Oftentimes, test equipment is the most variable capital expense for companies. While it’s commonly believed the initial purchase price of test assets is a one-time cost, decisions made in the acquisition process will weigh down a program’s total lifecycle costs. Research has shown total cost of ownership (TCO) can increase initial purchase prices by 60 percent, and includes factors like calibration, repair residual value, depreciation taxes, insurance, and overhead—just to mention a few.
According to Keysight Technologies’ Guide to Technology refresh Choices, an initial equipment purchase is typically funded by a capital expense budget, while continual upkeep receives funding from an operating expense budget. You must account for working within capital and operating expense budgets to ensure existing test assets operate accurately within specifications. You may realize their assets no longer meet measurement needs, and must update to newer test equipment pieces to meet evolving business requirements.
Looking at your test asset portfolio, Keysight’s guidebook cites opportunities for trade-offs to update test equipment, reduce overall costs, and improve time to market are identifiable, however, you’ll constantly face challenges of boosting test technology for your products (whether they’re in development or production). It’s important to balance technology needs with cost and schedule trade-offs, while giving yourself the opportunity to influence your program’s success and outcome by holistically evaluating your assets. The test process will be faster and more accurate by investing in the right technology, will accelerate your time to market, and return revenue a lot quicker.
Since some product lifestyles are very long, it’s important to explore options in these environments to keep your existing technology accurate and reliable until you’re ready for newer equipment. According to Keysight, it’s usually not very obvious, balancing technology with budgetary needs can be complicated, especially since new test technology often exceeds a project’s financial parameters. As a result, one must constantly evaluate their test assets and use their product lifecycle to make cost trade-offs to keep up with evolving technology, while staying within their budget.
As Keysight’s guidebook states, goals are largely dependent on your industry or field of work, but you’ll have opportunities to evaluate your test assets. In doing so, you can find ways of improving costs, scheduling, and technologies, which might not require the purchasing of new or solely sticking with outdated equipment. Having said that, some alternatives include equipment upgrades, trading assets for credit toward new components, or repairing and calibrating test equipment you already own. You can plan to combine the aforementioned options and make it work for you by evaluating trade-offs, which could result in encouraging cost savings and technological breakthroughs.
Getting the most from your test assets involves balancing utilization and TCO. Utilization is when test equipment is in use, active, and making measurements, while underutilized equipment is relied upon less frequently. Excess equipment tends to collect dust on the shelf and (if ever), used on rare occasions. While total ownership and utilization costs are interdependent, each can be examined separately. Internal financial models or using total cost of ownership calculations can determine total cost of ownership, along with helping to better understand the factors that drive costs.
Although some of these factors are more influential than others (like depreciation, residual value, calibration interval, and repair frequency), there are other ways to measure utilization, like simply recording visual observation by “walking the lab.” Another involves management and judgement estimates, but automated tools for better accurately measuring asset utilization rates can also be applied. It’s important for decisions to be based on evaluating and analyzing to better optimize test capabilities and align a project’s priorities. If you’re familiar with utilization and total ownership costs of test equipment, you’re capable of maximizing your asset values.
Filed Under: M2M (machine to machine)