Cheap at Half the Price

This article was published by Ben Hailes on 9 May, 2017

I've always marvelled just how cheap inkjet printers are today. A trip to your local Officeworks and you can buy yourself a tidy multifunction inkjet printer with all the bells and whistles for less than 0 bucks. Fair dinkum, I tell you no lies, a photo quality, duplex printer with scanner and ink cartridges. Crazy stuff, makes you wonder how manufacturers even turn a dollar these days.

However, as with most things in life, there's nearly always a catch and at some stage we all eventually pay the Pied Piper. So, what's the catch, the printers are easy to use (nearly to easy), they're reliable and our families love using them, until of course it comes time to replace the ink. Flop me, that can't be right, the ink is as much as I just paid for my printer! Now suddenly, you're managing your print runs by page, printing in greyscale or better still, black and white (black ink is always cheaper!) and your kids are now banned from using the printer unless it is deemed critical to their future development (sounds just like considering the cost of making a call on your mobile back in the 90's!).

What's this all got to do with mining and earthmoving equipment?

Absolutely nothing, until you consider the strategies used to entice customers to purchase, operate and maintain their equipment. Let's face it, we all like things shiny and new, even more so when it's the real deal, made by the company, for the people. There's nothing like the feeling you get when you unwrap that original part for your treasured machine.

In a report published by Macquarie Equities Research they lifted the bonnet on some of the large machinery manufacturers to understand what made them tick and more importantly, where they made their money. Macquarie's findings revealed that the profit margins for their maintenance and spare parts operations are higher than those attained when selling equipment.

They go on to highlight that this type of revenue tends to be less prone to downturns (think about all the existing machines operating in Australia today), providing companies with a steady and reliable source of revenue.

How does this apply to me I hear you ask? According to one of the 'Big 3' Original Equipment Manufacturers (OEM's), the revenue generated from maintenance (including components and parts) through the life cycle of equipment tends to be two to three times more than the original purchase price of the machine. My goodness, sounds just like my printer. How very, very clever, cunning even.

So, what's the alternative? Before the downtown in 2011, when companies were awash with money, new for many was the only way to go. OEM components and parts, through and through. If only the goods times could last. With the mantra of 'cash is king' and the core focus of cost savings, equipment owners, maintenance teams and miners have re-evaluated their alternatives and in recent years increasingly purchased used and rebuilt components as well as replacing non-core parts with nongenuine options.

Now, we all know that upfront savings don't always result in long-term cost effective outcomes however, if managed right, they can achieve incremental savings with similar, if not, better results. I'm a fan and believe in the merits that such solutions provide if you do your homework. Just like my printer, if you asked me if I'd use refillable ink over plug and play cartridges, I'd have to admit I'm a sucker for the real deal.

This article was originally published by the ComponentsONLY team in the May - June 2017 issue of "@ The Coal Face" magazine.