Recently we have been plagued with automation malfunction
which sparks the question, “Repair VS Replace during times of struggle?” Although there are many Pros and Cons for
both ways (if thinking optimistically in regards to the economy), one must
choose wisely. While manufacturing has
been relatively slow over the past 8 months, and the economy is still sluggish
to regain strength, many questions are raised.
Although we believe the economy is going to slowly regain
strength and retailers will begin investing back into capital improvements, at
Interior WooDesigns we haven’t seen the increase in production that speculators
have stated. Having spoken with other
manufacturers, they too are embracing similar issues.
While some automation equipment can range in replacement
value from $100k to $250k or more, they come with a significant investment
decision. On the other hand, when a
piece of automated equipment goes down, it could be as little as $500 to as
much as $3000 or more in a single visit.
Although our occurrences for needing repair are not frequent, with
several machines more than 10 years old, one must ask, “Is Replacement
Needed?” Although automation equipment
when properly maintained can last a long time, when repairing at the tune of
$3000 or more per visit, it can certainly add up quick.
Although most machines are depreciated out over 6 years, with
the replacement value so great and manufacturing having been so slow,
justifying capital improvements VS repairing a machine is a brain battle, and a
strategic decision that doesn’t come easy.
Many manufacturing plants are facing similar situations, and
some that have chosen to purchase new machines instead of repairing are no
longer in business. Although having new
automated machines could provide a strategic advantage and would likely allow
additional benefits, during struggling times spending excess cash on capital
improvements could be a “cut throat” decision causing a company collapse. At Interior WooDesigns we are constantly
re-investing profits back into the company, maintaining the machines we have to
the best of our ability and praying they last for a while longer. With the economy having remained relatively
stable over the past 18 months with a
slow progression, we believe that the best choice is to maintain what we
have, invest back into the company, hold cash, spend wisely, continue to
produce top quality store fixtures for our clients, and wait for the recession
to fade and the golden economy to emerge.
Even though this is our plan of action, with aging machines
and a sluggish economy for manufacturing, big investments with little work are
nightmare decisions I can only pray we are not forced to make. For those manufacturing plants that do have
to replace machines, I wish you the best for I know the challenge of
relinquishing cash in order to continue company operations.
The decision of “Repair VS Replace During Times of
Struggle”, is not an easy choice, but one that should be well thought out and
administered with due care.