There is more to equipment than just its operation. You need to consider its acquisition, installation, maintenance, and disposal as well.
When you commit to a new purchase, be it a dishwasher or car or piece of furniture, you are committing to its whole life cycle.
Sure, most of its lifespan will be spent in operation, so you might be tempted to focus on that largest portion of time in the life cycle.
But if you're failing to plan for the start and end of a purchase, then you're planning to fail.
Granted, most purchases do not need the careful consideration that production equipment needs. There's almost never catastrophic consequences for winging it with everyday items like sofas. Yet I believe in adhering to best practises even when it's not crucial, to be better equipped once the real struggles come along.
By choosing to purchase things without considering their full life cycle, you're squandering a valuable opportunity to develop your engineering mindset – and squandering a chance to run your life like a business.
The Equipment Life Cycle
There's loosely five or six stages to most equipment's life cycle, depending on whether you count maintenance as a standalone stage:
- Planning and Research
- Acquisition and Purchase
- Deployment and Installation
- Operation and Maintenance
- Decommissioning and Disposal
These should all make sense – items don't just magically appear in our homes and workplaces, they're moved with a significant amount of thought. And nothing lasts forever, so not only do we have to worry about getting new things, but we also need to deal with the old things.
This life cycle is relevant to finances as well, and not just because of the costs of purchasing. Accounting spends a lot of time dealing with depreciation and amortisation. You'll also want to look into operating expenses and salvage values.
But more on that later!
For the purposes of exploring each of these life cycle stages, I'm going to focus on one example: purchasing a dishwasher for the household.
Planning and Research Phase
In entrepreneurship workshops I learned that there are two main drivers for purchases: either you're seeking entertainment, or you need to solve a problem.
In our case the problem is the impetus, or the starting point. With a problem in hand, we begin searching for a solution. Thus begins planning.
With our hypothetical case, a dishwasher is a solution to the problem of dirty dishes and tedious time-consuming chores.
During the planning phase, we should determine whether a dishwasher actually solves our problem. Nothing is quite as frustrating as hitting a stumbling block at the last moment and finding that you wasted all that time and money for naught: such as if the dishwasher is too small to handle your dishes.
Thus this initial evaluation is about ensuring the machine's capabilities cover all your needs, and as many of your "want-to-have" features as well.
For example the dishwasher should actually clean dishes to your standard, and not destroy them if you have plastics. Having easily cleaned drain traps might be a good "want" point for you.
You're also evaluating measures such as cost – benefit and cost of operation and more. You may be talking about a quarter dollar of electricity and water to run a load, and it might be saving fifteen minutes of your time. Along with the initial costs and salvage costs, you need to weigh how much the benefit is worth.
The planning stage is usually the most crucial part of the equipment life cycle, because you're thinking through each of the later stages. Installation, operation, disposal? All things you need to sort out now, up front.
Before you ever buy something, you should have a good idea of the start to finish of its life cycle.
Acquisition and Purchase Phase
Once you've committed to the idea of purchasing something, you need to go through the motions of actually doing so.
That means shopping around for brands and models, sourcing where to purchase from, and paying for it.
Paying for it turns out to be more complicated in the business world, thanks to that aforementioned concept of depreciation.
In brief, depreciation is where you spread out the cost across equipment's useful life. It smooths out expenses. For instance, purchasing a $50,000 truck will hurt your reported profits for a year if you record the full cost. If you instead spread out the cost across five years, you're only reporting a $10,000 cost each year, making your profitability smoother.
Another thing you do when shopping around is look for sales, rebates, and add-ons.
The price of equipment itself is usually fairly fixed, but the value items such as add-ons tend to be negotiable. You can get upgrades for little more than the cost of the equipment itself, which is handy if you were planning to eventually get them anyway.
Deployment and Installation
After purchasing some equipment – like our hypothetical dishwasher – you need to get it moved to its eventual home and set up to work.
For a dishwasher it might be straightforward: the store ships you a box, someone carries it in to your home, and a technician connects up the water lines and power.
However, there's a plethora of considerations that can end up being major roadblocks.
When my dearheart and I moved into our first home together, we inherited a sofa set. It came in two pieces, and we moved the smaller one into our house with only a bit of a tight squeeze through the doorway. Then came the bigger piece.
I told my dearheart "I'm sorry, I think I messed up." It seemed too big to fit through the front door, and I worried that I'd just created a problem for us to solve.
Luckily we managed to get it through with only a few scrapes, but it was close and taught me that I shouldn't play so fast and loose with large items any more.
In our case physical constraints were nearly our downfall. Another common problem to consider is technical know-how required for installation, such as when hooking up a dishwasher.
You don't want to mess up connecting the drain line on a dishwasher, because it could dump water into your kitchen and become a costly water damage fiasco.
Technical know-how is usually hired out to someone who specialises in that niche. It's not usually worth it to learn a new skill just for a one-off occasion. Paying the one-time installation cost often works out to be worthwhile.
Operation and Maintenance
Operation is straightforward: it's putting your purchase into use. Loading and running a dishwasher, sitting on a sofa, driving a car.
You have your operating inputs like dishwasher detergent, gasoline, or electricity. These tend to be expressed as a recurring cost.
Sometimes operating comes with its own technical considerations. Things like training to get a driver's license for a car, or learning how to take photographs with an expensive camera.
Thus it's important to have an actionable path to operating your purchase. How will you learn to use it? Are there any efficiency gains you can capture? And so on.
Which leads to the next point: maintenance.
Nothing lasts forever. You need to take care of your stuff to make them last longer.
Dishwashers need their traps cleaned out, cars need oil changes and tune-ups, clothes need cleaning, and so on. These tend to fall under the classification of preventative maintenance.
You should also be periodically inspecting equipment, and occasionally you may need to repair something that breaks down.
Repairs and maintenance can make use of consumables or durable goods. In the above example, oil is a consumable that gets used up by a car. Whereas durable goods might be the tools you use to take apart a car or dishwasher or what-have-you.
Decommissioning and Disposal
There comes a time when the equipment's useful life has run its course. Perhaps it is obsolete, or too expensive to keep running, or it's breaking down too often.
You need to know how you're going to handle it. Will you replace it? Will you dispose of the equipment by salvaging it, donating it, or trashing it?
Before purchasing a large piece of equipment, good engineers have already estimated the salvage value and working lifespan of it. They know how much it costs overall, and how little of those costs will be recouped when it's salvaged.
In the case of our dishwasher, we might know of a trade-in programme that offers a discounted price on a new dishwasher if we give them the old one. Or we might have a disposal cost instead of a profit, as we pay a trash service to haul away our broken old dishwasher.
Regardless, having a plan in place at the start makes it easier in the long run – though you may have to adapt to sudden early failures, or surprisingly longer-than-expected absolute physical lifespans.
If you struggle with impulsivity then this approach purchases may or may not help you. For me at least it's an exercise in mindful spending. Everything I buy should either solve a problem, or entertain me.
Forcing myself to go through this life cycle planning before a purchase slows things down. By the time I finish, I'm certain whether I want to go through with a purchase or not.
Furthermore, carrying out purchases in such a measured manner is a good step towards running your life like a business.