Published with permission from Equipment Manager magazine by AEMP.
The decline in the economy has given way to a slew of manufacturers adopting their own certified refurbishment programs as equipment executives are looking to repair high-hour equipment rather than buy new. At about half the cost of buying new, refurbishment may seem like a no-brainer. Yet in order to achieve the cost savings and ensure longevity post-refurbishment, an equipment manager must be educated on five factors in the decision: what a refurbishment entails, what to look for in a service center, when refurbishment is appropriate for a machine, the potential benefits of refurbishment, and what to expect post-refurbishment.
1. Refurbishment defined
By definition, to refurbish something is to restore it to its original condition. In terms of equipment, refurbishment consists of reassembling and replacing components to restore the equipment to its state when originally manufactured, which is why the process is often referred to as remanufacturing.
Typically, a refurbishment will address every component of a machine: everything from cosmetics and operator comforts to mechanical and electrical components. The goal is to help the customer by producing equipment that is as close to the original as possible.
The process starts with an inspection of what is easily visible: paint, tire tread, operator seat, seat belts, floor mats, etc. Then the major mechanical components are addressed: drive line, engine, transmission, axles, brakes, differential unit, etc. Finally, the focus shifts to electrical and mechanical components that are not easily inspected without the aid of computer diagnostics. The end result is a complete analysis of the machine, in and out. How the refurbishment proceeds from here can differ greatly, which is why it is important for equipment managers to know what to look for in a service center.
2. Service center qualities
Although some service centers take a “flat-rate, replace-everything-no-matter-what” approach to their refurbishment programs, others have a much more flexible approach. A dealer providing flexibility in refurbishment services will perform inspections, present the results to the customer, and allow the customer to make the decision on what work will be completed. The flexible approach can save significantly on costs, especially if previous work has been done on the machine. For instance, if a 12,000-hour machine had an axle and two tires replaced 100 hours ago, the customer would likely choose not to replace them again during the refurbishment. With a flat-rate service center, everything will be replaced no matter what, which is often not the most cost-effective way of doing things.
Regardless of how a service center chooses to deliver the end product, it’s important to choose a center that has standards by which their procedures, their facilities, and their staff are held accountable. Such is generally the case with a brand-certified refurbishment center.
Firstly, it’s important to ask what type of standard inspection and testing procedures the facility performs on a machine upon arrival. A good refurbishment center will hold every machine to the same standard checklist of tests and inspections and will be transparent and flexible with the customer before, during and after the refurbishment process.
Secondly, it’s important to ask what type of standards the facility meets. Brand-certified refurbishment centers should have a number of standards strictly enforced by the manufacturer. These standards often dictate the type of machinery used to perform the work and require a guarantee that all parts and accessories are in stock at all times. Backorders can significantly lengthen the timeline of the refurbishment process, causing loss in productivity and often additional costs for storage and labor at the service center. Thus, it’s important for an equipment manager to review the standard facility requirements and ask questions about anything he or she feels is absent.
Lastly, it’s important for an equipment manager to know the credentials of the technicians performing the refurbishment. An equipment manager should expect the refurbishment to be overseen by a master-level technician—one who has not only been given a certification as such, but also is subject to ongoing, instructor-led education requirements.
Technology evolves quickly, so it’s important that technicians are enrolled in ongoing training.
A brand new piece of equipment comes with a factory warranty. If a refurbishment center is marketing their services as being able to bring equipment back to “like-new quality,” the statement means little without some sort of guarantee. An equipment manager should be wary of any service center that does not offer a standard warranty for refurbished machines.
3. When to refurbish
Refurbishment, if done at the right time, on the right equipment, and by the right people, can provide significant cost savings when compared to buying new. In order to achieve those cost savings, however, an equipment manager must know when refurbishment is right. The three important factors to consider are the type of machine, the size of the fleet, and the age and condition of the machine.
With the current structure of the market, refurbishment is cost-effective only for mid-sized equipment and larger, such as articulated haulers, wheel loaders and excavators. For two major reasons, compact equipment and backhoe loaders are typically not good candidates for refurbishment. Firstly, the market for used equipment is much stronger for compact equipment than it is for large equipment. Compact equipment holds a strong resale value, and an equipment manager should have no problem finding a buyer when disposing of an old machine and buying a new one. Secondly, relative to that of larger equipment, the price of components for compact equipment is a higher percentage of the overall price of the machine. This makes it difficult for a service center to refurbish this type of machinery at a rate that would be attractive when compared to buying new.
The emissions of an individual machine can also sway the decision on whether or not refurbishment is a good option. In order to improve the emissions of a machine, a great deal of sheet metal and airflow work will need to be done in and around the engine. Although making minor improvements to emissions is feasible and actually quite common in refurbishment, making drastic changes is costly and time-consuming. Bringing a Tier 2 engine up to Tier 3 status is affordable, but bringing a Tier 0 engine to Tier 4 would not be cost-effective. In this instance, an equipment manager would be better off buying a new machine with a Tier 4 engine.
