Every automation component you buy for your machines has costs associated with it. The most obvious are upfront purchase and installation costs, but maintenance and support costs can dwarf these upfront costs.
Similarly, the software that runs your machines has multiple costs. Software costs have an additional wrinkle because you often have the option to write your own software instead of buying a packaged solution.
In this article, we look at how machine builders and their suppliers view total lifecycle costs associated with machine automation hardware and software. The focus is on reducing these costs while still maintaining sufficient performance.
The Customer Counts
If your task was to build a functional machine you could sell cheaply and forget, then only the upfront purchase and installation costs would matter. Maintenance and support costs would not factor into your decisions because these costs would be absorbed by your customers.
In the real world, it’s the rare machine builder that has the luxury of passing all maintenance and support costs on to its customers. Instead, customer needs and wants are a key driving factor when purchasing automation hardware and software.
|FIGURE 1: 24/7 FOR 20 YEARS|
For its vertical form, fill and seal machines, Triangle wants only rugged components that can stand up to industrial use 24/7 with a 20-year target lifecycle.
Triangle makes vertical form, fill and seal baggers, scales, and cartoners (See Figure 1). As is the case with many packaging machines, performance and uptime are critical. “We only want rugged components that can stand up to industrial use 24/7 with a 20-year target lifecycle, and this is the number one factor for purchase decisions,” adds Bergholt. “We build relatively small quantities of each machine. The installation cost easily can be more than the part itself, so installation cost is second on the list.”
Another machine builder seconds Bergholt’s comments. Like Triangle, Kliklok-Woodman, Decatur, Ga., builds packaging machines—in this case high-speed automated packaging machinery for vertical form, fill and seal, and paperboard cartoning applications (See Figure 2 below).
Tom Pool, Kliklok’s manager of electrical engineering, shares his thoughts on lifecycle costs. “We put more emphasis on maintaining and supporting the product lines for the long term,” says Pool. “That’s not to say we don’t consider upfront cost, but I estimate we weight total cost of ownership about 70%, versus 30% for lowest upfront cost.”
|FIGURE 2: LIFECYCLE BEATS UPFRONT|
This Kliklok-Woodman vertical form-fill-seal bagmaker produces 100 bags-per-minute and uses servo controls on all motion axes. The company says total cost of ownership heavily outweighs upfront costs in its component choices.
Headquartered in St. Paul, Minn., MicroComponent Technology makes strip test handlers for final testing of semiconductor devices (See Figure 3 below). The company also finds that maintenance and support costs matter. “We put very little emphasis on getting the lowest upfront cost,” reports Richard Sidell, CTO at MicroComponent. “We look first for functionality to meet our requirements, then for long service life with minimal service requirements, and then for ease of setup and use.”
Not All Customers Are Created Equal
While these three machine builders place high priority on reducing maintenance and support costs, other machine builders operate in markets where upfront purchase and installation costs take on a much higher degree of importance.
When machines are sold into higher-end markets, maintenance and support costs are very important because demanding customers insist that these costs be minimized, and are prepared to pay the price.
Conversely, when machines are sold in lower-end markets, maintenance and support costs can take a back seat to purchase and installation costs. “The decision criteria between upfront pricing and lifecycle costs varies greatly depending on the particular machine builder, its position in the marketplace, and the customers they serve,” says Jim Oaks, packaging market manager at Pepperl+Fuchs. “High-end machine builders typically are driven by customer specifications where upfront cost is a consideration, but certainly is not the primary factor. In applications where less-expensive equipment is being built, upfront pricing becomes a more significant factor.”
|FIGURE 3: FUNCTIONALITY FIRST|
This MicroComponent Technology second-generation strip-test handler supports test strategies from single site to massively parallel site testing. In component decisions, the company looks first for functionality to meet its requirements, then for long service life with minimal service requirements, and then for ease of setup and use.
