THE BUSINESS OF VISCOSITY BLOG



    Reduce Your Capital Investment Risk – Try Before You Buy

    Posted by Rob Gladstone

    Dec 16, 2016 9:28:00 AM

    Image of a shoe measurement device. Manufacturing purchases require "try before you buy" approaches as well.For those of us old enough to remember shoe shopping before the internet, there was a lot of going to the store to try stuff on.

    What was the point of buying a pair of shoes unless you were sure they would fit? The process for buying shoes went something like this:

    To get the exact measurements of your foot, you would place your foot on something that looked like it was designed for discomfort while the shoe professional made the required adjustments. The sales person would then go to the back to get a box. You would try on the shoes and walk around a little bit. If they fit, great.  If they didn’t, you would continue to try on shoes until you got it right.

    Why were we going through all of this work? Because we didn’t want to make a bad decision. We didn’t want to spend money on something that didn’t work for us or on something that we would never use. Put simply, we were reducing our risk.

    Shopping on the internet has changed all of that. Take Zappos for example. You can order a pair of shoes, have them arrive at your house the next day, try them on and return them, (very simply), if you don’t like them. It doesn’t cost you anything. You could order the same shoe in three sizes, keep the pair that fits best and return the others, (very simply).

    So, why is this important to a blog title The Business of Viscosity? Because, while making a bad decision on a shoe purchase might cost you $50, making a bad decision on a capital equipment investment could cost millions. What if there were a “Try Before You Buy” program for capital investments? Sometimes there is.

    Many capital equipment suppliers offer demonstration units. While frequently this equipment may not be identical to the equipment you would purchase, it is generally capable of proving capability and can be used to help construct a financial justification. Some companies may require some cost sharing, (i.e. shipping, commissioning, etc.), but this is generally a small price to pay for evaluating.

    Other companies may charge for a demonstration unit. It is a good idea to accept this only if you can get it credited against the purchase of the equipment. If a company is unable to provide a demonstration unit, another option, (though not as good), is to gain access to another company that is using the equipment and get an unfiltered assessment of both the product and the potential supplier.

    Below are the five things we believe are the most important when preparing for and executing a product demonstration:

    1. Make sure your company is committed to the project – While demonstration units can help reduce risk, they are by no means free, (even if they’re free). You will have to commit resources to the project which includes time & money. Make sure that if the equipment performs as expected, you are in a position to purchase and install it. Get whatever capital equipment approval you need on the front end, before engaging in a demo. Performing a successful demo with no payoff on the back end is tremendously frustrating to both your team and to the supplier’s team.
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    3. Establish some baseline measurements – The best way to evaluate improvement is to compare it to status quo. Before performing the demo, you should be very clear on the improvements you expect. If you already have metrics to support a baseline comparison, fantastic. If not, prepare in advance of the demo so you have not only a baseline to compare but a consistent system to collect the information for comparison.
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    5. Measure, measure, measure – You may have heard or read that according to the latest findings in neuroscience, decision-making isn’t logical, it’s emotional. While that may be true, there will be whole lot of “logical” piled on in the front end. If the project does not make sense financially, it is very unlikely to go through. Back to points 1 and 2 above, you need to be very clear up front about the expected benefits, you need to be able to measure them against status quo and they need to be approved, financially, before they will advance. Get this stuff done up front and then you are ready for “will it or won’t it” evaluation.
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    7. Get feedback from the people using the product – The success of an implementation depends very heavily on those directly impacted. Some corporate cultures accept change easier than others. Know what kind of company you have, prepare the end users as much as possible and communicate early and often. Also, this is a great time to get feedback to pass on to the equipment supplier. What do you like, what don’t you like, etc. A good supplier will take your feedback and incorporate it into your design wherever possible. Don’t worry about hurting their feelings.
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    9. Evaluate responsiveness of supplier – With any technology, there could be issues during and after installation. It is important to see how it is handled. Are they easy to get a hold of? Do they respond quickly? Did they get it right the first time? Do they know why it failed? So many questions. This is a great time to determine whether or not they are team you could work with and whether you have confidence in their mechanical and communication skills. Even if points one through four are covered, not scoring high marks here could be a deal killer. If they don’t respond well when they’re trying to sell you something, how do you think they will respond after they’ve sold you something?

    Everybody wants to reduce risk and nobody wants to be associated with a bad decision. Having the opportunity to try before you buy can go a long way toward helping you make good decisions.

    Before determining which equipment to test drive with your existing systems, it can help to identify the areas that need improvement. Download our interactive waste calculator to help determine which points in your process are hurting your efficiency.

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    Topics: Manufacturing

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