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Week of 8 January 2018: Desperation in Procurement

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I mentioned last week how we may be entering a period of shortage of goods and services required for capital projects. I have seen this happen several times in the past, and for the uninitiated, a story and a couple of comments may be instructive.

Way back when I started my career, I was a co-op student with a great job. I worked for a company that made industrial metal finishing machinery--washing machines and ovens. This company had gotten into the can washing business for two-piece aluminum cans when that business was brand new. These washing machines took the can bodies after they had been formed and cleaned them of lubricants, die compounds and so forth in preparation for interior and exterior finishing. In the late 1960's/early 1970's, the time period I am referring to, that business was red hot. There were many players in the business (Jeffco, division of Coors Brewing and inventor of the two-piece aluminum can), American Can, National Can, Continental Can and I don't remember who else. All were buying can washers from us.


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The market went crazy (causing my employer and me to grin from ear-to-ear). Companies started ordering can washers with no place for them to go just to get in the production schedule, so we would build them and put them in warehouses in and about Cincinnati, where we were located. Of course, this caused more delivery date stretching and would initiate another round of purchases. The whole thing became a madhouse. The customers were paying for the machines and the storage of them. One of the last things I remember doing on one of these projects was going to a warehouse, taking inventory of all the electrical items on a brand-new machine in storage and converting it from 60 hertz to 50 hertz because the customer had decided to ship it to England rather than install it in the United States. This involved some electrical changes and many mechanical changes to account for the ratio change from motor to gearboxes and the motors were being slowed down with the change. And, of course, they were paying for every bit of this.

I don't think we are facing conditions as crazy as these, but let's talk about what we might be facing and how you might react to it. If an equipment shortage develops in some areas of operations, refurbished used may be as good as new. Refiners come to mind. So do vacuum pumps and pulper gearboxes. The important thing to know is the reputation of the rebuilder. Motors can be rebuilt, but older ones may have poorer efficiencies than newer ones, even when rebuilt.

I would stay away from used machine components--forming sections, press sections, dryers, coaters, calender stacks and reels. There is just too much work to do to bring these items up to new specifications. I would also stay away from used pumps and fans--it is difficult to inspect the internals in order to determine if they meet new specifications (likely they will not anyway) and even more difficult to refurbish them.


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Of course, on the electrical/controls side, stay away from everything would be my advice. Especially when it comes to process computers, they are already almost obsolete when you install them new, let alone if they have a few years on them.

One of the largest problems with used machinery, however, is no warranty. With new systems you can get a supplier warranty, a collection of pieces you put together, no matter how carefully you do so, will not have a warranty except on discrete, individual parts. This alone is enough to keep some away from the used machinery market.

Some of you who sell used machinery may take great exception to what I have said here. If so, write to me and we will publish your counterarguments.

And we know we don't buy any used safety equipment, don't we?

Be safe and we will talk next week.

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