For companies of any size, the effective utilization of assets is essential but often underappreciated. This is in part because the people who utilize the equipment are often different than the people who decide what to purchase. Furthermore, the budgets are often distinct and therefore people do not see the connection between how they operate and how they spend money on capital equipment.
New equipment purchasing is, to a degree, irreversible. You often buy equipment on a forecast of business needs, and we know forecasts are frequently incorrect. Once you’ve purchased it, you’ve purchased it. You can’t just give it back.
1. Be frugal on features. I saw a recent mock advertisement for Apple MacBook as a “$2,000 Facebook access device.” We habitually want the latest and greatest gadget without even knowing the features that it enables, or why we need those features. This is fine with our personal budgets, but not with our company resources.
A few years ago, I escorted a group of equipment manufacturers on a tour of Boeing. Boeing was starting to make more of its equipment in-house through internal “skunk works.” What the equipment manufacturers saw was Boeing making equipment with a simplicity and price that they couldn’t match. One vendor stated, “We don’t make one that is that small and slow,” but Boeing didn’t need a large envelope and high speed. Don’t pay for features you don’t need.
2. Make something old new again. One of the worst distortions of lean is the compelling need to buy new equipment in order to get “more lean.” Lean is not about spending money. I have found numerous companies where with lean fervor, the best way to get your capital requisition approved is to put “lean” in the description. A proper lean mindset first looks to avoid spending the capital in the first place.
There is a saying, “Make the equipment’s worst day its first day.” The purpose of this saying is to treat the equipment as something that should get better day after day, both by how you take care of it and through innovative improvements. Perhaps you found a better mode to lubricate key points while operating, or maybe a faster means to perform a changeover, or possibly methods to speed up the cycle time. The point is, equipment that is both well-maintained and improved upon is almost always cheaper than buying new.
That also means when you do need additional equipment, consider buying used and improving it yourself. Asseta.com, known as the eBay of manufacturing equipment, connects buyers and sellers without the highly manual and costly involvement of brokers. This is good for sellers, who take in cash for unused assets and can put that cash to work. And it provides buyers with easy access to lower-cost equipment.
3. Simplify your fleet. Much is made of Southwest Airlines’ many partings from conventional practice, including its boarding process and its supposedly hub-less footprint (although still hubs, just smaller ones). But one of the keys to Southwest’s performance is its very simple fleet. Southwest has only one type of aircraft, the Boeing 737, in only two configurations (with a third configuration on order). That makes it easier to substitute one asset for another. It makes it easier for people to learn how to troubleshoot the equipment when there is a problem. It makes it easier for spare-parts managers to have the right parts at the right locations.
A simplified fleet reduces the complexity of running the business, which is particularly useful when everything else — from customer expectations to government regulations — is getting increasingly complex. In the pursuit of this objective, you don’t need to violate point number 2 by buying all new equipment just to have a common platform.
Equipment assets can be a great enabler, both strategically and to further your performance goals. It is about performing lean, not just “looking lean” with shiny new toys. Make sure your equipment strategy is aligned with this outcome.
Contributing Editor Jamie Flinchbaugh is a co-founder and partner of the Lean Learning Center in Novi, Mich., and a co-author of “The Hitchhiker’s Guide to Lean: Lessons from the Road.”