One of the joys of being a grandfather is that you get to read fairy tales to your grandchildren. Recently I have been able to re-read most of the classics. The original fairy tales (not the new politically corrected versions) taught valuable life lessons.  

I was reminded of “The Emperor’s New Clothes” when Bob Wilcox (one of our salesmen) asked me after the StonExpo show why the MIA and others were stressing saw jets, CNC machines, and other expensive pieces of equipment. Bob asked if expensive equipment wasn’t the cause of many bankruptcies in our industry. 

When I was a young engineer at Procter & Gamble, I shared an office with a crusty old veteran named Rick, who was assigned the task of teaching me about capital justification. In our first lesson Rick explained that unless an investment enabled you to produce more product that you could sell or enabled you to fire someone, it would never produce a payout. He stressed that making more product was a no-brainer; the problem was selling it. He also said that you needed to have the names of the people who would be fired; you could not just say something like “full time equivalent,” you had to have the actual person.  

Lesson two introduced the concept of the entire systems vs. a segment of the system. Rick pointed out that you could justify just about anything if you were “saving labor” or “increasing production” at a particular work station or part of a process, but unless the investment increased production in total, you would not actually increase production, and unless you reduced employee headcount in total, you did not have a labor savings.  

Lesson three introduced the element of risk. Rick explained that the payback requirement on computer technology for example was higher because the risk was higher. He also explained that trading low priced labor with technology might make sense, but you might be trading low cost labor for computer programmers who were harder to find at that time.

Several years later I attended a seminar taught by a fellow named Goldratt who had written a book called The Goal. Goldratt was an Israeli physicist who became a management guru. He was the originator of the Optimized Production Technique, the Theory of Constraints and a prolific author. The Goal explains why after making many investments, a business was still not making any money. If you have not read the book, you might find it a useful read.  

It seems to me that the real issue is investment and return on capital. Simply owning the latest and greatest may not be the best strategy. My old friend Rick liked to point out that it takes real work and sober thought to analyze an investment, a one-size-fits-all solution does not exist in the real world. 

Perhaps the MIA could take on the job of really analyzing payback on various types of investments. For example, a programmable water jet compared to a manual bridge saw like a Renegade, and compare that to a rail saw such as the new Raptor. Likewise, a CNC machine vs. the Fab King, vs. a Hercules® Router and SinkMate combination. Or perhaps an edge polisher compared to the Edgemate. It would be helpful to see what the real output and real costs really are so that the industry can make more informed decisions.

I would like to hear from others on this subject. Please write me at publisher@slipperyrockgazette.net. Letters will be appreciated and published.

Have a good read,

Rich Hassert