Cost of Ownership Considerations

Estimated reading time: 12 minutes

by Gerry Padnos

As the SMT industry matures, containing several well-established vendors, it becomes increasingly difficult to differentiate offerings. Most pick-and-place machines from large vendors can handle the same component range with similar placement accuracies - exceeding IPC requirements. Companies compare price, features, and specifications, but not the actual cost of ownership. This article explores the factors that comprise cost of ownership, and how those factors affect a company’s bottom line.

What does it really cost to own a piece of equipment? A refrigerator that costs the same as another model, but uses more electricity will cost more in the long run. A hybrid car that uses less gas may cost more than a similar gas-powered car, but uses less gas and has tax benefits that may make it cheaper to own over the life of the car. Many industries talk about the cost of ownership as an important factor in deciding which route to take for capital investments. The total cost of ownership (TCO) is the complete cost of a product over its life cycle. A popular automobile information Website has a “True Cost to Own” calculator that estimates the total costs a typical owner can expect, including fuel, taxes, insurance, maintenance, and repairs. Why do they provide this service? They recognize that cost of ownership could be an important factor in helping a customer make purchase decisions. Machines used in an SMT assembly line are no different. There are the usual items to compare such as component range, rated speed, feeder capacity, accuracy, and board size; but there are many other less-obvious factors that contribute significantly to the TCO.

Costs that determine the TCO for any product can be divided into two groups: direct and indirect. Direct costs are actual costs of equipment, including parts needed to keep it running. Indirect costs are expenses related to a product, but not specifically used on that product. The most obvious general category of indirect costs is various labors needed to set up, maintain, and run equipment. Some people refer to indirect costs as “hidden” costs because they are not easily quantified. It is easy to compare the purchase price of one machine to another, and fairly easy to compare the estimated throughput (of a specific product). But it is not easy to compare the amount of maintenance time a machine needs, how reliable it is, and what impact maintenance and reliability have on your business. Some of the cost categories that contribute to the TCO of an SMT assembly machine are:

• Direct

- Purchase price

- Depreciation

- Spare-parts costs

- Consumables

• Indirect

- Uptime, including programming costs, setup/changeover costs, reliability, and maintenance costs

- Training

- Actual throughput

The SMT industry does not currently have any standard method to compare cost of ownership. The IPC is looking to develop a standard cost of ownership model, but at the moment there are no easy ways to compare. The fact that a standard is being considered is proof of the importance that cost of ownership plays. Initial purchase price is one factor that will affect the overall ownership cost over the life of the machine. This leaves end users on their own to determine what they believe the actual cost of ownership will be. We also see that many purchases are driven more by throughput or initial purchase price, rather than long-term costs. Over the life of the equipment, however, indirect costs can outpace direct costs. Because these costs are hard to determine precisely before you own a piece of equipment, it is important to be familiar with the factors when researching a new purchase.

Figure 1. Total cost of ownership example.

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Uptime and Machine Availability

The importance of uptime cannot be overstated. Programming time, setup time, maintenance time, and reliability can be grouped together to determine a machine’s uptime. Machines are only contributing to the bottom line when running (Figure 1). Catch phrases such as “cost per placement” have little meaning if the machine is not available. Assuming average cost-per-placement revenue of $0.01 to $0.03, the cost for downtime on a machine that averages 8,000 components per hour (cph) is $80 to $240/hour. In just over one year, a machine that is down for one more hour per day for any reason will cost $20,800 to $62,400. Multiply that over typical machine life, and the number can negate improved throughput. Compare a machine that has an actual placement rate of 8,000 cph to a machine that runs at 10,000 cph, but requires one additional hour of downtime per shift. Factoring in the losses for the additional downtime, you would obtain less than half the potential revenue increase (Figure 2).

Figure 2. Cost of downtime (assumes $0.02 per placement).

