How Quality Affects Total Cost of Ownership
The quality of a product or service has a considerable impact on the overall cost of owning it. Regular repairs or maintenance will add to the overall cost. Perhaps more importantly, the loss in productivity until the item is fixed can be even more costly than repairs. When a piece of equipment is critical to the core business, an outage puts you at a standstill, losing money every minute.
At the same time, the quality of the item may also impact on its life span. A higher quality product may last longer than a poorer quality one, and so the purchase price will be spread over more years.
Consider these quality concerns:
- Company certification and experience in the quality standard you are seeking matters and will show itself in the performance of the end product.
- Is it proven? How experienced is the company performing the work? Will it be a challenging project for them?
- ‘End of line’ equipment may enable you to cut costs, but it also cuts corners and might not meet your future needs.
At Enerfab, we encourage potential customers to take this into account when deciding between multiple bids on a project. The lowest bid in the short-run will not always have the best long-term results.
We’re confident you’ll find that Enerfab’s long-term track record demonstrates a lower Total Cost of Ownership over time. That’s why dozens of Enerfab customers are repeat customers.
Direct vs. Indirect Costs
Why is Total Cost of Ownership complex? The equation is all about what you include and don’t include. The initial purchase price of a piece of equipment – the direct cost – is just the tip of the iceberg. We encourage you to consider the indirect costs associated with maintenance, down-time, training, ease of use, productivity and efficiency.
Throughout your relationship with Enerfab, you gain the benefits from a partner looking at your big picture. Our Engineering team can offer value-added expertise for equipment that operates more efficiently and is constructed cost effectively. The highly skilled craft workers will utilize their superior expertise to produce a piece with fewer defects and fewer opportunities for failure. Our experienced quality assurance team will catch and correct even the smallest of problems before the product is ever delivered.
All of that equates to the Enerfab Guarantee, ensuring that we’re going to deliver on our promises to you.
Maintenance & Repair
As you compare providers for your equipment, be sure to factor in the anticipated maintenance and repair costs. The overall quality of the end product will have an impact on the necessary preventive maintenance as well as the frequency of minor corrective maintenance and major corrective repairs.
Due to our long-standing relationships with many of our customers, we can provide excellent references who can speak to their experience with equipment produced by Enerfab. We encourage you to learn why we have such a loyal group of repeat customers.
On a regular basis, we receive the call from a customer or potential customer hoping for a fast turn project because “we’re losing millions of dollars every day we’re down.” They have a piece of equipment which has reached the end of its life span, and they need a replacement ASAP.
The demand for this is high enough that we offer Emergency Projects as a service for customers and have compelling case studies demonstrating our abilities to turn projects around quickly.
What if you considered the exponential cost of down-time in your initial purchasing decision? The opportunity cost of a piece of failed equipment would drive you to purchase higher quality. At Enerfab, we can help you quantify the cost of poor quality on your business and show you how an Enerfab product can help your business.
Hard vs. Soft Benefits
Most Total Cost of Ownership calculations include only hard benefits, those that can be ascribed a monetary value. Consider that the quality of your equipment can have soft benefits, including:
- Heightened customer satisfaction through reliable delivery and higher quality of your output products
- Improved relationships with suppliers due to the dependability of your scheduled materials needs
- Enhanced employee morale by working on high-quality equipment with fewer failures
Calculating Your TCO
When calculating your Total Cost of Ownership, here are some common cost categories to consider:
- Initial Equipment Costs, including equipment components, fabrication, construction, installation
- Preventive Maintenance, scheduled tune-ups, scheduled part replacement and even regularly occurring overhauls that keep it in working order and extend its life
- Facilities cost include the space required for the equipment and the opportunity cost for how that space might otherwise be used
- Training and Education costs are driven by the ease of use of the equipment and the amount of time and materials needed to keep the workforce educated on its operation
- Minor Corrective Maintenance is the work completed due to a failure in the equipment’s operation, usually accounting for less than 5 percent of the value of the equipment
- Major Corrective Maintenance results when an equipment failure will cost between 6 and 50 percent and of the value of the equipment. In these cases, management decisions about replacement vs. repair must be made
- Predictive Maintenance is used to determine the frequency of preventive maintenance required to maintain operation. These evaluations become more frequent as equipment ages.
Enerfab’s quality production can create cost savings in many of these categories. By minimizing Maintenance issues, we can help you deliver a lower Total Cost of Ownership for your equipment.