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If you are considering purchasing new nondestructive testing (NDT) equipment, some thought should be given to the advantages of renting versus owning. Owning your NDT equipment may be attractive; however, considerations need to be given to the unforeseen expenditures, management and inventory challenges. Renting may prove to be the best solution after careful review of the reasons for renting and the cost savings that may result.
1. Access to a larger inventory and selection of equipment
Given the cost and wide selection of NDT equipment it is virtually impossible for even the largest organization to own every type of NDT technology. Within a given NDT discipline there may be several types of instruments that vary in capability. Different manufacturers may offer a variety of features that make one superior for certain applications. For example, it is common to have a borescope in your NDT inventory; however, it may not be the correct length or diameter or may miss a certain feature that you need for a certain inspection. Renting your NDT inventory automatically gives you an incredibly large inventory for more applications that would not be possible by purchasing alone.
2. Access to the latest and most advanced technology
When you purchase NDT equipment your decision is based on your current inspection requirements and technology. Typically, you will need to keep that technology for several years without the opportunity to upgrade, despite advances in technology or changes in your inspection requirements. A problem with owning your NDT equipment may be that the inspection the equipment was originally purchased for is not needed any more. Your equipment may show signs of age such as old recording media and displays such as: 3.5-inch floppy drives, DVD recorders or bulky CRTs in an age of SD Cards and LED displays. Renting your NDT equipment allows you to access the latest technology and avoid the problem of obsolete equipment in your inventory.
3. No calibration/maintenance required
NDT equipment may require routine calibration or maintenance. If the equipment is purchased all those responsibilities fall on the end user. Equipment may be required to be returned to the manufacturer for calibration and service, leading to periods when the equipment is not available and thus causing downtime. NDT equipment that is not used on a regular basis may sit idle for long periods only to discover that it is not working properly, required batteries need to be charged or a critical accessory is missing. Although preventable, it is understandable that even the most diligent NDT department may find itself in a situation where they have the needed test equipment and it is not usable. Renting removes the burden of calibrating and maintaining equipment and ensures that you have access to calibrated and properly maintained equipment.
4. Your equipment is in for repair or service
Many organizations have a well maintained inventory of NDT equipment, however, on occasion some instruments may become damaged and need repairs. The equipment that requires repairs is always the one needed at that particular moment and its absence threatens downtime, an extended plant outage or a stop to production. A short term rental can fill the need that that broken instrument was to be used for. A good strategy for any company is to have options for renting NDT equipment ready if the need arises to avoid larger problems that repairs may cause.
5. Cover short term needs/temporary surges in workload
Short term needs can be efficiently covered with renting NDT equipment. A new contract may mean additional work and the need for additional equipment. But perhaps the manufacturer cannot deliver in time to meet your needs, your own internal purchasing procedures will not allow for timely delivery, or the work does not warrant the need to purchase expensive new NDT equipment. Rentals are a fast and efficient way to cover spikes in production and other short term needs when purchasing does not make sense.
6. Minimize equipment inventory costs
Renting your NDT equipment can also reduce inventory carrying costs. The inventory an NDT department needs can be reduced with a reliable source for equipment rentals. Only those instruments that make the most financial sense to own need to be purchased. Too often I have seen equipment purchased that is only used once or twice a year. Tens of thousands of dollars could be spent better elsewhere by renting NDT equipment rather than purchasing equipment that just sits on the shelf waiting to become obsolete.
7. Delivery to any location in the field
Many companies have NDT field technicians that can travel the world and move from plant to plant as the year goes by. Each destination they arrive at may have completely different NDT requirements from the last. Work can also be seasonal with periods where equipment and people are idle. Purchasing, maintaining and keeping control of such a potentially large inventory can be a daunting task for even the most well organized company. A person or department may need to be tasked with the responsibility of maintaining, tracking and controlling this inventory. Renting NDT equipment means that the rental company now has the burden of maintaining, shipping and controlling the inventory and frees the end user to pursue their business more efficiently. The renter is also assured of receiving well maintained and calibrated equipment that is best suited to their specific inspection requirement.
8. Equipment trail period to ensure that it will perform as expected
The true ability of complex NDT equipment cannot be determined with a short demonstration. Renting equipment that you intend to invest in allows for a true evaluation of the capabilities and usability. Renting your NDT equipment may also serve as an excellent way to determine if the inspection equipment will fulfill the desired need. A variety of NDT disciplines can also be tried or used in conjunction to determine which methodology provides the best results.
9. Capital is not tied up in owning instruments that may not be used on a regular basis.
Your cash can be put to better use in other areas with a higher return. Owning NDT equipment not only involves a large initial investment but ongoing expenditures to support and maintain inventory that is not always being utilized. Renting does not involve any large outlay of cash and is typically pay as you go. Renting greatly improves your cash flow and conserves capital that may be better utilized. You can quickly determine the future value of investing your capital elsewhere versus locking it up with an inventory of equipment. The example below demonstrates the value of holding onto your capital versus purchasing your NDT equipment.
Future value of a present sum
FV = PV(1+i)n
FV = 20,000.00 (1 + .08)5
FV = $29,386.56
PV = present value
FV = future value
n = number of compounding periods
i = Interest rate
10. Cost of renting is less than owning
The most obvious and easiest case to be made for renting is that it is frequently less expensive than owning your NDT equipment. To determine if renting makes sense for your NDT program you need to know the price of the equipment, the estimated life and equipment usage. Some basic math will allow you to determine if you should rent or own your NDT equipment. In the example below renting yields a financial benefit of $10,300.00 versus purchasing equipment. To determine if you should rent or purchase your NDT equipment sub in your numbers in the example below.
Cost of Owning
|Average Purchasing Price||$20,000.00|
|Estimated Life (in years):||5|
|Annual Usage Hours:||1500|
|Total Payments (over life):||$ 24,300.00|
|**Residual Value:||($ 2,000.00)|
|Total Ownership Cost:||$22,300.00|
|***Total Operating Cost:||$4,000|
|Cost of Ownership:||$26,300.00|
Cost of Renting Equipment
|Rental Fees:||$ 400.00|
|Estimated Life (same as owning):||5|
|Cost of Renting:||$16,000.00|
*The monthly payment can be found by using the following formula:
P = (Pv*R) / [1 - (1 + R)^(-n)]
Pv = Present Value
(beginning value of equipment)
APR = Annual Percentage Rate
R = Periodic Interest Rate = APR/ # of interest periods per year
P = Monthly Payment
n = # of months
**Residual Value: Estimated Value of equipment at end of time period.
***Operating Cost: Cost of calibration, maintenance, repairs and consumables
Renting nondestructive test equipment may prove to be the better course for many companies after a careful review of the benefits. When compared with purchasing expensive NDT equipment, renting can be more efficient and reduce costs for many companies. Others may find that a hybrid approach of purchasing their most used NDT equipment and renting equipment when the case cannot be made for purchasing.