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Programming Costs

Because there is no profit derived from programming time, it is essential to prepare new jobs quickly. Virtually every company offers some sort of offline programming so the machine does not need to be stopped to generate new production programs. But there are other important tools that can impact programming time. Typically, due to the amount of data required, the pick-and-place machine takes the longest to program. The first step in preparing a new file is converting a computer-aided design (CAD) file into the appropriate machine format. Although Gerber data can be used by most manufacturers and CAD-conversion software, it is more tedious and time-consuming than converting a simple CAD file. CAD files have all of the data needed in one or two simple files (using a separate bill of materials). Gerber data has no centroid coordinates. To find the X/Y center that pick-and-place machines need, software must be calculated based on pad locations. One of the quickest ways to improve program-generation time is to use CAD files, not Gerber files. Often, EMS companies say, “I only have what I’m given to work with,” but we know that every board has been on a CAD system at some time, so the file is available somewhere. OEMs often do not know what files the EMS provider needs. They know they need the Gerber file to make the stencil, but they don’t know how much the CAD file would help the EMS and themselves. If setup time is reduced, the costs for having a board assembled could also be reduced.

Component-data entry can be one of the most time-consuming portions of program preparation. It is important to use component libraries or databases to speed this process. A component database eliminates the need to re-enter data for any previously defined parts. Databases often have the ability to copy generic package data (0402 resistors, for example) to new part numbers that minimize the amount of operator work.

When the production file is complete, companies frequently will make a first-article run to ensure everything is correct before beginning volume production. Again, the goal is to finish this job quickly, requiring minimum machine time. CAD files often have incorrect placement angles because the CAD programmer does not know in what orientation a component may come in the tape or tube, so they make an assumption. They also do not know if some devices will be fed in tape or tube. Using board-viewer software tools to preview and correct how the machine will place components improves first-article quality without increasing machine idle time.

Setup/Changeover Costs

When the line is stopped for setup or changeover, profit opportunities are lost and the cost of ownership goes up. Companies that frequently changeover will note that in some cases, changeover time is more important than the production time of a line. This depends on how frequently a line must be changed. In the U.S. market, however, frequent change is common. There are several items that contribute to setup/changeover costs. Feeder trolleys that can be loaded offline have become common. Feeder design is very important. Feeders must be easy to load and provide reliable component presentation. Although feeders can be loaded offline, if it takes too long to load a reel onto a feeder, the offline setup may not be completed in time (Figure 3). Historically, one of the more time-consuming items in setup is teaching feeder-pick positions. Software functions allow machines to automatically learn pick positions for some components so that operators do not need to stand in front of the machine, teaching every pick position, one at a time. Difficult-to-program components, such as odd-form BGAs, can be taught automatically, saving as much as 30 minutes per component in setup time. Easy-to-use tooling, such as automatic board supports, helps prepare individual machines for new boards. Tool-less adjustments can also save time. Finally, on-the-fly modifications of a production program at the machine can save time over having to re-optimize at a line-control computer. Choosing machines that offer these features can save time and improve cost of ownership.

Figure 3. Good trolley designs that incorporate fiducial recognition ensure high pick reliability, and can reduce changeover down to seconds.

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Reliability

Equipment reliability is probably the most significant indirect cost. A down machine has many repercussions throughout a business. The most obvious effect is that the production line is stopped, and is not generating revenue. But the stoppage may also mean that products will be delayed and could miss their ship dates. Customers that are unhappy with delivery delays could take their business elsewhere, costing a considerable amount of business. If missing a shipping date is simply impossible (as it often is), overtime for employees is one possible solution. But that also carries a cost. The true total cost of a downed machine includes lost production time, overtime costs, and possibly losing a customer.

Unfortunately, there is no Consumer Reports to evaluate the reliability of one SMT machine vs. another. The best method to learn about reliability is to talk to existing users. A factor related to reliability is a supplier’s response time when providing support if a machine goes down. Tools, such as online web conferencing that can be used for remote support, have helped equipment manufacturers provide rapid response when a machine has a failure. The sheer size of a service organization is not necessarily a good barometer of a supplier’s support capabilities. To the contrary, a large service organization could indicate an unreliable product. If machines are reliable, a lot of support personnel from the manufacturer or the end user will not be necessary. It is the quality of the support personnel and the equipment that makes a larger impact on reliability.

