The owner of a small manufacturing business wants to drop what’s left of the company’s CapEx (capital expenditure) budget on new CNC machinery. She’s read articles with advice from well-known suppliers explaining the benefits of multitasking lathes and why shops are moving to five-axis machining centers.
Given that the shop’s toolmaker is about to retire, she knows that either investment would help reduce dependence on his fixture-building prowess. These “done-in-one” machine tools also help improve part quality, eliminate much of the work-in-process sitting on the shop floor and pave the way toward lights-out machining. What’s not to like?
The owner’s son and much of the management team disagree. They want to invest in a manufacturing execution system (MES), complaining that the enterprise resource planning (ERP) software implemented years ago might help to improve estimating, invoicing, job costing and other front office functions, but it doesn’t do diddly for scheduling and real-time job tracking. Simply put, they need better control on the production floor.
It’s an old argument, one the owner typically wins. After all, adding machine spindles brings an immediate return on investment—drop the electronic iron on the floor, stick an operator in front of it and the thing’s paying for itself within weeks. Software, on the other hand, requires months of requirements gathering, user training, seemingly endless team meetings and regular visits from costly consultants. And if the users can’t work with the standard reports or want a bunch of data fields added to various screens—an all-too-common phenomenon—you’re quite possibly looking at months of delay and a blown project budget.
I’m no accountant, but it goes without saying that measuring the revenue from a CNC machine’s output is a straightforward exercise. By comparison, measuring the efficiency improvements and increased visibility brought about after a software system goes live is nebulous at best. This financial squishiness makes questions over amortization, depreciation and other bean-counting queries more difficult to answer and, therefore, justify to the IRS and Section 179.
It’s a tough nut to crack. On the one side, there are those of us who took our first steps on a production floor when floppy disks were just that—floppy—and decades before German economist Klaus Schwab would suggest that the world is entering a fourth industrial revolution. These baby boomers are more comfortable with the notion that business and manufacturing software is much less relevant to the proper functioning of machine shops and sheet metal fabrication houses than the machinery that actually makes saleable products.
Their kids and grandkids, however, recognize that “soft” technology—all the stuff that Schwab spoke about at the 2007 World Economic Forum—serves to increase the efficiency of said machinery and the people who operate it. They grew up with smartphones, email and social media and know that the digital thread is just as important as the machinery to which it’s tied; moreover, it’s an increasingly integral component of manufacturing success.
So, they’re both right. Now what? Invest in more spindles or the software that helps boost their effectiveness? I’ve seen this discussion play out many times over the years, and the conclusion generally comes down in the equipment’s favor—to the company’s detriment.
Fortunately, the software side of this equation is getting easier to digest. Where the ERP software was once a massive investment requiring months of configuration and training, most providers now offer SaaS, or software as a service. This subscription-based approach moves the costs from the CapEx side of the balance sheet (where the machine tool and equipment spend typically resides) to the OpEx (operational expenditure) column, giving management the warm, fuzzy feeling that you can indeed have your cake and eat it too.
Of course, the implementation isn’t free, especially if your workers don’t manage change well and wish to continue doing everything “the way we’ve always done it.” Even here, though, so-called low-code, no-code programming systems are easing the pain of custom software development. But that’s a discussion for another time. Until then, enjoy that new multitasker, and don’t forget the MES.
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