Taking on Millions of Debts to Replace Old Machines? | Machine Shop Talk Ep. 108

What would you do if you ran a machine shop for years, and now your equipment is getting outdated and you realize it’s going to cost MILLIONS OF DOLLARS to replace it all?!
This is the unfortunate reality that many shop owners run into if they run on a low- to no-debt model - as machines, even with the best maintenance, do tend to become less reliable as the years roll on. Should the owner take on huge debt to replace all of their equipment? We’re covering that and more on this episode of Practical Machinist’s MACHINE SHOP TALK with Ian Sandusky from Lakewood Machine & Tool.
What would YOU do in this situation? Let us know in the comments below!
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[@patrickgroenewegen]

They have been running a debt, a big one. Machinery replacement savings debt. If you don’t want to borrow money and be cash on the barrel, you need to be putting cash into the barrel for machine replacement. This is a known operating cost. This shop is arguably not profitable as a fair part of their “profits” have been machinery replacement funds that have been misappropriated.

[@androidtyphoo9161]

💯

[@TopperMachineLLC]

Absolutely. If you're not saving some profits for planned expenses, you're not profitable. I put away as much cash as possible for future equipment, or unexpected repairs. Not doing this will eventually lead to major debt or business closure and liquidation

[@smoothoperator7869]

When I started my business six years ago, I purchased all the old machines. Since then, I've been replacing them one at a time. I've financed some of them because I've built a business model on having machines financed. I use the bank's money to make the company money. My payments are nothing compared to our added revenue in a year. However, I wouldn't have done it all at the same time. Create a road map and chip away at it over a set time. Find profitable machines for your company and skilled people to run them. You can't have one without the other. Skilled people will make the difference in maximizing your investment. Financing can add value to your company right away, but the risk-reward must be diligently balanced so you don't find yourself in a financial predicament in the future. A lousy craftsman always blames his tools. Also, consider downsizing your business to upgrade your business. Sometimes, taking a step backward to move 3 steps forward in a more prepared and efficient way will increase the longevity and growth of the business. Pruning your business is a good thing.

[@5axmachine167]

Ten years ago, we had mostly older machines. Bought a 5 axis trunnion for a VF3. Boom! New work and new machines just started rolling in. We did take on quite a lot of debt, but the at the end of the day, it was a great decision to ditch a bunch of old 3 axis mills and invest in 5 axis. I'll never regret going into debt to grow my company.

[@thunderthormx]

Sounds like this guy kicked the bucket down the road way too long. We are a small shop and growing slowly we finance one machine at a time and when it's paid off we get a new one that fits our current needs. We so far have kept all our old machines and they get downgraded to more simple jobs to help lower set up times and increase capacity.

[@JiuJitsuStuTru]

Very good method!

[@iansandusky417]

This is an extremely important viewpoint - thank you for sharing it!

[@alexbanyard951]

A discussion I would love to see as an apprentice who finished 5 years ago is how you go about training. I've had people training me who won't give information due to not wanting to lose their job. People who forget to slow down to explain something. Old guys who love passing the knowledge down. And there are older people who will go in and fix problems without showing you how to fix them. Now I'm training new apprentices. I keep this all in mind. And so far, it's going well. I just want to see your thoughts on this. Because I've moved from shop to shop and seen apprentices who know nothing and used as cheap labour or cleaners to apprentices who know more than the old guys. There seams to be a huge gap in the skills of the trade

[@2SMPerformance]

Excellent Machine Shop Talk episode! Thank you Ian.

[@iansandusky417]

Thank you very much for the kind words!

[@Arthur-ue5vz]

I would identify your shop's core competency. It might be wire edm, or 5 axis milling, or something else. Whatever it is, I'd start there. Either upgrade or go new. Then, over time, upgrade what you can afford to upgrade. Sometimes you cannot afford not to upgrade because you have competition and you have to be able to make better parts faster. It might require a change in outlook like Titans of CNC. Titan runs very fast and "overclocks" tooling. They literally plan on breaking tools and they do. However, if the cost of a broken tool saves them many times the tool cost in machine run time, then it is cost effective to plan on breaking tools. Also, they run coolant at higher pressures to compensate for running faster. Let's face it, if you want to compete you've got to plan on running balls out every moment of every day. A new machine can be justified if you can run very fast. Higher pressure coolant, more aggressive toolpaths, planned for tool breakage, etc. It's not an easy arena in which to compete but it is doable. Buckle up and ruuuuun or retire while you still can. You wanted to be a machinist and now you are one 😊

[@josephmcandrew7937]

Have a guy make the same part on a few machines and run them through inspection. the one that is furthest from tolerance should be looked at first. This could build trust in the machines as you'll know which ones are no longer up to high tolerance work. personally id go for an upgrade because I've noticed when I get a machine with more capabilities, a customer will come along to utilize them soon, but that its up to the owner as they know their business. old machines could be shuffled to storage but personally I like to see then used for training if you have that many people.

