Achieve Cost Effective Test & Measurement Results

Key points

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Bernd Knoll, International Product Manager at HBM, explains how to determine the real cost of ownership and looks at the different cost drivers which should be taken into consideration when upgrading or buying new test and measurement equipment.

By Bernd Knöll, International Product Manager at HBM

When selecting your test and measurement equipment, it’s important to consider the purchase price of products. However, what appears to be a bargain at face value could quickly prove to be an expensive acquisition which could result in considerable subsequent costs.

Understanding the true cost of ownership is always difficult for test and measurement equipment as it is often hard to take variables into account, for example, let’s assume you want to buy a new multi-channel measurement system which will be used over a 7 year period and that the purchase price of this instrument is £8,000.

Although this sounds like a very competitive price, would this be the final cost of your equipment? Of course not! There will be an accumulation of associated costs, which more often than not are not specified on the invoice or in the quote.

Firstly, there is the time and effort involved in specifying the measurement task and its requirements for the test and measurement equipment – an essential prerequisite to designing, building, verifying and ultimately using a test system that will meet the application required. Not to mention all the coordination and research involved, which could easily amount to a week’s worth of work.

Based on an average working week of 40 hours and an average hourly rate of £60, the resulting costs of this alone could be in the region of an extra £2,400. And let’s not forget about implementation and training. This too could easily total 60 hours and considering the hypothetical hourly rate, could easily amount to another £3,600.

Operating costs are also another factor which needs to be taken into consideration. For example, configuration, adapting and evaluation over a service life of seven years, the expenses accrued could amount to £10,000, so as you can see, compared to the moderately low purchase price of £8,000, there is now an estimated cost pool of nearly of £24,000!

Obviously this calculation is based on hypothetical figures but irrespective of the final calculations, one thing is clear: the total cost of purchasing and operating test equipment far exceeds the purchase price.

This is what is known as “Total Cost of Ownership” (TCO).

More than just an economic theory, when taking the decision to invest, measurement technology companies worldwide are now increasingly shifting their focus from the simple cost of purchasing equipment, to the total cost which will arise during the use of this equipment.

Cutting costs doesn’t mean cutting corners

When it comes to purchasing new equipment, it’s safe to say that the purchasing cost will determine the decision to buy. Different quotes will be compared and the supplier offering the lowest quote will be awarded the contract, so no great savings can be achieved here.

However, as we’ve seen, the purchasing price does no represent the biggest proportion of the TCO. This is where we need to take the implementation and operating costs into consideration, as these are the factors which offer far greater cost saving potential.

Key factors to be considered when selecting Test & Measurement equipment

As is the case in most manufacturing industries, the world of measurement data acquisition is experiencing radical changes with market trends and new technology gearing towards smaller, more compact and flexible equipment and in line with this shift, the range of measurement technology systems is also becoming broader.

On one hand this can be seen as an advantage, but on the other hand it could be argued that this advance has increased the possibility of specifying a system that is not optimally tailored to the task in hand. And this is where additional costs for purchasing, start up, set up times and use can be generated.

Leading on from this, usability is also a key issue. Despite the advance into more complex and diverse equipment, it is important that operation is kept as simple as possible, to avoid expensive operating errors and therefore the recording of incorrect test results.

Another important issue here with regards to implementing user friendly equipment is the number of individuals who might be working with the measuring system. There could be a considerable amount of employees, some of which may not be experts, so with this in mind, it is important to ensure that personnel can learn how to use equipment quickly and effectively, which can often be achieved through drawing upon well known operating concepts.

So, from this we can see that two of the main key factors are; the consultancy and preparation involved in specifying test equipment, and also its usability function.

HBM Total Cost of Ownership of Test & Measurement equipment

Testing times

When selecting your test equipment it is also important to investigate possible maintenance concepts as the consequence of unplanned corrective maintenance events, such as equipment failure, can be catastrophically high.

As there are obvious difficulties in quantifying and predicting the outcome of such events, it is often very difficult to account for such eventualities in the TCO, so with this in mind it is important to consider using corresponding service concepts when purchasing new test and measurement products, for example such as those offered by HBM.

Other invaluable matching service offerings for regular, preventive or requirements-orientated maintenance and services also includes remote or on site support, practical technology trainings and project management, all of which could potentially save you valuable time and money.

Conclusion

As with most purchasing decisions, when selecting equipment, the purchase price is often viewed as the single most important cost element in the equation, whilst other variables, such as operating costs, maintenance etc, are not taken into account.

TCO mythology helps to bridge this gap by providing a model to calculate cost of key ownership factors over the entire life of the equipment.

When developing a TCO strategy, one of the most critical elements is to understand that TCO is not simply about the purchase price. This is just one small element; equally important are the elements that go into the ‘maintain’ variables.

All too often, procurement groups rarely take this into account and base most of their decisions on simply the purchase price and getting the largest discount possible, largely ignoring the costs involved for extra support, maintenance and operating etc, which could prove to be a very expensive option!.

TCO methodology is an important part of the equation as it helps to bridge the gap by providing a model to calculate cost of key ownership factors over the entire life- span of the equipment.

Not only is it important to assist equipment owners to make informed decisions on the actual purchase but perhaps most importantly, it can clearly demonstrate how variables can drastically change the overall cost of ownership for test and measurement, across the life cycle of the product.

As technologies become less of a differentiator between competitors, understanding the true cost of ownership has become more critical than ever to the success of a business.