Bearing prices, for shame

[Larry Diamond]

Capital Investment Vs Breakeven Point...

Many more things to consider...Possibly the bulk of the production equipment will last awhile. Depending on the abuse it takes and how well it's maintained is a factor in that.

Thus the conclusion is, the break even point must be considered up front and profit targets established. The breakeven point is typically the life of the equipment plus overheads plus profit. Part of the formula is to insure you have the cash flow or assets to cover the cost of the equipment when its beyond it's expected life.

The cost of the die is a big factor as well as the overhead of the support staff to make the parts and maintain the equipment or have equipment serviced...Costing gets very complicated in a manufacturing business.

The replacement cost of equipment is the main concern as typically it's either better to by new equipment for replacement or upgrade. The cost of poor quality is unacceptable when trying to string out the life of the equipment beyond it's usable life.

In summary, if a company is to survive long term in the manufacturing industry, there is no breakeven point for the cost of equipment. The capital investment is just that...investment... They have a planned return for the investment, just as if they were to invest the money in stocks and bonds.

See ya,

Larry
  ----- Original Message ----- 
  From: John Ferrell 
  To: discussion at nsrca.org 
  Sent: Wednesday, October 15, 2003 3:55 PM
  Subject: Re: Bearing prices, for shame


  RE:
  "P.S. in the APC example: I would think that they have to reset the equipment that sets the pitch and diameter of the props. The time they spend doing that costs them money, and the time spent makeing specialty props where they could be making 10x6 props also costs them money so I can see charging a premium. "

  I am not sure of the reliability of my source, BUT it is my understanding that the big cost in APC Props is in the cost of the manufacturing equipment. I was told that cnc equipment produces the dies and the injection molding equipment is the same on all setups. 

  When a business takes the risk on a capital investment there is a break even point, then there is a period where the only costs are supplies and labor. It is not unusual to see a markup of five or ten times the current cost of goods sold. 

  It is generally accepted that the risk justifies the reward.  

  The question arises :  "When is the reward excessive?"

  John Ferrell
  6241 Phillippi Rd
  Julian NC 27283
  Phone: (336)685-9606
  johnferrell at earthlink.net
  Dixie Competition Products
  NSRCA 479 AMA 4190  W8CCW
  "My Competition is Not My Enemy"
   

    ----- Original Message ----- 
    From: Anthony Abdullah 
    To: discussion at nsrca.org 
    Sent: Wednesday, October 15, 2003 3:40 PM
    Subject: Re: Bearing prices, for shame


    I agree with you 100%. In fact, prospecting for margin, and plugging profit leaks in our industrial chain is what I do professionally. As tight as things have gotten, we have some account reps that would love to get an order for two bearings at 35% margin, specially if it is a no labor order where someone called in with a part number. We've done a whole lot more for less. Like going out and measuring and identifying the failed part, picking it up from the SC, and returning it to the customer within hours, all for 13% GP. Yes that is a customer that buys a lot more than two a year, but there is very little labor involved with turning a part number into a part and accepting money. The staff is going to be at the service center anyway. In addition, every unit we sell strengthens our buying position with the manufacturer, and factors into our strategic marketing credits (rebate and incentive program).
    I manage my severely limited resources the way pattern builders manage weight (except for Mike Darr (you know I live you bro <vbg>), I save a gram at a time and in the end it adds up to a new engine, a digital servo, or a new airplane. If I save five bucks a piece on bearings that I have to buy anyway and can possibly help others do the same, why not.

    P.S. in the APC example: I would think that they have to reset the equipment that sets the pitch and diameter of the props. The time they spend doing that costs them money, and the time spent makeing specialty props where they could be making 10x6 props also costs them money so I can see charging a premium. But if NTN makes a million of the same bearing and an SC hands you two of them out of a big drum or a box without all the packaging then it makes sense to me that you should get to enjoy a lower price. 

    Anthony Romano <anthonyr105 at hotmail.com> wrote:

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