Saw Filing 101: Purchasing equipment steps
By Walter Peat
By Walter Peat
As I mentioned in my last Saw Filing 101 column, being able to justify equipment purchases plays a key role in sawfilers’ success and ability to work with all trades in the sawmill industry. There are typically four steps in purchasing equipment: determining the benefit, determining the cost, calculating the value and writing the proposal.
I will now go into detail about what sawfilers should do at each step in the process.
Determining the benefit:
New equipment should increase productivity (lower labour costs), improve product quality and quantity (value and recovery) or reduce operating cost (supplies and expenses).
Many of the machines in today’s world are automatic, and, in some cases, completely robotic. To suggest such machinery could lead managers or owners to cut labour costs, which can be an issue and get our filers in a pickle. But the filers should still do intensive quality control on the end result of these automated machines.
The real benefit is less down time and improved lumber quality – a huge savings as far as sawmills are concerned, as minutes saved in downtime can be of great value to most operations. Also, the quality of machinery will enhance the quality of the lumber in the end. Yes, many will say the labour savings are there, but many make the mistake of focusing on labour savings as opposed to machine quantity and quality. I will not dwell on labour savings, as I believe this is the wrong mindset. But to make sure that the right decision has been made regarding new machinery, you should conduct a few tests before and after purchasing the equipment.
Determining the cost:
When determining the cost, you should look at the purchase price, the cost of installing the equipment, cost of training the filers and maintenance people, the cost of maintaining a spare parts inventory and the cost of disposing old equipment, if applicable.
This is pretty much self-explanatory, but some people like to ignore this for fear of not being able to purchase equipment again. But, all of these things should have a value assigned to them in case you are questioned. The key is, know what you are buying and what the positives and negatives are, as trying to save a dollar now might be a sore spot later. I can speak from experience dealing with many equipment purchases over the years – sometimes, other influences are involved when trying to penny pinch and, in the end, costs will accumulate.
Calculating the value:
Looking at the equipment’s benefits (proven by testing) and the costs listed, the total gives you the tools for justifying the capital investment. In most cases, your accounting department will try to do the number crunching to show or disprove the value of the purchase, so the more detailed information you can provide, the better. This can go a long way in terms of credibility for your next purchase.
Writing the proposal:
Here is a brief outline of what to include when writing a proposal for new equipment:
- Title: proposal for purchase
- Introduction: what you propose to purchase and its intended use.
- Benefits expected: productivity, value, recovery, and operating costs
- Cost: Summarize all costs, including price, installation and training
Again, it’s very important to be very detailed yet effective in describing all information involved in the purchase proposal. Never leave out important details and assume the person making the decision understands the importance of the purchase and its benefits going forward.
Walter Peat is the head saw filer for Terminal Forest Products Ltd.