[@damientoomey1194]

We have a shop full of older mazaks 91-00 models. We do get the odd breakdown but we have more machines than operators so a job can be shifted to another machine if need be while the machine is being repaired. While they can breakdown we don’t really have issues with bad parts, if the machines are running they make good parts. The age of the machines is a little concern but our plan is to keep an eye on the used market for machines about 10 years newer. Our machines are still worth money in the used market so if we found a newer replacement we would purchase that machine and sell the older one.

[@Sweetchilliheat18]

If you cant make good parts on bad machines you will never survive as a machinist in Ontario Shit to shine for a dime on time 👍

[@iansandusky417]

Ain’t that the truth!

[@joshualegault1095]

The tax write off is where purchasing new equipment every year makes sense for me. Your going to see the money go out the door either by income tax or a machine payment. Personally I would like the money go to my shop rather than the government. Always keep buying better or more equipment imo.

[@symey91]

You don't have to buy new. There are loads of used but good condition machines for sale. Buying used can give you an idea of what you need instead of what you think you need. A lot has changed over the last 10/20 years with machines. Programming at the machine now is far easier and quicker but some people would need brought upto speed using the latest technology and that has it's costs. If machines are needing replacing because of lack of care and maintenance then new machines are going to end up the same way. One thing to think about is if you buying new sometimes rigging, installation and training can be all part of the package so you could end up paying not far off the same amount when getting a used machine up and running.

[@iansandusky417]

For sure - that’s a good way to look at it!

[@euclid9718]

Is there also another option like to include amortisation cost into the cost of machining hour?

[@mackenzieruiter4665]

Idk man. I built my shop on old machines. Most of my fadals I’ve paid less than 20k for and I still build molds on them, just have to maintain them regularly. Sounds like his issue is employees and maintenance to be honest.

[@iansandusky417]

This was my thought as well - sounds like a management issue far more than a machine issue - my ‘94 and ‘96 still hold decent tolerances!

[@winningwithoutracing7811]

Couldn't agree more. Fadals are great in non production environments aka anything not justifying a hotrod horizontal.

[@thehollowbox]

Take the best performing machines and refurb them. You have jobs for it and the machinist's trust will come back even if it's not perfect. Those machines will also carry the shop as you take on debt replacing the others. Take the crappiest ones and replace them with new machines that add capability in the shop. Getting rid of a 2 axis lathe and adding live tooling, or a dual spindle, mill turn. Change a 3axis mill for a 5 or a mill/tap.

[@iansandusky417]

Excellent advice!!

[@georgedreisch2662]

You seem to have neglected there being a difference between a genuinely worn out machine and a machine in need of maintenance, adjustment and or repair. Indifference / dereliction of maintenance, will eventually lead to apathetic attitudes. I feel that eventual replacement or substitution of machines should be integrated into the maintenance budget and approached incrementally over time, and also provides for backup, without extorting oneself into having to finance out of a situation of urgency, for loss of a machine.

[@danielstjean3476]

I would personally find parts that we can make with the old machines. Eg lower tolerance parts. And finance one new machine for precision parts. Once the cash flow is positive enough try to purchase one at a time as you can afford them.

[@iansandusky417]

That’s a very good strategy! I certainly take that approach with my older machines, and do the more tight tolerance stuff in the newer ones

[@mrechbreger]

I just got an offer ~17.000 USD for a Lathe from ~2005 (with a controller from 1999) ... I gladly replied I'm willing to pay 1.500 USD (and this is very generous). Why? Per my experience with fixing an old CNC Mill... the components on the electronic PCBs exceeded their specified lifetime, it's scrap even if it works. It might only work a few more years it's absolute gambling. Second the memory, they did some crazy stuff with keeping memory persistent with a battery and RAM back then (many people know that...), once the battery is empty all the machine settings are gone, and if they use special servo controllers you can also replace all the controllers. To recover such a dead machine it will take 1-2 months at least (if you are experienced with installing another controller and able to source parts quickly). From an economical point of view I understand why machining companies don't want to put their hand on used machinery, this is something for an experienced machinist/allrounder who can do everything himself.

