PPP: A New Perspective on Cost
When you look at new equipment, how do you know what you can afford? Is it all about the price tag and the money in your bank account? Or are there other hidden factors that need to be considered?
Virtually every successful pottery producer eventually faces this dilemma. To grow your business, you need to purchase new equipment that will enable you to increase efficiency and quality, but new equipment is often too expensive for your small budget. As a result, everything tends to be categorized into wants vs. needs. For example, while a fancy new dryer would be nice, a kiln is a necessity. So you purchase the kiln and decide that your products can be air-dried. And they probably can-but what is it costing you?
High LossesSeveral years ago, Renee Newsome, owner of Tiles by R Design in West Valley City, Utah, found herself facing this question. Her company, which she started in March 1988 at her kitchen table making deco tiles with ceramic transfers, had grown larger than she ever imagined. In 1993, after five years of operating the business from her home, Renee made the move to a larger facility and began supplying tiles wholesale to Dal-Tile International, while also expanding her product line into hand-painted tiles, flat liners and rope moldings. Decorating was the company's specialty-Tiles by R Design purchased all of its tiles as bisque from an outside supplier. But as the company continued to grow, Renee soon realized that she would have to bring tile production in-house if she wanted to remain successful.
"By 2000, the company had grown to the point where we were buying about 17,000 tiles per month. It just wasn't cost-effective. We decided we were going to have to do the production ourselves if we wanted to stay in this business," she says.
Renee attended a program hosted by Laguna Clay that taught her and her husband, Steve, how to make tile. She leased another building nearby for production space, and bought a new press and a 50-cubic-foot gas kiln on a lease program. These were big expenditures for the small company, and even after taking out a second mortgage on her home to cover the costs, Renee was maxed out. A dryer wasn't even a consideration. The company decided it would simply air-dry its tiles on Masonite shelves placed on bakery carts.
After the initial learning curve with the new press and kiln, the production process seemed easy enough. But drying was a problem-the company was losing about half its tiles in this stage due to warping. "We were constantly trying new things to keep the tile from warping," says Renee. "We'd wrap the carts in plastic and let a little bit of air at a time come in, or we'd place the racks full of tiles in a smaller room with a humidifier to keep the tiles from drying out too quickly. Nothing worked-our losses were at about 50%. We recycled as much as we could, but we were still losing money."
A Dry IdeaTiles by R Design struggled with high drying losses for nearly two years, unsure of where to turn for help. Then, in 2003, Renee's clay supplier (Aardvark Clay) passed along an article in Ceramic Industry, written by Cameron Harman Jr. of Ceramic Services, Inc. (Kilnman™), Bensalem, Pa. The article discussed how a commercial dryer could be used to eliminate drying defects and increase production space and efficiency.1
Although Renee was leery of the cost of purchasing yet another big piece of equipment, she was fed up with her existing process. She contacted Harman and learned that Ceramic Services offers a program that would allow her company to test the dryer before making the purchase. Renee decided she had nothing to lose.
"As soon as we started using the dryer, we saw immediate improvements," she says. "We played around with it for a little while, ironing out a few things and trying to get the program just right. We're high desert here, so we never have humidity. Our winters are very cold, and our summers are very warm, so we had to adjust for that and have programs for the different seasons. But once we got that down, it was really simple.
"In the very beginning of the trial, we saw our losses drop down to 15%, and by the very end our losses were down to 2%. I felt like we had finally found the solution we were looking for."
After just two weeks of testing, the company decided to purchase the dryer. Renee admits that she was still intimidated by the price. "We used a lease program, which helped tremendously, but the cost was still daunting. But when I started to think about how much money I was losing in wasted product each month-and how much we would save with the new dryer-it just made sense. I would rather spend a little bit of money up front to save a lot more in the long run," Renee says.
The Next LevelSince purchasing the new dryer in late 2003, Tiles by R Design has continued to grow. The company now produces 20,000-30,000 tiles per month and employs 14 people. Its product line encompasses more than 40 different styles of moldings and architectural elements; customized, hand-painted tiles and murals; and ceramic transfers in a variety of designs. The company's losses have remained at about 2%, which has enabled Renee to add some much-needed profit to her bottom line. But the dryer has provided other benefits as well.
"Instead of using dozens of drying racks, now we only need eight, so the dryer has freed up a lot of room for production. It's also allowed us to dry a lot faster. When we were air-drying our tile, one batch would take over a week to complete; now that same size batch is dry within 24 hours."
The reduced drying time and hassle has enabled the company to move one person from its drying operation over to glazing to eliminate a bottleneck in that area of the operation. Renee's second mortgage is paid off, the kiln will be paid for this fall, and the dryer will be paid for in just a few more years.
"There have been huge benefits," Renee says. "It hurt for awhile, but it's better now. We wouldn't be able to do what we do and still stay in business without the dryer."
Renee's next goal is to automate some of the company's glazing operations to gain even more production efficiencies and eliminate the human error that is inevitable with hand spraying. Beyond that, she's open to additional improvements.
"It's all been kind of a waterfall effect. We saw that the press helped, and from there the dryer changed everything. And if we can glaze more efficiently and consistently, that will be another improvement. We're constantly on the lookout for new technologies that help us improve our quality or production process," she says.
As far as the expense goes, Renee now has a different perspective than she did in the beginning. "For a small business like ours, money is always a big concern. But you have to be willing to invest in your business if you want to be successful," she says.
For more information about Tiles by R Design, visit http://www.tiresbyrdesign.com.
For more information about Ceramic Services, Inc., contact the company at 1060 Park Ave., Bensalem, PA 19020; (215) 452-4040; fax (215) 638-1812; e-mail email@example.com; or visit http://www.kilnman.com.