PMMI Column: Consider all costs of machine ownership
While investing in capital equipment purchases, training and personnel may still be a delicate balancing act for many firms, moving forward with those investments now could pay off in dividends over the next few years of predicted growth.
For food and beverage manufacturers heeding the call to invest budget dollars wisely, evaluating new equipment based on the Total Cost of Ownership (TCO) is a critical exercise, especially as they attempt to stretch their capital budgets as far as possible. In many cases, investing in high-quality new equipment will create long-term savings by providing years of reliable service with lower overhead and maintenance costs.
TCO predicts the cost of equipment through its entire life cycle. Generally, it’s calculated based on three fundamental elements:
• Acquisition cost, which includes purchase price, engineering, transportation, installation and initial training, as well as any customization and start-up costs;
• Sustaining cost, which encompasses operation costs like labor, utilities and consumables, as well as equipment efficiency like mean time between failures (MTBF) and mean time to repair (MTTR), and changeover time. (Consider length of changeover time and the amount of labor needed);
• Maintenance and repair costs, including spare parts, maintenance labor, life of equipment, and disposal costs.
PMMI’s recent MarketTrends conference in Chicago featured a session with Dave Wiemann, senior consultant at Pak Edge Solutions LLC, leading attendees through the basics of calculating TCO. He also reviewed steps domestic machinery manufacturers can take to help food and beverage manufacturers better understand the TCO of their equipment, perhaps giving them an edge over foreign equipment manufacturers, who may come in with a lower initial purchase price. His suggestions included:
• Reducing changeover costs, including the number of parts needed;
• Providing more specific information on air, water and electricity requirements when quoting equipment;
• Designing more modular equipment to increase the owner’s ability to upgrade or expand;
• Creating simpler, more visual operator interfaces (e.g., improving graphics and adding self diagnostics);
• Finding ways to continuously reduce customer costs (e.g. MTTR, MTBF and parts upgrades);
• Working closely with customers to determine real benefits of any add-on to standard equipment.
TCO is a critical part of the machinery purchase equation, and Pack Expo International 2010 (Oct. 31–Nov. 3 at McCormick Place, Chicago) presents an ideal opportunity to explore what packaging and processing solutions providers have to offer. More than 20% of the 1,600-plus exhibitors will showcase processing solutions; of them, 150 will be concentrated in the Processing Zone. This is the food and beverage manufacturer’s chance to compare and contrast options and find the system that best fits long-term financial and operational needs.
In addition, Pack Expo’s partners, including the Grocery Manufacturers Association (GMA) and the Institute of Packaging Professionals (IoPP), will address aspects of TCO in the educational programming they’re providing during the show. Register for PACK EXPO International 2010 and co-located conferences online at www.packexpo.com. F&BP
Jorge Izquierdo is PMMI’s vice president for market development.