Tuesday, May 22, 2018
Publication Date: 06/1/2008
Archive >  June 2008 Issue >  Management > 
Pre-Owned SMT Feeders: Cost-Effective Options

Obtaining the correct types and quantity of feeders with pre-owned SMT equipment is just not in the cards. Invariably, buyers almost always end up with feeders they don't need or shortages of the ones they do need. To make up for the shortages the only option that had been available was to purchase feeders from the OEM.

The result: end-users often have found themselves stockpiling feeders with no foreseeable requirement. After all, what's the likelihood of purchasing a pre-owned system and ending up with exactly the feeders needed in the correct quantities? Probably better than winning the lottery, but still not in your favor. Resellers soon realized feeders really had their own sub-market and considerable activity began to take place with the buying, selling and trading of pre-owned feeders.

This secondary market, through resellers, has provided end users with a cost effective avenue for matching their feeder inventory with production demands and allowing them to sell or exchange unneeded pre-owned feeders for the ones they were lacking. For some lucky buyers, even brand new still-in-the-box feeders are often found in the secondary market. This activity didn't go unnoticed by the end-users who initially sold their SMT systems with the associated feeders, often allowing them to be undervalued and simply sold as part of the deal. With a multitude of resellers in the market, and often with published prices, they could now put a value on their feeders and demand more money for the system and feeders when sold as a combination. Or, in many cases, break up the package and sell to more than one buyer with the system and feeders going to multiple buyers. Better prices for the end-users soon caused the margins for resellers to gradually shrink and stabilize.

The more sophisticated resellers who remained committed to the feeder market began to add value to their transactions, moving away from the "As Is" sale and towards reconditioning feeders and even providing a warranty. This value-added scenario was immediately accepted by buyers and has allowed resellers the opportunity to increase their margins and justify the technical staff needed to provide this type of service. It has also been a major win for the end user, allowing them to purchase pre-owned feeders with a warranty and potential savings of approximately 50 percent when compared to buying new. As a result, the demand for quality pre-owned reconditioned feeders has steadily increased. In fact, today the demand for later model "state-of-the-art" pre-owned feeders far exceeds their availability, forcing some buyers to purchase new until pre-owned ones start to move into the secondary market.

Over the last two or three years, resellers have taken additional steps towards providing even more value-added services. These include calibration and reconditioning of feeders owned by the end-user on an outsourced basis. With the cost of calibration equipment and skilled technicians being fairly expensive, this makes good sense. With significant volumes being sent to the reseller they can justify the expensive people and equipment while allowing the end-user to avoid the expenditure. Also, as a by-product to reconditioning feeders, it's not uncommon to find feeders that cannot be repaired. An example would be a unit with a cracked casting. However, many of the parts on these feeders are still in excellent condition and easily salvaged. Much like the feeders themselves, these parts are also being offered for resale at attractive prices. This has added still another cost savings for the end-user who elects to repair his own feeders.

While some end-users still believe that having the ability to repair their feeders internally is a clear advantage, there is a larger movement toward outsourcing. Companies that outsource prefer to expend their resources on activities they feel are better focused on their core business — building high quality PCBs for their customers. As board designers continue to increase board density, while at the same time placement speeds and production efficiencies dictate profitability, this trend seems to be appropriate. The feeling in these companies is that employees are hired to work on the quality improvement of their product, not chase replacement feeder parts and analyze performance problems, etc. Maintenance is viewed as a separate issue and should be outsourced to third-party suppliers who can take advantage of economies of scale — not too different from the original concept of outsourcing PCBs to contract manufacturers.

Maintaining a strong relationship with a reseller as a third-party provider has also proven to have a side benefit for the end-user. Since this relationship often gives the reseller visibility to upcoming requirements, it enables the reseller to monitor the market for bargains and then bring them to attention of the end-user. Additionally, the larger resellers often buy and sell many of the other assets involved in the production and testing of PC boards and can work with a wide variety of assets in exchange for assets relating strictly to SMT placement. As an example, an in-circuit-tester, AOI or flying prober might be used to purchase an SMT placement system or a quantity of feeders. Obviously, with resellers offering a broad range of assets and services these same assets can be used to purchase calibrations, reconditioning, refurbishing, on-site services and annual service contracts. Finally, being able to complete these types of transactions within a single reseller can greatly reduce transaction time and increase flexibility. Many can even be cashless transactions often making impossible "budget restrained" purchases, possible.

Further still, resellers can also offer rental opportunities, on certain pieces of equipment, with short-term rental periods and terms. They also maintain strong relationships with leasing companies comfortable with pre-owned equipment and structuring leases to support their purchase. Leasing companies are also attracted to resellers because they rely heavily on them to provide market values for equipment coming off existing leases. Which, at the same time, may provide the reseller with an advance notice that equipment needed by an end-user is about to become available.

Leasing feeders in significant quantities, with the purchase price often exceeding the cost of the placement machine, can even make sense and provides an alternative to impacting short-term cash flow. End-users today have an extensive list of options available to them when it comes to feeders and related assets. The secondary market provides a cost-effective alternative for liquidations, purchases, trades and repair and maintenance services. Idle assets, like superfluous feeders might be readily converted into an alternative asset or service that could better suit the company's current production needs.

Contact: Lewis and Clark, Inc., 131 Burke Street, Nashua, NH 03060
603-594-4229 fax: 603-594-0554 Web: http://www.lewis-clark.com

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