Maintenance Costs

Maintenance costs encompass the time needed for routine maintenance, cleanings, and calibrations. They are closely related to reliability, but a highly reliable machine could take hours of maintenance to keep it running. An unreliable machine is costly, but so is one that takes hours of maintenance per week. Simple maintenance means the machine is running more of the time. A well-designed machine should have maintenance points that are easily accessible. Software should help diagnose when maintenance is needed. Calibrations should be automated, and only needed when a part is replaced - not as a routine event. It is important to understand how much time preventative maintenance will require, what tools are needed, and what skills a maintenance technician must have to gauge maintenance costs accurately.

Skilled operators and maintenance technicians can keep equipment running at peak efficiency. The amount and level of training needed for these personnel affects cost of ownership directly. Complex machines (programming and maintenance) require more training that takes operators away from the line where they can contribute to the bottom line. If a machine is complicated to operate or maintain, it also is possible that a company may need to hire more personnel or more skilled (i.e. highly paid) personnel to run it. Initial operator training is often included in the purchase of a machine, but additional training for new operators or higher-level training may not always be included. Advanced maintenance training is beneficial to the end user and the vendor. Having a skilled maintenance technician onsite can decrease repair time. Not only can a skilled maintenance technician repair the machine without having to wait for factory support to arrive, they also can communicate issues more effectively with the factory to fix problems more efficiently. The cost of training classes, and travel/living expenses for those classes, also increase ownership costs.

Spares and Consumables

Spares and consumables also add to overall operational costs. Most machines will require some consumable parts, including filters, grease, oil, and other wear items. Some manufacturers consider items, such as nozzle tips, to be consumable, while others require replacement only after failure. Purchasers should get a list of consumable parts required, along with prices to consider in the TCO. Spare-parts pricing is hard to compare because each machine needs different parts, but it also can be helpful to get a list of the most common parts replaced. It can take a lot of worn-out conveyor belts to equal a single failed motor driver or control board. Of course, the machine’s warranty also affects spares and consumable costs. A longer or broader coverage warranty means fewer spare parts at the end users’ expense.

Throughput

Some people say that every time a part is placed, it is like a cash register ringing. Clearly, the faster a machine places parts accurately, the faster it can make money. One of the first questions many customers ask when evaluating a machine is, “How fast is it?” Every SMT equipment manufacturer has specifications for the throughput of their machines, but the specifications don’t apply to every possible PCB. Pick-and-place machines are probably most affected by product variations because one PCB may have a completely different number and component type than another. IPC-9850 tried to provide a more standardized measurement method; but unfortunately, components placed on test boards do not accurately reflect a realistic PCB. Prior to IPC-9850, each company devised its own method to determine maximum throughput, so IPC-9850 does add some standardization. But there can be significant de-rating of a machine’s throughput in actual production.

To accurately compare more than IPC-9850 speeds, customers can have the same board evaluated by multiple vendors. This is effective when comparing the throughput of one machine to another, but cannot necessarily be extrapolated to other products. The throughput for a board without BGAs or QFPs could be higher than the throughput for a more complicated board. It is better to get an estimate for a small sample of typical boards, rather than rely on just one.

Conclusion

Total cost of ownership is a common metric used to evaluate capital investments in many industries, and even for consumer purchases. It is an important aspect to consider because purchase price alone does not provide a complete picture of cost. Although exact numbers can be difficult to obtain, it is important that anyone evaluating an equipment purchase at least consider the cost of ownership for all models meeting their basic production requirements.

Gerry Padnos, director of technology, Juki Automation Systems, may be contacted at (919) 460-0111; e-mail: gpadnos@jas-smt.com.