[@viliusr6974]

It sounds to me like the owners have been on the very narrow-minded path for those twenty years. And if the shop was run like that, probably machines did not see any proper maintenance too. Keeping the shop on continuous improvement path is the only way for the business to survive long term. It sounds to me like the owners were milking the old cow until it could not move anymore. Especially when they were on such a fortunate situation over the years to have very low overheads. Having a small loan ticking over to cover machine upgrades would have kept the business in a strong position today.

[@peterfitzpatrick7032]

I don't know if you are a member of the Practical Machinist forum (I lurk & learn there) but if you are, I would love if you could ask the guys what their thoughts are on PCBWAY branching out from pcb-making to a similar business model but machining parts to order ??... Its OT I know but maybe not ??... if business is heading there thats less business for US manufacturers so buying machinery might not be a great choice ?? Just a thought... From the Emerald Isle 😎👍☘🍺

[@TrPrecisionMachining]

good video Ian

[@iansandusky417]

Thank you very much for checking it out!

[@sunsetusa6926]

What is the workload of local shops, is outsourcing and subbing jobs out to increase cash flow an option? Can you push product instead of job shopping? Pivot into adjacent industries that are lower tolerance, dressing sand castings, rail, logging... branch out.

[@richardimhoff4370]

Replacement or repair should be part of the budget from the beginning.

[@iansandusky417]

Couldn’t agree more - it’s a painful lesson to learn the hard way!

[@phalanyx3478]

Replace the worst machine with a nice one and put your most competent and brightest younger machinist on it. Cannibalize decommissioned machines beyond repair to stretch a little more life out of the still operable ones if parts are not available. This will also have the effect of teaching whoever dissassembles them exactly how they work so its much easier to diagnose and repair problems. On jobs that require making a ton of chips on larger parts, perhaps rough those parts in on old machines because you don't care about precision there anyways and then use the new machines to finish those parts to preserve their precision. Slow down the cycle times because running the spindles and ways that fast causes exponentially more wear the faster things are moving. Thats just how physics works. If you stop scrapping parts as often do the math to see if the lower production speed pays off with less scrap and longer machine life. Of course this all assumes the machine is the problem and not the machinists or management. I for one believe we are the worst paid trade in the country.

[@iansandusky417]

This is a fantastic approach!

[@codyfinley8634]

Took 2 years of me begging to get a better machine, finally get me a haas st20y, i run it for the last 4 years, no crashes, get more work, need more 'help'. Hired someone with "15 years experience" paying them 40k more a year then me. He crashes the haas so bad the first week it needed 5k worth of alignment and replacement parts, 3 months later he does the same thing but this time also rips the ATP arm and probe right off the machine at the same time. Somehow managed to start the main program and run it with the probe arm down...straight through the probe arm, into the spindle at 3k rpm. This industry is full of low IQ morons pretending to be machinists. Im probably gonna quit soon. Shit is stupid.

[@dustinwalden7091]

I’ve got a 91 Leblond Makino (23x15) mill that still does good work but we needed a bigger mill. Got a 2011 bigger mill (40X20) but now could use an even bigger mill. Same thing with lathes. We have a 2000 HAAS SL30 that still makes good parts but could use a bigger lathe. Don’t really have $200K in the bank nor want to pay $4K/month for one. Don’t have the constant need for the bigger lathe but it would help with capacity as it can do small parts too.

[@ov3753]

At some point your Makino will die, and it’s better to replace it planning in advance than buying some Haas, only because it’s the only machine available next day and you need it rush

[@dustinwalden7091]

@@ov3753 that’s why we got the newer machine. Paid cash for a 2011 Hyundai Wia F500. Will keep the Makino til it dies or need room for something else. My dad is 73 and I’m 43. I’ve seen the good times and the bad times of business so neither of us are willing to go into debt for a new machine.

[@weldmachine]

IF I can see the business going forward, I would be happy to update my equipment. Unfortunately, at this current time, I can't see my business growing beyond what I am currently doing. As much as I would like for my Son to take over, this is only a dream. He has his own plans for his life. Which is a bit of a shame. I would Love to help him eventually take over and purchase equipment which could help the business grow.

[@jacobvaughn7247]

I’ll be your son lmao.

[@weldmachine]

@@jacobvaughn7247 😀👍

[@peterkolta1207]

What are you worried about most when using old machines? Can you list the biggest items? Currently I'm fixing an old device, afterwards I plan to replace all the electronics. I don't have to make money with that machine neither did I have to buy it - but I want to give it a go once it works. From my experience (so far with a machine which I have not used yet due to faulty parts): - Electronics is failing, old memory chips are dying - poor maintenance, all the compressor pipes burst - Endstop switches jammed. My plan is to replace the controller once I understood how the servos are controlled, I had it move already for a few minutes (until a servo controller passed out, now I'm waiting for spare components to recover it).

