Unforgivable actions

[strantor]

Your inventory system sounds similar to the one we had. In addition to when and where a part was used we also tracked the number of cycles the parts would last and the time it took to replenish stock when a long lead item was used.

We had order points and order quantities that assured the proper parts were available when needed. Inventory dollars were easily in the millions, but it was constantly turning over. There were no dead or obsolete parts hiding in the shadows.

Fortunately the management was onboard with keeping the proper inventory

What was your system called? Ours was called MP2.

 

[projectnut]

Our system was called MUSCLE. It was developed in-house and kept track of all phases of maintenance.

It automatically ordered parts when the order point was met. It notified the supervisors when a maintenance routine was coming up. It notified the parts people what parts would be needed for the upcoming routine. It scheduled trained technicians to be working when the routine should be completed

It kept track of man hours against every machine. It kept track of overtime, and a lot more.

The downside was that it was a mainframe program written in COBOL. When the mainframe was replaced with pc’s we had to make a choice of rewriting the program or going to another. We didn’t have any programmers left that knew COBOL so they went with SAP. A terrible mistake in my opinion.

 

[mmcmdl]

Danaher actually has a world wide system set up as a division which tracks everything as well . Funny , as a Danaher owned company , we didn't use it . That thing spit out 200 PMs a day with only 2 mechanics on site each shift . They are now down to one and Bob is still on their ass regularly . Hard to keep the floor running AND do PMs at the same time .

 

[strantor]

200 PMs a day with only 2 mechanics on site each shift . They are now down to one and Bob is still on their ass regularly . Hard to keep the floor running AND do PMs at the same time .

That's the story almost everywhere. There is almost never enough maintenance personnel to accomplish the job. I think it's because there aren't enough skilled techs. I think there aren't enough skilled techs for a few reasons:
1. It's not a job you hear about on career day in school. Hey kid, wanna be a mechanic? AND an electrician? AND an HVAC tech? AND a lube monkey? AND a machinist? AND a programmer (of some weird quasi-graphical programming that nobody in the real world understands)? Wanna not be able to explain to your friends and family what kind of things you work on because it's not something they've ever seen or heard of?
2. It (usually) doesn't pay enough. I think white collars don't understand just how skilled a guy needs to be, to be a skilled maintenance tech. At my current employer they pay maintenance $15-20 starting out. I wouldn't take a maintenance job for less than $50/hr (in TX - other places I might have to demand more). So our maintenance is done by high school dropouts, felons, and people who don't speak English. And predictably, it's done poorly. And we still don't have enough techs.
3. In such a dimly lit space it's too easy to shine brightly. Anyone who is actually as good as what (ideally) a maintenance tech should be, often gets noticed by an OEM and ends up being a field service tech. Maintenance loses talent once again.
4. There is a lot of liability that is not reflected in the pay. Everyone knows, whenever there's an incident, someone has to be at fault. If it's not an obvious case of operator error then the maintenance guy can brace himself for the inevitable dumb ass interrogation questions. "hey didn't you change some setting in that VFD last February? They said ever since then the machine has be going haywire (but not haywire enough to justify submitting a ticket) - do you think that could be related?"

 

[mmcmdl]

All's you need is a valid roofer's card . I'll fix anything under the roof as well as above . I'll start at $80 an hour now that I'm retired . Companies fly people in from across the country every day for meetings , deciding how they can get more work for less . I was pretty fortunate , my training taught me how to do everything for nothing !

You know I ran 3 plants in my career . I stuck to my guns and told these white collar ****** how it works in reality . Never been fired , never been written up , never been un-employed , never been late , never let any company down . 48 years , I can go back to any one of my former employers .

 

[Ischgl99]

Something similar happed at a customer of ours at a previous employer, new owner came in and threw out anything that couldn’t be identified as necessary. They threw out all the tools to disassemble their centrifuge a colleague and I were sent there to overhaul. Luckily for them, it was relatively local to our office and those parts were actually in stock. It cost them about $10,000 in new tools and lost production time while I had to go to pick up the tools. That was 30 years ago, the tools are probably twice that today.

I wonder if there is any workaround/loophole for this.... What if the brass were to start a second company, some kind of company which exists to buy/sell/refurbish equipment. I imagine the tax implications for the second company are different, since they are buying equipment not for the purpose of production, but for the purpose of retrofit/resell. Do vendors pay the same kind non-performing asset tax for products which sit on the shelves? I doubt it, it seems like it would push both retail and wholesale totally out of existence. The original company could sell equipment to the new company either at book value or scrap value (not sure if it would matter), then the new company can sit on it indefinitely. The new company can, while in possession of it, do safety upgrades (or not), overhaul (or not), sell to outside buyers (or not), and when the equipment is needed again, sell it back to the original company.

That might work here in CT, if the companies wanted the additional overhead of the second company. Companies pay tax on all assets used in a company based on their acquisition cost and how many years you have it. The value decreases each year according to a schedule and bottoms out at I think 30% the original value after 5 years. At that point, they are paying tax at that value until they dispose of it. If they sold it off to a separate company and that company had the intension of selling it, then it would be inventory, and inventory is not taxed here. But, that second company is paying tax on the property value, equipment they use for running the business, employees, etc., so it might cost them more to have a separate company rather than just getting rid of it.

 

[strantor]

If they sold it off to a separate company and that company had the intension of selling it, then it would be inventory, and inventory is not taxed here. But, that second company is paying tax on the property value, equipment they use for running the business, employees, etc., so it might cost them more to have a separate company rather than just getting rid of it.