Another vendor seconds Oaks’ viewpoint. “Many commodity machine builders are under fierce price competition from low-cost overseas manufacturers,” says Howard Salt, product manager for encoder systems at Renishaw. “Price is a very big selling point in this commodity market. Non-commodity machine builders, while still under heavy price competition, tend to rely much more on performance, installed cost, and product features because they supply machines in a more favorable marketing dynamic.”
Rockwell Automation sees upfront costs dominating the selection process. “Most of our customers focus on price first and lifecycle/total costs second, if at all,” says Paul Wenner, manager of global OEM programs at Rockwell. “Customers generally are not given the option to base their buying decision on anything other than price and features because it’s the easiest path of decision making.”
Beyond Customer Need
As we’ve seen, customer needs and wants weigh heavily when evaluating lifecycle costs. Another key factor is the nature of the purchased automation component.
A passive component such as an enclosure is more likely to be evaluated solely on upfront costs, while total lifecycle costs are more likely to be taken into account for an active component such as a PLC.
An electronic motor drive is a component that has advanced to install-and-forget status. These components are so reliable and require so little maintenance that upfront costs dwarf all other considerations. “Our customers put much more weight into the lowest upfront price because they’re selling packaged products,” reports Boyd Janny, district manager for ABB’s low-voltage drives (). “Machine builders first look at price, second at physical size, and third at quality. Lifecycle costs still are a few rungs down from these three considerations.” Note that quality is a lifecycle cost issue because it affects long-term reliability.
On the other hand, industrial OEMs are more aware of lifecycle costs for controllers and other components that require constant interaction with their end customers in order to optimize machine operation. “Our control system customers are sensitive to initial component purchase cost, but they’re more concerned with minimizing the effects of component obsolescence over the lifetime of their machine,” believes Steve Nylund, CEO of Delta Computer Systems. “To meet the demands of our machine builder customers, we focus on providing technology that has a long lifetime. We do this by choosing components for our products that are widely available from multiple vendors or are certified by their suppliers as part of long-life product roadmaps.” When this isn’t possible, Nylund says his firm’s products incorporate standardized interfaces, so new components adhering to those interfaces can be plugged in if necessary. Delta makes machine controllers and specializes in hydraulic control applications.
Software Is Special
Evaluating hardware lifecycle costs is something of a textbook exercise in weighing upfront purchase and installation costs versus maintenance and support costs, all tempered by customer demands.
Then there’s software. Evaluating software lifecycle costs follows the same pattern, but also must include other factors. Chief among these factors is the make-versus-buy decision.
“We find more machine builders understand the long-term drain of supporting custom applications,” says Dick Ciammaichella, director of control systems integration at CSIA member RoviSys Co., Aurora, Ohio. “Custom applications not only are expensive to support, they’re becoming less necessary because packaged software has become much more capable and flexible. We find that most needs can be met by applying job-specific configurations to packaged software.”
MicroComponent Technologies prefers to buy software whenever feasible. “We purchase some small software packages that are integrated into our equipment for functions such as charting temperatures,” reports MCT’s Sidell. “We do this when we can find a commercially available package that meets our needs. Our volumes will not support developing software internally when it’s available externally.”
One problem with packaged software often cited by machine builders and their customers is annual licensing fees. MCT has a way around this issue. “We look for software that will meet our long-term requirements, and which we do not expect to update or modify further during the life of our equipment,” says Sidell.
On the subject of make versus buy, Sidell says “We’re just trading our estimated development and maintenance costs against the total cost of all the copies we expect to purchase. The decision for us always turns out the same. If it’s available exactly as we need it, we buy it. If we’ll have to write a lot of software around the purchased application, then we’ll do the whole job. We’ve found that the effort to develop the software integration glue can be as expensive as the effort to develop the function.”
It costs more upfront than a packaged solution, but there is another reason to develop software internally. “Most of our customers prefer to develop their own motion applications instead of using packaged software because it adds differentiated value,” reports Dean Onishi, product specialist for performance controls at Danaher Motion. “Customers win with a better machine, and the machinery builder gains share.”