[@mtnbikeman85]

They are talking about things like spindle runout or backlash in lead screws meaning that you can't reliably hit target sizes the first time or repeat parts. Basically they get sloppy, holding 0.001" on a mill should be easy but once they can't (all things held equal with good operating, programs and cutting tools) its time for replacement or upgrades. Somewhat they are also worried about controls reliability and the machine doing funny things or tripping out but less so than the mechanical issues above. Btw Pro shops shouldn't be doing controls upgrades, usually the end up half implemented with safety's and interlocks missing. A professional controls upgrade is most of the way to a new machine anyway, so its only worth it on very large or very specialised machines, not commodity 3 axis mills or 2 axis lathes.

[@peterkolta1207]

@@mtnbikeman85 thank you for your reply - so here I'd follow up: - the machine I'm working on has backlash settings - isn't that sufficient? - Spindle runout, on older machines wouldn't it be enough to change bearings for that - and get back to a state where it's almost like new? I'm using LinuxCNC for my small mill and small lathe (the accuracy I get on both is 0.01mm -- of course depending on how how strong I cut), I plan to remove the controller and interface most available parts. I'm originally a software / electronic engineer. The machine has several tons, I don't see that I could buy something similar with a good controller (as LinuxCNC) for less than 100k.

[@GnosisMan50]

Investing a million or 2 in new machines is not a lot of money provided that the parts you are making justify the cost. If you make high end parts, you need high end machines. I would add to that if I had a machine shop, I would not be so dependent on customers needing machined parts but I'd make my own products to earn money. Take for example the Argentinian-Style grills that go for 3K. You don't need high precision to make them. I have yet to make one myself to see if I can sell it at at 2k since I'd still be making a profit and you don't need much to fabricate these grills.

[@johnwilleford7715]

I'm a chicken,I would be afraid that if I bought a million dollars worth of equipment at one time I would wind up not having enough business to make the payments. One machine at a time seams to be the way to go.

[@iansandusky417]

I’m in the same camp as you for sure!

[@abdalrohmanmousa7405]

1 new 5 axis machine is better than 4 old 3axis machines

[@ov3753]

Would it be efficient to replace for example old Haas Vf2 to new smaller Suil? Considering that parts this shop making fit Syil

[@iansandusky417]

SYIL is interesting to me - I’m definitely going to look into them and see if the hype matches the reality of their performance

[@funwitharobot]

The age old wisdom of you get what you pay for keeps going through my head on these Syils, Atleast you can get service and support locally for a Haas.

[@metaltradesmachine8910]

Even though friends don't let friends buy haas, it's still an American made machine. Replace it with a foreign made machine? No Way!

[@ov3753]

@@metaltradesmachine8910 Ian is Canadian, so in this case American made doesn’t count

[@HOWEES]

Is He charging enough for the work he is doing????????????

[@ov3753]

Hi Ian, do you plan to add new machine to your shop in near future?

[@iansandusky417]

I definitely am! I’m between a few options right now - there are a few brands that interest me at the moment

[@ov3753]

@@iansandusky417 As well as we are, we are in the process of choosing live tooling lathe, and you wouldn’t believe that HAAS DS30 cost as much as DN Lynx2100

[@iansandusky417]

@@ov3753that’s a wild comparison of those are the same price points - I think I know quite clearly which I’d choose based on my experience with the ST28-Y!

[@wyattkoppy4000]

take it slow

[@Arthur-ue5vz]

I would identify your shop's core competency. It might be wire edm, or 5 axis milling, or something else. Whatever it is, I'd start there. Either upgrade or go new. Then, over time, upgrade what you can afford to upgrade. Sometimes you cannot afford not to upgrade because you have competition and you have to be able to make better parts faster. It might require a change in outlook like Titans of CNC. Titan runs very fast and "overclocks" tooling. They literally plan on breaking tools and they do. However, if the cost of a broken tool saves them many times the tool cost in machine run time, then it is cost effective to plan on breaking tools. Also, they run coolant at higher pressures to compensate for running faster. Let's face it, if you want to compete you've got to plan on running balls out every moment of every day. A new machine can be justified if you can run very fast. Higher pressure coolant, more aggressive toolpaths, planned for tool breakage, etc. It's not an easy arena in which to compete but it is doable. Buckle up and ruuuuun or retire while you still can. You wanted to be a machinist and now you are one 😊