Case Study – Avoid costly mistakes that affect bid win drilling contracts and ROI
AVOID COSTLY MISTAKES THAT AFFECT BID WIN DRILLING CONTRACTS AND ROI
Contractor XYZ assumed that drilling times were the same on all plasma cutting combination drilling machines they were considering. However, Contractor XYZ failed to realise until after the machine was commissioned that the machine was fitted with a mist coolant delivery system that provided a small amount of lubricant to the top of the plate and not at the tip of the tool drilling cycle. This required the carbide drills RPM and feed rate to be up to 30% slower than a machine fitted with the drilling coolant delivery system supplied by SMS. As a consequence, Contractor XYZ found that the cost per part increased because the new machine had 30% slower drilling times and this prevented the machine from addressing the gap in the market for which the machine was intended to meet.
Plasma cutting and drilling combination machines supplied by Specialist Machinery Sales (SMS) have a state of the art method of providing an atomised lubricant and high-pressure air through the spindle and through to the tip of the tool. The lubricant is supplied at less than 50 millilitres/hour while the air at 100 psi and flows up to 1,500 Liters/minute blasts swarf out of the hole. This coolant delivery system allows the machine to run 30% faster for carbide drilling and high-pressure air than mist coolant delivered to the top of the plate.
Contractor XYZ was a 3000 tonne per year structural steel fabricator that wanted to bring their steel processing in house and sell their excess plasma cutting and drilling capacity to the market. The business calculated that the in-house add on part processing was between 10-15% of the 3000-tonne capacity. It was calculated that 450 tonnes would require 1 shift for 15 weeks to process their internal requirements. The majority of the ROI was calculated from selling their excess capacity like several clients of SMS have successfully achieved.
The ROI modelling for the machine was based on successfully supplying the contract plasma cutting/drilling market with two shifts of capacity per day that was going to generate a new source of revenue and cash flow for the business that did not eventuate. This investment, instead of generating new revenue and an ROI within 2 years for the business, has restricted growth whilst the fabricator pays $20K a month in lease repayments for a machine that is underutilised and working 15 weeks a year. Keep an eye out for Contractor XYZ’s business or machine being sold in 18 months time as a result of a poorly specified and underutilised machine being leased that did not close the gap the machine was intended to address.
The consequences and impact can be significant when supplying a price-sensitive part to a competitive market. If you would like to challenge this commentary ask a contract laser cutting business how successful their bid/win ratio would be if they reduced the time it takes to piece a hole by 30%. Most will tell you that either the business would close or the ineffective machine would be sold or relegated to low
tolerance work.
We have all witnessed how simple it is to make these kinds of mistakes when a buyer is moving outside their area of expertise. Fabricators assume that a machine tool builder, that supplies to all five continents, have identified and closed the gaps in their product offering.
What is often discovered, after it is too late, is that the R&D departments from the machine tool builders are outsourced or the machine tool builder is too large to be motivated to change their design to meet the higher specified machines that Specialist Machinery supply. Many machine tool builders do not discuss the limitations of their specification and, when buyers do, it is best to be prepared for the ‘CCC’ sales approach (convince, confuse, con). Some in the machine tool industry are slick at delivering the ‘CCC’ method to first-time buyers. The saying is true ‘buyer beware’. Fabricators and steel service centres, you may be ‘taking a gamble or a punt’ if you do not request evidence-based metrics to base your buying decision on!
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