Why Aftermarket Support Matters More Than Purchase Price

by RobertB
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Why Aftermarket Support Matters More Than Purchase Price

Aftermarket support is much more important than purchase price, but why? This guide explains why aftermarket support matters more than purchase price.
 

By Robert Bond

According to the Bureau of Labor Statistics, between 2011 and 2017, more than 7,000 nonfatal injuries occurred each year as a result of forklift-related accidents.

The BLS data suggest that most of these injuries are the result of improper training or operator error. However many serious accidents happen due to equipment failure caused by poor aftermarket support.

For instance, a Pittsburgh steelworker was paralyzed when he lost control of a forklift due to its faulty breaks and crashed. The emergency brake had been installed improperly and forged inspection records covered it up. He won $8.5 million in a settlement.

Avoiding such accidents is not the primary benefit of effective aftermarket support, but it might be the most important. Properly maintaining your equipment can have a serious impact on the health of your workers, and your bottom line.

The Elements of Effective Aftermarket Support

Good aftermarket support signals a company cares about their reputation and the quality of their goods.

Many companies offer some sort of repair or warranty programs. However, true aftermarket support involves a more comprehensive focus on extending the useful life of your equipment.

To keep your equipment running, you’ll need:

  • Trained repair technicians
  • Variable maintenance programs and schedules
  • Nationwide accessibility
  • Parts for every make and model of equipment

The issue is the freedom to tailor the support to your needs. Companies have an incentive to make repairs difficult. In fact, the Right to Repair movement sprang up to make it easier for people to fix their equipment.

“Short-term Thinking Hurts Your Business. You may still be tempted to go with the cheaper option. Sticker shock is real. So are opportunity costs.”

Calculating the Total Cost of Ownership

Even setting aside arguments about quality or commitment, there are practical financial reasons to prioritize good aftermarket support. The key is understanding the total cost of ownership vs acquisition price. When you differentiate the two, you can save money in the long run.

The initial acquisition price is just the sticker price, how much you pay upfront. The total cost of ownership takes into account the acquisition price and all the other costs you incur during the lifetime of your product. These costs can include:

  • Repairs and maintenance
  • Operating costs
  • Consumables like fuel or parts
  • Personnel costs (including training on new systems)

You might also want to include the opportunity costs in your calculations. Opportunity costs are basically the value of other opportunities you could not pursue because you made this purchase. For instance, if you buy a forklift, you may not be able to upgrade your inventory system.

Once you’ve settled on what costs to include, you should then pick a timeframe. For instance, you could calculate the total cost of ownership per year (as in, how much fuel you would need for a year) over a 5 year expected lifetime.

Depending on that lifetime, repairs or consumables could be a much higher piece of the total cost than the initial price. Over time, the higher-priced option might be a better value.

Amortization of the Initial Price

Thinking long-term like this also puts the price of new equipment into perspective. The key is amortizing that initial price, or stretching that initial price across the lifetime of the asset.

Let’s compare two fake products:

  • System A costs $20,000 and will last 8 years
  • System B costs $30,000 and will last 15 years

At least in terms of price, System B costs significantly more.

However, when you amortize that price over the lifetime of the system, the calculus changes. System A costs $2,500 a year, whereas System B only costs $2,000 a year. System B would actually represent a net savings over a long enough time frame.

Replacement Costs

In fact, the above analysis probably underestimates the savings from good aftermarket support, even if we hold costs for parts and repairs constant. The important thing to keep in mind is replacing equipment or systems carries its own costs.

Using the same example, suppose you want to forecast operating costs for the next 30 years.

Over that timeframe, you will need to buy System A at least three times (the initial purchase and two replacements), possibly four. However, you will only need to buy System B twice (the initial purchase and one replacement).

Each time you replace the system, there are associated costs. Most likely you will have to train people on the new version of the system to account for any changes. And, there will be downtime during the replacement. These costs add up.

How Often Should You Service Industrial Equipment?

One of the key variables in calculating the total cost of ownership is how often you will need to repair or service your equipment. The more a forklift needs to return for repairs, the more expensive the total cost of ownership will be (and the more important aftermarket service will be).

To begin, the Occupational Safety and Health Association (OSHA) has set out regulations requiring regular maintenance for forklifts and other heavy machinery. These regulations include daily inspections of all equipment.

As these regulations indicate, ignoring regular maintenance can lead to equipment-related accidents like the one described above. Such accidents could damage your inventory or, even worse, injure your staff.

To determine the appropriate maintenance schedule, the manufacturer’s suggested maintenance guidelines are a good place to start. But, creating a precise schedule is a bit more complex.

The thing to focus on is the hours of use. Equipment that runs eight hours a day, seven days a week will need maintenance more quickly than if you only ran it five days a week.

The type of engine in your equipment can also affect service schedules. Equipment that relies on internal combustion engines will need service more often than equipment that relies on electric motors.

Coming up with the right schedule can help you plan production and forecast operating costs.

Short-term Thinking Hurts Your Business

You may still be tempted to go with the cheaper option. Sticker shock is real. So are opportunity costs. But, when you think long-term and prioritize aftermarket support, you end up saving money, protecting your workers, and getting a better product.

To find materials handling equipment that will help you for years, browse some of our new or pre-owned inventory.

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