Full refurbishment of a machine can take up to 60 days, so an equipment manager must plan for the downtime. If a manager has a small fleet of wheel loaders and is dependent on those wheel loaders to run the business, that manager must weigh the options, comparing how much a refurbishment will save versus how much loss in productivity will be caused by up to 60 days without a machine. The decision is a much easier one for managers of large fleets who can plan for the downtime and compensate with the rest of the equipment.
Although it would be convenient to be able to say machinery is best-suited for refurbishment at a certain number of hours, such a statement is too general. The type of machine, the age of the machine, and the application in which the machine has been used all play important factors in properly timing a refurbishment.
Wheel loaders are typically good candidates for refurbishment around the 12,000- to 15,000-hour range. If the machine has worked in a harsh application, such as a rock quarry face, 12,000 hours would be a good time to have the machine inspected. In other applications such as a waste handling site, it’s not uncommon for machines to run well over 15,000 hours without changing the engine or transmission. This would be a good time for an inspection, though, as refurbishment should take place before any major failure that would cause unplanned downtime, which could occur in the middle of a heavy work cycle or large project.
Similarly, the lifespan of an articulated hauler is entirely dependent upon how it has been used. If the truck has been hauling 40-ton loads in and out of steep, rough quarry roads, 8,000 hours would be a good time to consider refurbishment. If the environment has been less harsh, the hauler should be able to run up to 12,000 hours before refurbishment should be considered.
When it comes to excavators, timing a refurbishment is not as clear-cut. The hydraulics tend to need repair or replacement around the 8,000-hour mark, whereas the engine can easily run up to 12,000 hours. The equipment manager should weigh the options when it comes to whether a complete refurbishment is going to be necessary and cost-effective, or if it would be better to update the machine twice, first for the hydraulics and again for the engine at a later date.
A refurbishment can entail replacement of each and every component short of the machine’s frame, which is why the structural integrity of a machine is key to deciding whether it would be better to refurbish or buy new. Typically, a newer machine that has accrued a high number of hours in a short period of time is an excellent candidate for refurbishment. On the other hand, an older machine that has accrued the same amount of hours over a much longer period of time is more likely to have structural issues and may not be as strong a candidate for refurbishment.
A good refurbishment center will work closely with the owner to determine when refurbishment is most appropriate.
4. Potential benefits of refurbishment
Equipment managers are initially drawn to the option of refurbishment because of its cost benefits. Refurbishment typically costs about half as much as buying new and can bring a machine back to like-new condition. In addition to the initial cost savings, refurbishment increases resale value and can provide tax benefits to a business, depending on how it’s structured. A refurbished asset can be recapitalized on a depreciation schedule at half the value of a new machine.
Cost savings are not the only benefit to refurbishment, however. Not only are operators familiar and comfortable with the machines they’ve been using–which eliminates the learning curve associated with new equipment–but they also take pride in taking care of their machines. Many operators who have been through the process would agree that seeing their trusty old machine brought back to life had a positive psychological effect. Refurbishment also gives the opportunity to upgrade to the newest available technology, and by refurbishing a machine, the owner creates a smaller impact on the environment.
5. post-refurbishment expectations
The same variables affecting the lifespan of a new machine also apply to a refurbished one. The post-refurbishment lifespan depends on the type of machine and how it will be used. If the machine is used in the same application after refurbishment, an equipment manager should expect to extend the machine’s lifespan by about 80 percent while adhering to the same maintenance schedule after it’s refurbished. In other words, if a wheel loader was refurbished at 15,000 hours, the equipment manager should expect to receive an additional 12,000 hours out of it after refurbishment. To back up these claims, a good service center should offer a warranty on all refurbished equipment.
Refurbishment is becoming an increasingly attractive option for equipment managers. At about 50 percent of the cost of new equipment while extending life expectancy by about 80 percent, the numbers speak for themselves. In order to achieve these cost-effective results, however, an equipment manager needs to make an educated decision on when and where to refurbish equipment.
A brand-certified refurbishment center will be held to strict guidelines in terms of their facilities, their equipment, their procedures, and the credentials of their staff. A good refurbishment center will also be flexible and transparent throughout the process, allowing the customer to make decisions on how to proceed through each step of the way. Refurbishment of machinery should be a collaboration between the owner and the refurbishment center–the owner being the expert on how the machine has been and will be used and the refurbishment center being the expert on how to best prepare it for its new life. EM
John Taaffe is marketing and sales manager, customer support, at Volvo Construction Equipment.
