual machine maintenance.

A Better Approach

For a more effective approach, the TCO of a machine should be calculated as the purchase price plus all costs of running and maintaining it minus the resale value. This last factor is one of the only ways to reduce lifecycle costs after installation. It can make a significant difference in the actual cost of owning a machine tool.

Consider a budget-friendly machine tool that costs, for example, $60,000, financed over a typical five-year financing plan. For many shops, the five-year cycle also serves as a way to keep integrating new technology, expand capabilities, pay off a machine, resell it and use those funds to purchase new machines. After five years, that machine might be worth around $12,000, which means its TCO was $48,000. There are typically two reasons for such a low resale amount: the machine wears out in a shorter amount of time or there is a lack of aftermarket support.

Higher Initial Price, Lower TCO

Conversely, that same shop might opt for a more expensive, high-performance model that costs, for instance, $100,000, again financed over five years. At $40,000 more than the previous example, some shops would balk at the high upfront cost. But if the machine lasts longer and also has a higher resale value of $50,000, the five-year cost of ownership is only $50,000.

If the $100,000 machine also offers faster cycle times, greater throughput and increased durability, costs may plunge even further. When these benefits are combined with service packages that reduce downtime or training opportunities that improve your workforce, it becomes apparent that sticker price alone fails to provide the full picture.

In addition to the better speed, throughput and durability offered by today’s machine tools, other contributors to TCO also help lower per-piece cost. These include the elimination of unplanned downtime and the reduction of scrap and rework. Speed—including faster programming, tool changes, acceleration/deceleration and pallet changes—also contributes to a lower per-piece cost. In addition, multitasking lowers per-piece cost by eliminating the need for multiple machines and operations, and reducing tooling, setup and fixturing costs.

At Mazak, we’re dedicated to lowering TCO, whether by developing new methods to recapture coolant or building machines with done-in-one part processing that also retain their value. And by taking advantage of these properties in five-year machine tool purchasing cycles, our customers have discovered the most effective way to keep lifecycle costs as low as possible.

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