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    FT Archives

    Editor's View: Understand the Real Cost

    By Rodger Talbert
    March 10, 2004
    My business revolves around problem solving. Simple days involve prioritizing upcoming tasks and planning for the next few weeks. Some days are more challenging, working to figure out how to layout a new system within the space the customer has set aside (often too small) or working in the lab to solve a coating problem.

    I always focus on the best way to do the job, while my clients are often most concerned with cost. I have learned through experience to develop more than one way to satisfy a particular need, a list of possible ways to proceed that works using the best solution to the lowest-cost decision and a cost/benefit analysis to show the value of the higher-cost options.

    It does not always follow that the best solution is the most practical. For example, a faulty coating system could best be corrected by replacing it with a new system, what I call the "dynamite" solution. Blow it up and start over. It's much easier to build it right the first time than it is to make a silk purse out of a sow's ear.

    But this is seldom a workable idea because of the logistics and dollars involved. So we often find solutions that offer the most for the least, not the cheapest way to do it, not necessarily the best way to do it, but the most practical way to do it. This is fine as long as it is a definite fix and the weaknesses are understood and acceptable.

    This is where the problem comes in: Companies often don't do what's guaranteed to work, they go with the low bid. Then they struggle trying to live with an unreliable process or unacceptable quality. Many of the people making decisions on behalf of their companies, large and small, know little about the long-term impact of the choices they make. And with the short-term goal of satisfying shareholders or business managers, they make bad choices.

    Then they often blame their vendors. "Your paint is no good; your chemicals don't work; there is something wrong with your washer, oven, spray gun or booth." I can think of so many examples that it's hard to decide where to begin. A customer wants to know why his powder spray guns are surging and choking out during production. He calls the gun vendor and the powder vendor for help. They ask about his wear parts and maintenance program and he says everything is fine there. They go to the facility and find that the wear parts are shot, and he doesn't know it. Another customer opts for a smaller washer because the longer one just would not fit in the building. The parts come out of the washer with flash rust or water spots, and he wants the chemical guy or the washer manufacturer to fix it.

    Do not be one of these guys! Learn about the operating costs and the other long-term issues before you make a change or a new purchase. Understand the real cost over time of a particular approach of doing the task.

    I'll close this discussion with an analogy from a trip I took to Amsterdam. I noticed that most of the cabs were Mercedes. Since this is regarded as a luxury car in the United States, I asked my cab driver why they all drove Mercedes. He said that with the miles that they need to get out of a car purchase, they could not afford to drive anything less. He reasoned that his annual cost was much lower with a reliable vehicle that needed the minimum of routine service to deliver well over 200,000 miles of service.

    You may not be able to buy a Mercedes all the time, but try not to buy a lemon. Examine all of the cost issues, and you may find that your decisions are holding up a lot better over time.

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