Acquiring Supply Chain Technology: The What To Do And When Dilemma
By Dean Starovasnik
If you have bought a car in the last 5 years I’m certain you’ve at least once thought, “If I had waited a little longer I could have bought a car with____” The blank at the end of that sentence has been an ever changing/expanding list of options made available or at least cheaper by technological advances. Think about when satellite radio or, more recently, collision avoidance systems were first introduced. Once reserved for luxury vehicles, they’ve now become standard on even some of the more economical models.
Such technology advances follow a lifetime cost curve. Therefore, the longer you wait, the more you get for your money. However, while time appears to be your friend it can also be your enemy. This is true in project timelines and it’s true in technology acquisition.
You see, there is a cost to do nothing. This is true in regards to potential deferred savings in your operation. Perhaps more significantly, your competition could be making such advances. So, you may be losing ground even faster than you realize. But that leaves us in a quandary, doesn’t it? When do we take the step?
We have a client who was facing this dilemma. The technology they are considering will save dozens of heads, over a million dollars in labor each year. However, it is a technology that is expected to get considerably less expensive in the next few years. So, what to do? Invest soon and start saving money? Or wait and reduce the capital investment required?
We’ve helped this client arrive at a bit of a half step. They will lease the technology, greatly reducing the up-front investment. And the labor savings far exceeds the lease cost. So, they may be paying a slight bit more in their lease than had they waited to acquire the tech. However, they will be far enough ahead in operational cost savings that the impact is minimal. More importantly, they will be well on their way to reducing their head count (actually reassigning the staff to other functions) and easing the pressure on HR who previously had to work particularly hard to fill these positions, especially on 2nd and 3rd shifts.
Does this mean leasing is the right answer for your operation? Perhaps. But of course, each situation is unique. The tech you’re considering may not lend itself well to leasing. Or your near-term savings may be insufficient to justify even the lease expense. Don’t worry. Comparing lease costs for certain tech options against the possible savings is a determination you and your team can often do on your own. But if you need some assistance in evaluating major acquisitions, don’t hesitate to reach out. We have the experience and are certainly happy to help!