I deliberately set up the question in such a way that most anyone would assume that the second company has a its own facility, its own staff, it's own bills, etc. but that does not necessarily have to be the case I think.

At my day job I work for a Logistics company that has several entities. All owned by the same people but there are at least 5 different company names being thrown around. One is for trucking, one for packaging, and a couple more for various other things. I don't know the specifics but it seems some of the demarcation lines are more imaginary than others. On the side I own (am) a single-member LLC where I go into manufacturing plants and troubleshoot machines. I have a few customers who lease space to other, smaller companies that operate under the same roof, sometimes without walls between them; the unknowing observer wouldn't realize they were looking at two completely different operations, different unrelated companies. My last day job was company that made subsea tools but one corner of the facility was leased to a Formula1 team, so there were race cars coming in and out of our shop every week. At my current day job, one of our facilities has half of the building leased to a company that processes sugar while another facility has a third leased to a company that ships beer. My favorite gas station has a Mexican drive-through operating out of a back room. Often Taco Bell and KFC will share a facility. Point is, two companies (with or without joint ownership) operating under one roof is definitely "a thing."

The main company and the second company could be under the same roof, maybe even share the same employees. Clock out, take two steps to the left and clock in on a different time clock (if that's even necessary). The second company could lease space from the main company. Left hand pays the right hand, it's all clearly documented on paper. Essentially the main company just moves machines into the corner (if that's even necessary), throws a tarp over the top and mothballs underneath, calls it "stock" instead of "an asset" and everything looks good on paper. The machines were sold to an overhauler with a massive backlog of work, meaning they won't get around to the overhaul for maybe 3 years, during which time the original company might experience changing demands and be willing to buy back the equipment as-is, for the same price they sold it for (or for way less, or for several times more, whatever looks best on paper - after all, it's just the right hand paying the left hand).

I'm sure it's probably not that simple but with a well funded legal team it seems any kind of ethically gray shenanigans are possible in this country. It's pretty ridiculous actually, how we keep passing these asinine and poorly thought out laws, legal system growing ever larger and more complicated, while legal ferrets keep digging ever more convoluted tunnels around them. It becomes a system where you can do whatever the hell you want, if you have money. I think throwing away machines because government incentivized it is just laziness, or an indicator that the company isn't as well funded as it might seem, they can't even afford legal freedom.

 

[Ischgl99]

Point is, two companies (with or without joint ownership) operating under one roof is definitely "a thing."

Their assets and the portion of the building they use, still needs to be separate for tax purposes. My church leases our steeple to T Mobile for a transmitter. The church is tax exempt, but every square foot of space T Mobile uses is taxable and needs to be accounted for. The same would be true for space leased out to another entity of a for profit company, it needs to be accounted for in case there are different tax considerations, and there will be because of the lease. I don’t know how it’s done in other states, but here in CT, anything leased is treated as if you own it, so tax is charged on that cost. There are plenty of loopholes the finance guys can use that might make something like this work, but my point is, it’s much simpler to scrap the machines than to spend effort on schemes like this that might cost them more money in the long run when everything is properly accounted for.

 

[verbotenwhisky]

The last thing they want to do is deal with the IRS, after writing it off for many years they can as a last middle finger scrap it and take the remaining value as a total loss but that doesn't work if you sell it or give it away, it has to be a loss. Our government at work...

 

[projectnut]

The company I worked for built 80+% of its own processing and packaging machinery. We did buy some commercial machines, but they were heavily modified before going into production. When outside machinery was purchased, on occasion we allowed factory reps to come into the production facilities to service them. We quickly found that wasn't a good plan. It seems the factory reps were documenting all the upgrades we made to the machines and started offering them as options or standard equipment from the factory.

To minimize trade secrets going out the door the company decided to eliminate the factory reps and take on all forms of maintenance, repair, and overhaul on commercial machines. The first machine we started with was a high-speed meat slicer. The manufacturer advertised it as being able to cut and stack 125, 8 oz. packages per minute. We had 62 of their machines throughout the company, but the fastest they could reliably operate was 80 packages per minute. As part of the project myself and another engineer were tasked with creating maintenance routines, an overhaul manual, and opening a stand-alone shop to rebuild them from the ground up.

Writing the maintenance routines and overhaul manual took nearly a year. When that was finished, we had to train technicians how to rebuild the machines. We started with a top-of-the-line technician and a supervisor that were both considering retirement. We offered to set them up in an independent shop for the sole purpose of rebuilding the machines and training technicians on how to complete the process.

The rebuild process usually took 2 to 3 weeks depending on the condition of the machine. They were shipped to our central rebuild shop and accompanied by 2 technicians from the production facility. The technicians not only learned what needed to be done to overhaul the machines but were also involved in implementing much needed upgrades. They were also an excellent source for feedback as to the completeness and accuracy of the manuals. BY the time the project was finished the original manual had been updated dozens of times. Almost every technician going through the program had contributed to upgrading and refining the maintenance and overhaul routines.

The end result was a new series of machines that could easily exceed the original advertised packaging rate, and technicians that could diagnose problems and fix them in a fraction of the time it took to get the factory techs involved. In addition, none of the company secrets were leaking out the door only to appear on the next generation of the machines.

All this being said the machines were returned to service with a new book value. The original machines cost around $75,000.00. They had generally been depreciated down to around $10,000.00 before being pulled from service and rebuilt. The new book value was between $45,000.00 and $65,000.00 depending on what upgrades and improvements had been installed.

While the company didn't save any tax dollars, they certainly kept their competitive edge by not allowing trade secrets to be copied and sold.