New vs. Used Material Handling Equipment
ABCO Systems sells used material handling equipment. In fact, ABCO Systems sells an awful lot of used material handling equipment. We have over an acre of outdoor secure storage conveniently located just outside of the NJSEA. We also have 30,000 feet of indoor storage space. Used material handling equipment is an integral part of our business and that is why we continue to keep such a large stock available at all times.
However, as the culture of logistics and distribution changes, I do wonder about the future of installing used systems. The logistics culture is evolving, and the validity of used systems appears to be changing along with it.
First and foremost, logistics professionals are realizing now more than ever, that distribution centers are not cost centers, as they were seen in the past, but rather they are a way to create long term cost savings. With the increasing cost of commercial/industrial space and the increasing minimum wage, one of the most obvious ways of saving money is to design an “optimized DC” that utilizes the cube, creates lasting efficiencies and has a logical and clean product flow.
Expectations have changed dramatically. Distribution and how quickly customers receive their purchased goods is the new race that is constantly being improved upon. Customers want their product in a timely manner. The speed and accuracy which is essential to moving a product through a DC is being realized as an essential part of todays evolving business model.
The interesting part about all of this though, is that it is just the beginning. The change in culture is all relatively recent. The shifts in the distribution model are all very recent. When you look at the changing landscape you can see that we are just starting to scratch the surface.
Because of these shifts, logistics professional are realizing that a truly optimized DC is going to be designed based on the business model of each and every distribution end-user. There are endless criteria that will be relevant to each business and their distribution requirements. The chances of finding a used material handling system that will save money over the long term based on true engineered solutions is slim.
Depending on what the end user is looking for, while slim, it is most certainly still possible. However, much of the shift is lending credibility to the fact that the majority of distribution centers do not have one single material handling solution. For example, pallet racking is extremely common in a DC. However, while in the past, pallet racking was often a one size fits all solution, most DC’s today are going to have pallet racking for their bulk storage and still require pick faces, along with conveyance, packing, staging etc. On top of that, the once simple pallet rack solution is getting more specific as well. Heights of buildings, along building column placement, along with weight capacity, along with shelf levels all have a part in how the DC will operate in both the short term and continue to save money in the long term. The days of finding the closest match, with the lowest cost, are ending. Adding a few more rows or racking, or another pallet level or even pick locations below the bulk storage can literally save tens of thousands of dollars over the years and create greater efficiencies.
Saving a few dollars by installing a used system could very well cost far more over time by not installing the “right” system. Used conveyance was very common in the past. Today, there are so many details that make a conveyor or sortation system applicable for an operation that finding a used solution almost guarantees that you are sacrificing something.
While we are talking about cost, there is also not that much of a savings. Typically, the only savings available comes from the actual equipment itself. Whether conveyor, pallet rack, or GOH, the engineering, the freight, the installation all costs the same. Specifically with conveyor or sortation, there is still the cost of the electrical work, the panel and the safety requirements. That still all costs the same.
So while there might be a savings in actual material, when you add up everything, it is a marginal savings at best. A used 8’ pallet rack shelf beam typically sells for approximately $15. A new 8’ pallet rack shelf beam costs approximately $19. A project with 5,000 pallet positions is likely going to cost around $300,000. The savings on the used beams is minimal.
On top of that, used material handling equipment comes with its own set of problems. Stickers, damages, rust, to name just a few. Specific to conveyor, it is a mechanical system and it is not typically possible to know the quality of the system you are getting, how well it was maintained and how much it will cost to make it work right again. The same way you wouldn’t want to buy a used car with no service history, buying a used conveyor comes with an awesome amount of uncertainty.
We won’t stop selling it because it is certainly still relevant in many applications. However, over the years, we have become much more of an engineering company that is building solutions that are tailored for each customer to save money over the long term. The right system will undoubtedly save money over the marginal savings of used equipment.
In addition, the distribution model is now clearly a part of the business. For many thriving businesses such as 3PL’s the distribution is the business. For manufacturers doing their own distribution the same philosophy applies. The material in the building is a showcase and helps create a better atmosphere for employees along with a better visual for potential customers. A look into any of the big distribution centers of today will show you a clean, well organized operation.
In conclusion, there are clearly applications where used material is still needed and will still save money. But as time goes by that need is going to continue being reduced. The model will continue to trend towards greater efficiency, space utilization, safety and an overall coordinated effort to provide better customer service.
ABCO Systems designs and installs distribution centers. Contact us for all of your warehouse needs.