Balance is key
Why winning companies invest in equipment, technology and talent.
One of the toughest parts about establishing a total cost of ownership (TCO) for a piece of machinery is balancing the known, upfront costs with the variable future unknowns, such as overall equipment effectiveness. Our TCO model provides a framework for getting it done.
Big capital expenditures induce more than their fair share of organisational angst. But it must be done – winning companies always invest in equipment, technology and talent.
The struggle centers on balancing the proposed upfront investment with the future impact of the equipment. How will the new machine allow you to tap into new markets? What efficiency improvements will it have? Will the machine be scalable?
We’ll share some thoughts on how to consider these questions in a model that’s specific to the converting industry. We’ll break it down into three main factors.
1) UPFRONT INVESTMENT
We start at the obvious place — the price tag. Converting machinery will have an obvious sticker price, but that will include a number of additional elements that must be calculated, including annual maintenance and training. You’ll also want to project out energy consumption costs:
- Purchase price
- Energy consumption.
Your finance team will need to factor in mitigating factors, such as:
- Tax deductions.
2) OVERALL EQUIPMENT EFFECTIVENESS
Factor 1 usually inspires a fair amount of anxiety, but Factor 2 is where the fun begins. It integrates potential growth and organisational efficiency that can result from the new equipment. Consider these potential benefits:
- Downtime Reduction: Will the new machine reduce downtime from current levels?
- Improve labor costs: Will new automation from the machine allow you to save money on labor costs by either reducing expenditures or remaining at current levels?
- Scalability: Is the machine scalable, and will that reduce the need for large Cap Ex investments in the future?
- Growth potential: Will the new machine allow you to take on new lines of business, and add new revenue streams? Will this allow you to produce new and different types of products, and expand your market share and ability to innovate?
- Reduce maintenance expenses, scrap and outsourcing: will new system offer substantial savings in these areas?
3) THE BIG INTANGIBLE
We’ve provided a framework for some quantitative upfront investment and OEE measurements. But we have to also consider one critical intangible factor.
When you improve the reliability and performance of your machinery, you become more confident in the throughput you’ll produce, day in and day out.
The goal is to reduce variances from part to part. The less subject you are to manual processes, the greater your accuracy and repeatability. You reduce scrap, improve efficiency, and serve the customer better.
Overall, you’re creating a culture of excellence. While it’s hard to connect an actual number to that ideal, you’re well aware of its value. Consider it, as well as the other quantitative factors we mentioned here as you calculate your total cost of ownership.
Visit our office/ showroom in Gothenburg, Sweden
Delta Modtech invites you to visit its office and showroom. The facility expands Delta ModTech’s commitment to growth and service for the European market.
The facility includes a showroom and equipment demonstration center, designed to provide a firsthand look at the latest in converting technology, and coating and drying equipment solutions from Frontier, a Delta ModTech Company.
“We are excited to have this office and showroom to feature our total capabilities as we continue our growth throughout
Europe,” said Evan Schiebout, owner of Delta ModTech. “The applications coming out of the region are challenging, ambitious, and require a certain level of risk that makes us a perfect fit.”
Converting machine demonstrations at Scanpack and K-Show
Delta ModTech will demonstrate a Crusader Converter at Scan Pack in Sweden from 4 to 7 October and at the K-Show in Düsseldorf Germany later in October.
The Delta ModTech Crusader converter offers flexibility and enhanced ergonomics to ease changeover and improve overall throughput. It showcases a variety of processes including tight tolerance rotary die cutting, multi-layer lamination and precise placement.