How To Justify New Equipment

Gregg Gabbana decided to move into color printing and convinced the management at Unisys to purchase several pieces of equipment, including a color press, an imagesetter, a color proofer and a plate processor.

Mike Renn of Mellon Bank negotiated an offset press, two Macintosh workstations, a RIP and a color copier for his in-plant shop.

How did these two get the goods when so many other in-plant managers are snagged by red tape trying to buy even one piece of equipment? Read on to find out how these and other in-plant managers were able to sell their supervisors on superior equipment—and how they managed to get the best deals from vendors.

Shopping For The Future

Every in-plant has a different purchasing process, but the consensus is that the sooner you bring your case up to management, the better.

"If we see a potential problem or bottleneck, we might start the process a few months or even a year ahead of time," says Richard Gonzales, director of printing operations for the State of Kansas. "A bottleneck costs money."

Knowing when to start moving a request up the line involves constant scrutiny of your own in-plant operations and of the technological innovations in the industry. When a new development in the industry coincides with a need in your operation, that's the time to make a move.

"I always keep an open dialogue with my manager on technology changes in the industry," says Mike Renn, assistant vice president, corporate services at Mellon PSFS, in Philadelphia. "The earliest I start knocking on his door is when I see an opportunity to do more and I don't have the capacity or proper technology, or we clearly need to improve a poor process."

Do Your Homework

Record keeping, research and reports: It's not exactly the three Rs, but it comes pretty close. To convince upper management to grant their requests, in-plant managers need to record everything from printing costs to turnaround time, and cross-check these results against the local competition. They also need to thoroughly investigate any proposed changes to the in-plant operations.

"We definitely do research," says Gonzales. "We try to get brochures, look at trade shows, visit sites. We want to see the equipment working. We also encourage vendors to come in and talk with us, and they'll generally suggest a site visit."

Renn advocates networking and benchmarking to determine what the best equipment is and how it will mesh with the current operations.

"After I know what direction we need to move in, benchmarking can begin," says Renn. "I don't try to reinvent the wheel. Before I talk with any vendors or even look at any equipment, I consult with my peers. Organizations like the International Publishing Management Association that share knowledge and are objective are great resources for making good equipment decisions. I compare apples to apples and then I talk to the vendors, go to the shows and exhibits, and weigh it all."

How can you prove to management that the equipment you're requesting will provide a decent ROI and will increase productivity and save money? After all, any piece of equipment can look good on paper, but the tables could turn once the machine is installed. To convince management, you'll need to return to your research.

"Proving ROI requires a lot of research and a simple formula," explains Renn. "The first step in the research involves accurately determining the volume of work that is being produced annually for the organization by outside suppliers. Of that work, I analyze it to see how much of this work is one-time printing only or ongoing.

"Turnaround time, delivery destinations and the current level of customer satisfaction must also be studied. This requires customer cooperation and is usually done before the equipment is considered. After the proper technology is selected, I build a model of the equipment in my estimating system. I include all operation costs as well as a depreciation timetable.

"The model allows me to calculate the number of jobs that could be produced in a year," Renn continues. "I then can bid on this number of jobs going outside. The customers can compare the cost and turnaround time against the outside vendor they are using currently. This accurately reflects the cost savings percentage. So if the equipment can produce X number of jobs annually and save Y percent outside cost plus Z percent sales tax, this will equal your annual ROI or cost savings. I present a one-page proposal with the savings and attach all research and verification documentation."

When it comes time to quote your time-saving facts and figures to management, your request will look good on paper—and even better once the machinery is up and running—if you play it safe in your estimates.

"In justifying, you have to say how much time you save with the new versus the old equipment," says John Rogers, director of print services at the New England Journal of Medicine. "Err on the side of conservatism and list only half of it. Then break the savings down into weeks or months."

The Three-Legged Stool

When Gregg Gabbana, manager of manufacturing operations, print on demand, at Unisys, in Plymouth, Mich., discussed his request for color printing equipment with management, he talked about a three-legged stool. No, that wasn't one of the pieces of equipment he was looking to buy—it was a way to show management what his print shop's duties are and how they could be improved. According to Gabbana, it's necessary to convince the powers that be that all three legs of the stool will benefit from the proposed equipment.

"We have a three-legged stool for the company, so I created one for the print shop," he says. "The legs are cost: I'm cheaper than the outside competition; quality: I produce better quality than the competition; and service: I can deliver the product to the customer when he needs it. If you're missing one of those legs, the whole thing collapses."

Mike Renn also adheres to the three-legged stool rule.

"When I propose the acquisition of new equipment to management I always justify the real benefits to the Bank," he says. "The proposed equipment must be able to increase capacity and services without adding to staff. Delivery time has to be faster. Quality must be improved. Return on investment must be in a year or less, and the product produced must be substantially less expensive to the internal customers."

The Customer Is Always Right

Your customers' opinions can be the element that makes or breaks a bid for new equipment. Keep your customer base up to date on breakthroughs in printing equipment so they will have an idea of the printing possibilities open to them.

"If I didn't have customer support, I wouldn't get anything that I request," admits Renn. "This is not to say that the customers propose the equipment to my management. Though in the case of the four-color press, some of them did suggest it to my manager. If your customers and direct managers aren't interested in what you are doing, don't expect any support moving a capital project up the line."

It certainly doesn't hurt to rally the customer base behind you when you go in to make a request for new equipment.

"You can tell clients that they'll be able to do more and that turnaround will be faster," says Rogers. "Clients don't stand up in the meeting and say, 'I think you should buy this.' They'll do it subliminally."

Once your request for new equipment has been approved, it's up to you to get the best deal for your budget. It can be like buying a new car: You go in, kick a few tires and then mention to the salesman that you can get a similar item cheaper at another dealer. Then you negotiate add-ons to the deal.

Printing equipment vendors won't offer free fog lights or rustproofing, but the analogy still holds—you can get many extras simply by asking.

"Good vendors often offer free parts and labor service agreements for a year along with training," says Renn. "I always make sure our sourcing department puts that in the contract. I usually let our sourcing people wring whatever else they can out of the vendor. Also, no matter how big the vendor, always get an implementation plan, procedure and schedule before installation, or walk away from the deal no matter how good it looks." John Rogers also suggests that the in-plant manager negotiate for free rigging if it's not included in the price.

But there's a difference between negotiating for the best deal and pitting one vendor against another.

"The only trick I have up my sleeve with vendors is honesty," says Renn. "They know I deal fairly with them. I don't share other vendors' bids with them. I just ask for the best deal and they know if they don't come up with it they're out."

Rogers agrees. "Playing tricks is a very bad practice," he says. "The ones who do it will get bitten."