Trends Favor Lifecycle Evaluation
The overall industry trends favor evaluation of total lifecycle costs for automation hardware and software as opposed to just looking at upfront purchase and installation costs. Maintenance and support lifecycle costs are of particular interest.
In addition to needing near-perfect uptime, machine users are operating with smaller automation support staffs, so they need to make sure the automation components that control their machines require less maintenance and are simpler to support.
Downtime is becoming ever more expensive, increasing the value of long-term automation component reliability. When components do fail, customers look for ways to quickly diagnose problems, and get their system back up and running.
If a machine builder wants to move up-market, lifecycle costs become even more important. “High-performance machines require sophisticated technologies, a track record of success, and global support,” concludes Onishi. “Machine builders realize this, and won’t compromise performance with inferior components if it devalues the machinery. They realize the true cost savings of a machine will be achieved by minimizing downtime, long-term maintenance costs, and required support.”
Others support this premise. “When machine lifetime is 10 years or more, many manufacturers considering capital equipment purchases will think beyond the obvious cost factors such as purchase price,” says Steve Cruickshank, senior marketing manager for factory automation at Cognex. “These less-obvious costs include the cost of changeover, unscheduled downtime, and the cost to educate the production staff on a chosen technology. These costs can be deciding factors in vendor selection and component specification.”
From the machine builder standpoint, repeat business and more sales to the higher end of the market are the keys to higher margins. These goals cannot be attained without close attention to lifecycle costs.
Components of Lifecycle Costs for Automation Components
Factors Driving Lifecycle Cost Decisions
An Integrator’s Opinion
Concept Systems, Albany, Ore., serves a wide variety of machine builders and has a good overview of lifecycle costs, especially as related to maintenance. Michael Gurney, principal engineer/owner, contends its machine builder customers are becoming more concerned with maintenance costs. They want machine automation systems that help them to reduce these maintenance costs without placing a heavy technical burden on their technicians.
“These customers traditionally have put the most emphasis on getting the lowest upfront/repeat unit pricing,” says Gurney. “During the past few years we’re seeing more and more folks looking for ways to reduce maintenance and support costs over the lifecycle of the machine, and are willing to pay for these benefits. This is driven by the end customers of the machine builders.”
|STAY RUNNING, RUN CHEAPER|
Concept Systems focuses on providing advanced graphical operator terminals to provide better information to machine owners, operators and maintenance personnel. This meets the requests of those manufacturers that need reductions in system downtime and overall lifecycle costs.
“It’s a bit ironic that automation has allowed managers to better see maintenance costs because, in some cases, it’s the automation that has caused increased maintenance costs,” says Gurney. “We see more customers looking at how automation can be used to make them more efficient from a maintenance standpoint. Customers are looking for systems to provide advanced feedback features in order to minimize troubleshooting and support time.”
More information in the form of alarms and interlocks is available and is being presented on graphical operator terminals, which limit requirements for maintenance personnel to get on-line with the controllers to troubleshoot or to dig through panels with meters. As technology advances and field devices get smarter, these capabilities should continue to grow. Users also are taking advantage of proven networking technologies that allow information to be distributed to the folks that need it when they need it.
“More customers are standardizing on the automation platforms they select,” continues Gurney. “This standardization minimizes spare parts inventory requirements and makes it easier for maintenance crews to become familiar with the hardware they have on their plant floor.”
As automation advances, so does the technical skill required to maintain those systems, adds Gurney. “The typical mill electrician is being asked to do a lot more than just ring out wires.” More and more are being asked to get on-line with automation systems and understand how they work.
“As soon as you add another platform in a facility you’re asking the maintenance folks to pick up an entirely new and often complex maintenance task,” adds Gurney. “Minimizing these tasks by standardizing automation platforms pays big dividends from a maintenance standpoint and also reduces downtime.”