Consider the Lifetime Operating Cost of Hydraulic Machines

My son Benjamin turned 9 last month. For his birthday, we bought him a new mountain bike with all the bells and whistles: front shocks, rear mono-shock, front disc brake and 21-speed derailleur. I still can’t get over the price. It was only $149, and that was the regular ticket price. Of course, it was made in China.

When you look at the finished product, you wonder how it could be so cheap. The retailer has his margin in there, and there’s also shipping costs to consider. My guess is the ex-factory cost could be as little as $20 to $30.

While the bike looks like a top-quality product, only time will tell. But even if much did go wrong with it, for this sort of money, it would likely be cheaper to buy another one and cannibalize the original for spare parts. It is hard to argue with the economics.

As we all know, this is not just happening with bicycles. Whether we like it or not, China is currently the world’s leader in low-cost manufacturing, which includes hydraulics.

Hydraulic machines and most of their components are big-ticket items, so upfront savings are always seductive. But as I discuss in detail in Insider Secrets to Hydraulics, when considering a cheaper alternative, it’s important to weigh what you will save if it lives up to expectations versus what it could cost you if it doesn’t - and whether you’re willing to carry the risk to find out.

This is another way of saying that the initial or upfront cost isn’t necessarily the most important consideration. Instead, it’s the life-of-ownership cost that counts the most. This involves thinking beyond the here and now. Superficially at least, the math is fairly simple. Just add the initial capital cost of the machine or component with the cost of keeping it running over the course of its useful life.

While the capital cost is easy to quantify, the lifetime operating cost is more difficult to calculate because it is usually dependent on the first variable.

Regular readers of this magazine are well aware of the importance of proactive maintenance and the influence it has on the life-of-ownership cost of any asset, including a hydraulic one. Of course, maintenance tasks consume time and resources, and therefore the need for maintenance should be designed out rather than designed in. However, this almost always means a higher initial investment, at which the majority of hydraulic equipment buyers baulk.

This is why we are likely to see Chinese hydraulic manufacturers make fairly rapid inroads into Western markets. Their entry strategy will be based on price, and a lower initial capital outlay will prove irresistible for a large number of potential owners. It’s happening already. Most of us can probably think of an example.

But the Chinese are copiers, and they’re not always good at it. Obviously, the quality of individual components affects the reliability of the machine as a whole. For instance, if the entire machine was built in China, which factory did the machine’s hydraulic filters come from? Did they come from a reputable filter manufacturer’s facility in China or a “me-too” outfit? If from the latter, how well will they perform?

Also, where was the design of the hydraulic system borrowed? As pointed out previously, with most established equipment manufacturers in the Western world designing with one eye on initial capital cost and the other (blind) eye on reliability, the Chinese won’t be taking the lead in this area anytime soon.

So by copying hydraulic designs that are less than ideal from a maintenance and reliability perspective, and then building these machines with components that may not be up to snuff, the learning curve for Chinese manufacturers and their customers could be long and at times painful.

As far as machines go, my son’s new bicycle is about as unsophisticated as it gets. Provided the brakes don’t fail and the wheels or handlebars don’t snap off, its safe operation is not too much of a concern. Of course, I checked that everything was secure and correctly adjusted, and rode it around the block myself before I put him on it.

I’m sure my son will grow out of his new mountain bike long before he wears it out. But in the case of a Chinese-made hydraulic machine, if it’s half the price of a locally made unit and lasts better than half as long without any safety incidents, the economics may be OK.

On the other hand, if it’s half the price and only lasts a quarter as long, the economics don’t stack up. So how do you know? The reality is that you don’t. The same goes for Chinese-made hydraulic replacement parts or components. It’s just not realistic to pay a quarter or even half the price and expect the same performance or service life.

This is not to say that such economics can never be a good deal for the end user of the hydraulic equipment. It may indeed have a happy ending, but only if the user knows the devil he’s dealing with, has considered the possible safety implications and has a large enough economic margin of safety built in. These are the only reasons why my son is riding around on a new mountain bike made in China.