As we approach the peak selling months in the fenestration industry, now is the time to analyze long term equipment needs and begin making decisions regarding equipment investments for 2020-21. As orders approach peak levels, the next few months will reveal to door and window manufacturers which areas in their manufacturing processes we need to focus on in the next few years in order to supply customers with the highest quality products with the shortest lead times. Of course, all of this must include a cost that allows manufacturers to achieve profit goals. There are five factors to keep in mind when considering new equipment purchases.

Factor one is orientation. The orientation of new equipment is a key consideration as it impacts the usage of valuable floor space and production flow. Vertically oriented equipment is becoming increasing popular in North America as we are now going through the same floor space shortages that European companies have dealt with for decades—factors which spawned the development of vertical equipment. As door and window companies expand their production into new product lines or vertically integrate by manufacturing components that were previously outsourced, floor space is being consumed. Companies should analyze the profit levels which are generated per square foot of factory floor space used in each area of the plant and seek to maximize dollar profits per square foot consumed. Consider outsourcing components which generate less profit per square foot of floor space used and replace that operation with a more profitable use of that particular section of the plant.

Degree of automation is a second critical factor to consider. One of the biggest complaints that I continue to hear in recent times from window and door manufacturers is the shortage of skilled labor. It is becoming a real issue in many parts of the country. The COVID-19 crisis led many to fear working in the close quarters that are characterized by many manufacturing jobs. Many plant workers left when the pandemic started and may never return to the manufacturing floor. Working at home seems to have taken on a life of its own and many jobs are available that allow this. Manufacturing jobs are repetitive, which can lead to worker compensation claims. Conditions are hot and humid during the summer months. Safety is also a concern. Wage rates have been rising to help attract more manufacturing personnel, but this drives up overall production costs. High turnover rates can affect quality assurance. Employee training programs are stretched to the limit. Suddenly, the price tag of automation does not seem so high when stretched out over the next five years with paybacks and improvements coming in all of these areas.

Software integration is the third area that can significantly impact a business in the long run. Investing in “smart” equipment allows integration between each part of the manufacturing process with order entry, inventory control and quality assurance. Synchronization becomes possible between each part of the fabrication process thereby streamlining the overall manufacturing process, cutting out paper, improving lead times and optimizing production efficiency and order accuracy. The bottom line is that it can enable a company to produce products of higher quality faster and at lower costs—all good. Many companies get sticker shock when they look at the price of the software, but the long-term impact on the future success of the organization can be enormous.

Financing is the fourth factor to consider. The used equipment market is not what it was in 2009, when it seemed that there was a used equipment auction almost every month. The price tag of automated equipment and sophisticated software can be substantial. It used to be that such equipment had to be capitalized and depreciated with a series of tax deductions taken over the years. However, the Section 179 Deduction changed all of that, allowing companies to depreciate the full cost of the equipment (up to a limit) in the same year that the equipment is put into service. So, a company interested in automated equipment can finance such equipment over several years while receiving the full tax savings from depreciation in year one. Extra dollars earned today are preferable to extra future earnings. Indeed a $1MM machine may only cost $650K after the tax savings – check out the Crest Capital Section 179 Tax Savings Calculator to see for yourself. Yes, aligning your company with a strong and smart financial partner can be huge. The best finance companies will offer flexible terms, low interest rates and tools to help analyze the return on your investment, thereby acting as a valuable consultant. Take advantage of the tools and expertise that your financial partners offer.

Finally, factor five is lead time. Fenestration equipment is becoming increasingly sophisticated. There are many options available and each machine is tailored to the individual needs of a company. The result is that these machines are not stock items. They take months to build. Along with the shortage of used equipment mentioned earlier, new equipment orders are surging, so lead times of six to eight months are now the norm for the most sophisticated machines. As a result, this must be factored into the purchase decision and planned for accordingly. Now is the time to be looking at finalizing decisions if you are planning on installing the equipment during the slow season, which is what most door and window plants seek to do in order to minimize disruption to the manufacturing environment during the busy production months.

So, these are the factors to consider for companies looking to improve their stakes in the door and window market. It is a critical time. Our industry is currently caught in a challenging situation with unexpected demand on one end of the equation vs. labor and material shortages on the other. Gains in production efficiency, reduction of labor and minimization of waste will be key in staying ahead of the curve.

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