Business intelligence: code for success

Total cost of equipment ownership, preventative maintenance and quality systems on-line are global and domestic trends in coding, marking and labelling. In this article, I’ll look at costs and efficiencies within manufacturing. 

Cost and efficiency are two forces that overarchingly affect manufacturing — not just in Australia, but globally.

It’s a simple fact that the more efficient a manufacturer is, the higher their potential for profit is likely to be. In this highly competitive business climate, the challenge for Australian manufacturing companies is to find creative ways of lowering costs without compromising high-quality products going out the door. And, of course, this all has to happen while regulatory and compliance standards are maintained.

Investing in core business competencies and optimising management of non-core activities is a good way to achieve a sustainable competitive advantage.

Total cost of ownership

One non-core activity is the life-cycle management of the capital assets and equipment that support your business operations. This is done by optimising their total cost of ownership, or TCO.

TCO is a concept used to represent all costs (both direct and indirect) of owning capital assets. It goes through the equipment’s whole life: starting with acquiring the asset, maximising its operation, maintaining its performance, and then determining when to properly upgrade it.

Direct costs are usually those you plan for in a budget and can see in invoices and receipts, so they’re easy to identify and track. As an example, here are some direct costs to consider with coding and labelling equipment:

  • capital

  • consumables over the period

  • routine maintenance

  • service contracts

  • corrective maintenance

  • spare parts

  • installation costs

Typically, indirect costs are hidden and not included in a budget, so they’re instantly harder to measure and quantify. Often, indirect costs aren’t factored into the equipment’s TCO either. And even if they are factored in at the start of a project, very rarely are they monitored over the equipment’s life to ensure it meets original expectations. Continuing with the coding equipment example, here are some indirect costs:

  • downtime if the equipment breaks down

  • shipping if the servicing is return-to-base

  • downtime due to routine maintenance tasks

  • replacement parts at time of service

  • operator training and training time

  • financing costs if it is a lease/ rental

  • cost of disposal

Get proactive with TCO costs

You can save money, increase your equipment’s performance and improve your workforce’s productivity all by simply understanding the life-cycle costs associated with equipment ownership. Try implementing some proactive strategies to optimise costs over your equipment’s four-phase life cycle — acquisition, operation, maintenance and disposition.

Here are some strategies to minimise your TCO and maximise the ROI on your equipment:

  • regularly inspect and maintain the machine, with fixed-price service contracts

  • invest in proper operator training

  • evaluate the mean time between failure, response times and same-day fix rates

  • look at the capital cost versus the ongoing running costs (a low capital cost, but high running cost, is a hidden TCO)

Have a think about the questions below. If you answer “no” to some of them, then you have hidden costs. Eliminate those hidden costs by rationalising your asset base and reducing your number of suppliers. This will maximise your buying power, increase your operator performance and reduce some management and administrative burden.

  • Have my operators received proper training?

  • How many different suppliers (manufacturers and service providers) am I managing?

  • Am I buying and standardising on the best equipment available?

  • Am I leveraging my purchasing power and volume?

  • Have I compared the ownership of equipment from one manufacturer to another to know if I’m getting the best value for money?

  • Are my operators trained on how to use all of the equipment?

  • Do I know if it’s going to cost more to service a particular equipment than if I was to buy new equipment?

Each business decision you make in each one of the equipment life-cycle phases will impact the other factors. The companies looking at TCO holistically are the ones who improve their profitability and sustain a competitive advantage over their competition.

Planned maintenance

Planned maintenance is also a very powerful weapon in having a sustainable competitive advantage.

Probably one of the best-known examples is Japanese carmaker Toyota, showing that Total Productive Maintenance (TPM) maximises profits in manufacturing.

In other words: take care of your equipment so you eliminate all unplanned downtime.

But at what point does the benefit of having preventative maintenance outweigh the expense of setting up TPM on line? To explain, I’ll look at two approaches to equipment management: the more traditional “reactive” (“it’s broken now!”) and preventative maintenance.

 a) The traditional approach: reactive maintenance

Potential benefits: hopefully, your equipment won’t break down, if it does, an inexpensive solution may work. But you cross the bridge of downtime and idle labourers when you come to it.

The costs: reacting when something breaks is “flexible” to a degree — until you find yourself in a rut, unable to get parts or repair staff within a profitable timeframe.

The “putting out fires” approach usually occupies valuable resources, as key staff or technicians are forced to make crisis management time in their day. Worse your floor staff are idle, unable to do their jobs.

If products aren’t going out, and you’re unable to meet your commitments, reactive maintenance to a breakdown on the line could cost you more than is necessary in money, sales and customer relationships.

 b) The lean approach: predictive, preventative maintenance

Potential benefits: on a closely monitored line, you have more information about the condition of your equipment, so naturally you can discover what’s causing the breakdowns or production stoppages more quickly. You also eliminate the risk of unplanned downtime and increase plant utilisation.  

There’s no “I wonder what it really is” assessment (and cost) because you have up-to-date, real-time information. When your product is coming off the line with first-pass quality assurance, you avoid the expense and hassle of rework.

Preventative maintenance is also a major factor in increasing the your line equipment’s life. (I can think of numerous manufacturers with in-line printers that are 15-plus years, despite the “expected life” being five to seven years.)

The costs: expect to pay a monthly fee, the costs of which are determined by your choice in company and plan.

Another way to sum the differences and benefits of reactive versus preventative maintenance is this: the reactive approach seems a bit like letting the oil run out in your car: it’s far more expensive to blow a gasket than it is to get an oil change regularly. With so many variables, expense piles up quickly, even for smaller Australian manufacturers who are looking to keep expenses low and grow relationships with retailers.

Online quality system

Another way to give your business a sustainable competitive advantage is by having a quality system — or vision technology — running on your production line.

Vision inspection systems, when combined with the right software, provide intelligent image recognition, giving a business the high level automated quality assurance it needs during production and packing. This continuously evolving technology cost-effectively ensures products are fit for purpose. And any potential for mistakes is eliminated.

Manufacturers can spend a great deal of time, energy and money checking products manually; but vision systems allow for appearance, character and defect inspections to be done automatically –and it can also allow reduced overheads in terms of staffing.

You can implement vision systems in a range of different environments, to do a range of tasks: from quality control to quality assurance, and even process control. Vision systems can inspect, identify, count and measure products across many different sectors — from food processing and pharmaceuticals, to heavy industry. For instance, in food and grocery, systems can be programmed to check labels, barcodes, caps, bottle rims, product formation, use-by dates, tamper seal, lids, label match, product orientation. The system will let operators know of any issues when they happen, so they can be rectified, before the product is shipped.

Vision systems can now be incorporated into other production line technology, so your automated solutions work as one. Any faulty products can be redirected to be fixed or rejected if the error can’t be fixed. For any business owner, preventing costly recalls for products that aren’t shelf-ready yet are shipped anyway, is invaluable.

The systems can also be used for process control to sort products based on their specific markings, and inspect them, ensuring the packaging contains the content it should at the correct levels. Industrial applications can include checking parts or components or even details like the amount of glue on edges for sealing.

There are many ways manufacturers can give themselves a sustainable competitive edge. Understanding TCO, using preventative maintenance and quality systems on line, are three sure-fire ways.

About the Author

Matt Nichol is a laser-marking expert with Matthews Australasia and has in-depth knowledge of product ID technologies. He is a regular at international trade shows, such as Pack Expo and Interpack, and is constantly looking at emerging trends and technologies. 

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