HOW EXPENSIVE IS CHEAP
Part 1of 5
The General Concept
Here is an odd look at an awkward term “How expensive is Cheap”.
We will look at areas of
* Initial outlay
* Decision- reception to end users
* Culturally effects on efficiency
* Short to long running costs
* Extension if business ideology
This overview will effect company’s small to medium business. 2-200 people
AS a quick snap shot of modern business
* High standard of competition business
* More people increasing into self-employment rather than adding to larger resource pools
* Lower average age being lower every year.
* Greater skill shortages
* The challenges of business of finding correct people, that represents a outward standard
* Rising running costs whether by regulation or advertising budgets
* Greater liability with insurance complexity and workplace safety, including litigation
* Greater demands of clients standard as globalisation sets commercial and lead-time milestones
By the time all the other considerations have happened people are generally look for the cheapest products and plant to offset mounting costs from above. The understanding is that if something technically qualifies as a tool to produce the service as promised by the business, then it is the decision that is made
GENERIC Plant and equipment
The equipment that is the most effected by low bottom line initial outlay are
* Tipper trucks
* Mulch bodies
* Vacuum Trucks
* Tilt trays
* Mini Excavators
* Water Trucks
* Plant trailers
* Earthmoving buckets
* Hydraulic hammers
* Table Top Trucks
The one thing all these have in common is they are all very generic, where influx of new business in construction will generally start with one of these machines. This generally drives down the initial
purchase price on new items as well as the service life of second-hand equipment generally will move through up to 5 owners through the peace of plants service life. Being recycled down from principal contractors down to low budget business starters.
This creates a culture of manufacturers that put cheap before quality is mostly 80% of potential buyers of these machines will be looking purely for bottom-line cost to get the units on the road.
PURPOSEFUL Plant and equipment
This is equipment that has a specific purpose where safety or hire of failed plant on tenders or specific contracts is not easily found. This tends to lead to a culture of plan manufactured to be suited to reliability and efficiency. Some plant is as follows
* Garbage compactors
* Road profilers
* Hammer mills
* Directional drills
* Elevated work platforms
mostly businesses that have moved into areas that use these types of plan above. I realise that reliability and efficiency is a fundamental part of the formula of their hourly rate based on the forward workload. So here is the minority of price not being the key dictator of the decision of the final equipment that receives the purchase order as an asset.
Looking back at how the generic plans can be reassessed to find cheaper alternatives to a better product.
Accountants are always experts and everything regardless of their experience. That’s because the simple belief that businesses money they are experts of money so the experts and everything to do with business. This is a fairly honest objective account of how decisions are made within businesses and organisations. But no accountants can tell you confidently that they can factor in KPIs or have a account in the chart of accounts that directly relate to cultural impact of premature deterioration via disconnect of plant and people.
Meaning ratio of time that plant can survive within the company when there is no cultural adoption of the item. The reason accountants can’t fix algorithms to this is because it is a perspective rather than a unit of measure. But extremely real nevertheless.
The reason why I have outlined relationship of accountants and plant, is because it is became a growing trend over the last 20 years where the disconnect of man and machine has come through labour that has respected the required tasks and projects instilled on been supplied with equipment that they are aware as experts is of subgrade and eventually breaks down which adds cost, downtime which ultimately makes the projects that these teams are on become unprofitable, with explaining to do. When discussions of plant quality are always raised with the people who’ve made the decisions 95% of the time queries of low quality plan are answered by. “While other people were out there using them´ why can’t you, they come from a big company they must know what you’re doing. We doing wrong for them these items to break in your care´
This is an extremely common occurrence in companies we can imagine that when those types of comments are made to teams are using that equipment. The problem is that now the plants failure is increasing frequency and cost to the company will be more money in repairs and downtime to prove the point; with unfortunate circumstances where these plant tend to break down on contracts that one in front of principal contractors and government departments.
If a non-management company representative is on-site who’s company owns this plant they will be too often be happy to offer up that the decision-makers in the company lack of consider to reliability and quality when buying equipment.
Manager’s owner’s or supervisor’s underestimate that these comments do paint a picture of the business that result down the line could cost between thousands or millions of dollars in lost revenues.
So conclude part1 (general concept)