When price is not king
By Darryl Shafto, Managing Director at Goscor Lift Truck Company – September 2018
Traditionally, the upfront capital cost of a piece of machinery used to be the prime determinant of many buying decisions. In many instances, it’s still the case, especially when times are this tough. The local market is still notorious for its insatiable appetite for cheaply-priced products without necessarily factoring in the bigger picture, which, in my view, is total cost of ownership (TCO). However, signs are clear that the market is maturing, as procurement departments are, slowly but surely, grasping the fact that price may not be king after all.
What we have seen in the materials handling equipment (MHE) space is that the buying decisions are largely application-specific. For example, for a machine that is destined for lower production applications – 100-hour and below per month – it is always about price! However, when customers start doing 200+ hours per month, TCO definitely plays a part in their buying decisions. Often this group of customers specifies maintenance contracts, together with a fleet management system to carefully measure all the relevant costs. Productivity and uptime are also key operational parameters that come into the equation.
It is my belief that investments in MHE are such big-ticket purchases, therefore, it’s principal to note that the ongoing costs once you have signed on the dotted line are as important as the upfront capital price. When buying a machine, decision makers should consider how much that equipment will cost over time. There are many definitions of TCO, but to put it in simple terms, it is a performance measure meant to uncover the lifetime costs associated with the piece of equipment, both before and after it’s purchased. In other terms, this can be defined as daily running costs linked to the longevity of the equipment, or ‘sweating’ of the asset to its fullest.
I fully understand that the lure for a so-called “cheap” price is too good to forgo, especially during these turbulent economic times. However, as was once brilliantly put by Benjamin Franklin, “the acrimony of poor quality is remembered long after the sweetness of a low price”. That rings to for our local market, often we go for price over quality. It is strategic to think of the purchase of mission critical equipment as an investment, and the company’s MHE is no different.
The aftermarket service downtime is often the first pain point that quickly awakens an equipment buyer from their resounding price slumber. It is for this reason I believe that the business owner should take into account the repercussions of downtime, poor service turnaround times, poor parts availability, incessant breakdowns, non-after-hours availability and generally poor product quality.
TCO should be an important measure in buying decisions of this nature. It should be factored into the buying criteria as a cheaper product may not last as long and require regular repairs. Owners and management should also devote some time into educating procurement departments on such matters of importance, especially TCO.
At Goscor Lift Truck Company (GLTC), we have also invested time and money into various management systems linked to our Autoline (in-house management system), which tracks all breakdowns and costs outside of maintenance contracts. The system also schedules service intervals, among other operational specifics, and is backed by world-class service technicians offering a 24/7 service to all major customers.
This is driven by our understanding that uptime is a very important key component to achieving greater TCO. Our focus on uptime is also based on the understanding that customers only make money when their machines are running. That is why GLTC is always looking at processes and systems that provide service technicians with more efficient access to information and support than before – ensuring shorter resolution times for the customer.
Solving machine issues instantly is such an important contributor to our customers’ success, that GLTC has placed uptime and ultimately TCO at the heart of its strategy in southern Africa. Using digitalisation tools, such as fleet management systems, as one enabler of improving efficiencies, we are adopting an extended enterprise view to be even more proactive in the support of our customers.