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Machine Shop Capital Expenditure and ROI; Comparing Vertical vs. Horizontal CNC Machining Centers

[April 3, 2020] For any milling and machining operation, return on investment (ROI) is a huge metric and a measure of success when looked at for what it can achieve for the business. This measure of profitability indicating whether or not a company is using its resources in an efficient manner takes on added significance in today’s business climate, and moving forward, given the current economic challenges CNC machine shop owners face as a result of the evolving Coronavirus crisis gripping the United States and the world. According to a recently released National Association of Manufacturers (NAM) survey, 78% of respondents say that the COVID-19 outbreak is likely to have a financial impact on their businesses, and 53% of manufacturers are anticipating a change in their operations in the coming months. The bottom line is that the COVID-19 pandemic will result in U.S. manufacturing activity contracting as the outbreak continues to pressure the economy.  

At Advanced Precision Machining’s (APM) Colorado machine shop, all of this is in stark contrast to the first quarter of 2020 that was off to such a positive start, and it is everyone’s hope that we all can return to a sense of normalcy soon. The first three months of the year experienced a most welcome increase in demand for our milling and machining services including continued expansion, increased sales, net profit, and investment in new machinists and cutting-edge technology to broaden our range of precision manufacturing services. Despite the uncertainties that lie ahead, our long-term growth initiatives remain unchanged for the time being. This includes capital investment in new high-speed machining technology that will boost our capabilities and better meet our client’s needs for precision parts and components delivered accurately, on-time and on-budget. Presently, the majority of our machine shop services are provided utilizing more traditional, yet technically advanced, vertical CNC milling machines including Hurco and TRAK Machine Tools. However, as we are continually looking to expand and improve upon our reputation for quality parts, upgrading to a horizontal machining center (HMC) is a serious line item that is up for consideration. For our business, and any machine shop for that matter, the pros and cons of such a significant purchase must be explored, and ultimately the question must be asked, is the return worth the investment?

Most small and mid-sized CNC machine shops, APM included, satisfy demand for the majority of milling and machining work utilizing vertical CNC milling machines (VMCs). Given their relative affordability and versatility, they are THE go-to piece of precision machining equipment utilized on the most shop floors. This cutting-edge technology employs a spindle in a vertical orientation, working with gravity, allowing for the removal of material from the top of a workpiece. VMC's possess 3, 4, or even 5-axis capability allowing for a range of possibilities in shaping machined parts. Adding components such as pallet changers or some form of automation is a great way to increase efficiency, productivity, and profitability by shortening cycle and load times. They are proven to be more versatile than their horizontal counterparts and have relatively simple CNC controls to program, but perhaps the most important attribute involves cost. VMCs are far less expensive than their horizontal counterparts. Bottom line; If you are a smaller machine shop where money is tight and experience is limited, or if you haven't acquired the necessary skills and experience to run a HMC, and you don't need to fill high capacity orders, VMCs are a good option. 

As mentioned previously, APM continues to set its sights on expansion with a staff of dedicated and expert CNC machinists, and we are exploring the option of adding a modern, technologically advanced horizontal CNC machining center (HMC) into our lineup. Cost of course, and the impact of such a heavy capital expenditure on our future plans, has to be given a serious thought. According to The Association For Manufacturing Technology, the average HMC costs $375,000 vs. just $115,000 for a VMC. However, today's HMCs have the potential to double the capacity of the two VMCs we currently run. HMCs are designed with the spindle in a horizontal orientation. This configuration allows for uninterrupted production work. A two-pallet workchanger can also be loaded on one side while CNC machining occurs on the other. In addition, the horizontal orientation lets workpiece chips fall out of the way aided by gravity, resulting in less cleanup time, longer tool life and better finishes. They are well built with a heavy design, more rigidity for high volume capacity, and can be configured with multiple axes, tombstones, additional vises, and more options to improve productivity. You get what you pay for with an HMC, and in our opinion, the benefits seemingly outweigh and justify the costs.

Even with uncertain economic realities facing our business and the precision manufacturing industry as a whole, increasing productivity, throughput, quality, and floorspace, all while reducing labor costs, are compelling arguments for the purchase of a new HMC for APM's machine shop. The ROI for us just very well may be worth the capital expenditure. Time will tell, but our hope is that business conditions will rebound, our economy will roar back, and the justification for this piece of CNC machining technology will seem more and more likely. 

The following article from the Smarter Finance USA blog provides a good analysis of some financial considerations.

All of us at APM hope you and your family are safe during these uncertain and unprecedented times.

Want to learn more about vertical or horizontal machining centers, or have a question about any of APM’s machine shop services? Contact one of our expert CNC machinists for all of your precision part manufacturing needs

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About the Author

Gerry Dillon is a co-founder, current owner and certified CNC machinist at Advanced Precision Machining (APM), a full-service machine shop located in Longmont, Colorado. Before making his home in the United States in 2000, Gerry was born and raised on the emerald isle of Ireland and took an interest in milling and machining from an early age, ranking #1 in the Irish National Apprenticeship Program. In 2005, he and a partner began what’s grown into a leading Colorado machine shop. Gerry brings over 30 years of machining experience to the shop floor and is certified in all aspects of geometric dimensioning and tolerancing. 


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