PROS & CONS of Purchasing Used vs. New CNC Panel Saws and CNC Routers

The recession hit the plastics industry hard in 2009. Sales were down by approximately 25% versus 2008 and capital expenditures for machinery were literally frozen. The plastic shapes industry had a significant bounce back in 2010, with sales increasing between 15% and 20% for many companies. The industry continued to rebound during the first quarter of 2011 and there are now indications that capital expenditures are beginning to loosen once again. However, many companies are still taking a more conservative approach and are considering used as well as new equipment. The purpose of this article is to examine the pluses and the minuses of purchasing used versus new CNC machines for those companies that provide value-added services.

All of us are aware that the only thing you can absolutely count on in business is change. It’s staggering how far our business efficiencies have improved due to the technological revolution during the last 10 years. Furthermore, we have only reached the tip of the technological iceberg as we go into the next decade.

Let’s look back just 10 short years ago:

Laptop computers were heavy, had barely any storage or RAM and had a screen that was only slightly brighter than an Etch-A-Sketch™; we were listening to cassette tapes; we were using analog cell phones that were called “car phones;” we rented movies on VHS tapes; we were using cameras that required film; Google was a sound a baby made and AltaVista was the search engine in vogue; large screen televisions were expensive monstrosities that took up half a room; and there was no social networking, no blogs, no satellite radio and no GPS.

And 10 years ago the most popular CNC panel saw in our industry had a maximum carriage cutting speed of 120 feet per minute and a maximum pusher speed of 40 feet per minute. Today's models have carriage speeds of 560 feet per minute and pusher speeds greater than 490 feet per minute.

Most CNC panel saws and CNC routers did not utilize PC interfaces, and if they did, they were using Windows 95. Today’s saws have more built-in connectivity and diagnostic features than saws built 10 years ago. Many hardware and software features introduced in the last 10 years have made significant difference in cycling speeds.

Ten years ago the most popular CNC router speeds were 1,200 inches per minute in the X-Axis and Y-Axis versus today’s models with speeds of 3,600 inches per minute and more in the X-Axis and Y-Axis.

With all that innovation, buyers are looking to make the right choice for their needs. The major considerations for purchasing a used machine are the initial short term cost, which is typically 50% lower than a new machine, and in some cases, a faster delivery. Obviously, the manufacturer, age, model and condition of used machines differ.

Let’s examine the productivity of a typical 10 year old CNC panel saw versus today’s high speed saws and the productivity and costs of a 10 year old CNC router versus today’s more technologically advanced machines.

The following two cut-to-size examples (Exhibit 1) illustrate the speeds (in man hours) of today’s technologically advanced CNC panel saws versus the most popular CNC panel saw of just 10 short years ago.

Exhibit 1	10 Year Old CNC Panel Saw			New CNC Panel Saw
Cut-To-Size Example 1
Extruded Acrylic .118 thick x 11.50’ x 11.50’ Hours to cut 10,000 pieces	More than 8 man hours Includes loading and unloading	Less than 3 man hours Includes loading and unloading

The actual cutting speeds are fairly constant between a 10 year old and a new CNC panel saw. However, the lightning return and cycle speeds is a major differentiator. This results in greater productivity - up to 4 times faster or in many cases, even more. It also presents greater opportunities to close new business due to improved customer service, faster deliveries and reduced costs.

Typically, CNC routed fabricated/machined part costs consist of approximately 50% material value and 50% labor. However, most distributors and fabricators focus primarily on purchasing raw materials at the most competitive prices. They leave the labor cost and hours to their estimating department or fabrication manager to oversee. Sales personnel are frequently reporting to their managers that they are not competitive when quoting fabricated parts. The manager re-evaluates the material cost, which is generally competitive. Then, the manager begins to doubt and question the accuracy of the salesperson that obtained the market intelligence. But with more efficient machinery, pricing can be more competitive.

The customer’s inquiry calls for 200 pieces of a fabricated/ machined part. Each part is 12’ x 12’ x ½” thick with multiple holes, slots, grooves and chamfers. Example 1 is made from UHMW and example 2 is machined from cast acrylic with polished edges.

Labor charges should be priced considerably more when parts are machined on a more technologically advanced new CNC router due to the higher cost of the machine and the improved efficiencies. New machines are usually 2-3 times faster than older models, even though the direct hourly labor costs are about the same.

The examples below (Exhibit 2) are based upon labor selling prices that include direct labor costs plus profit. Labor performed on the used CNC router plus the secondary polishing is calculated at $50.00 per hour ($.83 per minute). Labor performed on the new CNC router is calculated at $100.00 per hour ($1.67 per minute), which includes the polishing operation. New machines, depending on the manufacturer and model, should be able to perform the polishing operation, thus eliminating the need for the secondary polishing operations. The material selling price for each example is $10.00 per part which includes material cost and profit.

In most cases, value propositions, customer service, relationships, etc. can and should demand a premium price. Realistically however, customers only allow these factors about a 5% premium. As illustrated above, the UHMW part is priced 10% higher if machined on a used machine and the acrylic part is 20% higher on a used machine, even though the material cost is the same.

In addition to labor savings, a new machine actually provides greater value at a lower cost when the “hidden costs” and risks associated with a used machine are considered. Older machines will have installation costs, could break down more frequently, typically have no warranty, longer set-up times, higher tooling costs, are less energy efficient, have higher spare and replacement part costs, have greater difficulty in procuring replacement parts, generate more scrap, have more internal rejects and potentially more customer rejects.

Operational safety is also frequently overlooked. There can be greater costs associated with used machines with respect to employee accidents and increased insurance rates. Older machines do not comply with the highest safety standard levels and a single accident resulting in an employee injury could create a significant financial liability

In addition, customers that make facility visits could have an unfavorable perception of a company due to the older equipment.

Much like car phones, audiocassettes, VHS tapes and camera film, 10 year old CNC panel saws and routers are no longer viable options for those companies seeking to significantly grow their long-term business by increasing sales and profitability through value-added services. Today’s customers demand greater productivity, improved quality and faster deliveries with more competitive pricing.

Written by Michael Batky, Vice President, Business Answers International. Business Answers International is a full service consulting company that provides various services to the plastic shapes industry including market research, recruiting, M&A, and represents SCM Group for machinery. Contact them at 800-583-4726, E-mail: mbatky@plasticlink.com, Web: www.baintl.com.