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From: Food Quality & Safety magazine, August/September 2005

Managing Growth Responsibly One Machine at a Time

How to balance capacity, quality and budgets with pre-owned equipment.

by K. C. Christensen

Here’s the situation: Your newest product has become an apparent winner. Initial orders will require production of 200 cases a day and your marketing team is projecting this will increase to 500 cases, and possibly 1,000 cases, within the next six months.

This development is coming at a tough time, however, as seasonal orders for two existing product lines are also spiking. Moreover, an advertising campaign has rejuvenated yet another mature product line and it too is realizing a sizable increase in demand.

Production and packaging capacity has suddenly become an issue of paramount concern. Both of your 10-hour shifts have been loaded for weeks and simply cannot produce more without sacrificing quality. There is space to add additional machinery, but the company’s quest for cost reduction has put a cap on your capital budget so adding new equipment is not an immediate option. Outsourcing is another consideration you quickly dismiss because outside partners have not been able to meet quality standards in the past.

If this sounds familiar, upgrading your line with pre-owned equipment is an option you may want to consider. Top-of-the-line equipment that has often been used for less than a year is typically priced at 50 percent of the cost of new processing and packaging machines. Renting provides an even more economical option over the short term. In either case, you know that the machines you need can be installed and operated quickly.

This approach will address the timeline and financial aspects of your capacity challenges, but how can you be sure these machines will work or that throughput will be significantly increased without compromising quality?

Overcoming the Unreliable Myth

Many food companies have large processing and packaging machinery inventories that are not being used, while some smaller organizations have just one or two pieces of idle equipment. A lot of this equipment has either been in operation for a minimal amount of time or is an older machine that has been well-maintained.

In either case, these types of machines can still provide exceptional value to a processing or packaging operation by performing at optimal levels of service, particularly because they can be acquired for a fraction of the cost of new machines. For example, a top-of-the-line, pre-owned machine that has been in use for less than a year can be purchased for less than half of a comparable new machine and rented for even less.

So why is it that some plant managers are leery of acquiring pre-owned equipment? The biggest reason stems from a perceived lack of reliability. To be sure, no machine, new or pre-owned, will provide value if it does not function properly. However, high quality pre-owned processing and packaging machines from reputable manufacturers do offer years of dependable service to their eventual end users. The trick to mitigating risk in acquiring pre-owned equipment is to establish a set of performance standards that validate the level of a machine’s quality.

Performance Standards

Plant managers should take into account several criteria when assessing the reliability of pre-owned food processing or packaging equipment. Some of these include:

  • What type of documentation exists to explain a machine’s full capabilities;
  • How well the machine was maintained while it was in use;
  • How long the machine was used and for what purposes;
  • Where the machine was stored when not in use;
  • How the machine was transported from one location to the next; and
  • What is the brand of equipment.

Documentation of a machine’s comprehensive performance capabilities is one of the most important things needed to ensure optimal pre-owned equipment usage. Operators often times unnecessarily use pre-owned machines inappropriately because they do not know how to make adjustments that address a variety of applications, such as varying production speed and packaging sizes. A copy of the original operation manual should be supplied with each machine, and the equipment’s provider should also be able to offer counsel and training, if needed, on how to use it.

Maintenance is another important indicator of future performance. At the very least, a reputable provider of pre-owned equipment should be able to explain how long a machine was used and the type of products that were being produced during this timeframe. The very best pre-owned equipment was subjected to routine maintenance by its previous operators and has been inspected, tested and certified to operate against specific performance parameters by a qualified, independent technician.

Another consideration resides in how a piece of equipment was stored when not in use, as well as how it was transported from one location to another. For example, a machine that was removed from the line, taken into an unsheltered area behind the plant and left exposed to the elements for weeks or months is more than likely a problem waiting to happen for the next person who uses it.

Buyers should insist on equipment that has been stored indoors in climate-controlled environments. Storing equipment on a skid is an additional precaution that aids in long-term reliability. You should also ask your vendor how they are transporting the equipment, ensuring that it will arrive at your location in the same condition as when it left the supplier’s warehouse.

Finally, don’t forget to check out who the original manufacturer is, i.e. the brand of equipment you are purchasing. Many manufacturers have earned reputations for making high-quality food processing and packaging machines. It only stands to reason that these machines will also provide more reliable service as a pre-owned asset.

When to Consider

There are two situations where purchasing or renting pre-owned equipment in the food processing industry is an ideal solution: One, when a machine is needed in a very short period of time and two, when there is no room in capital budgets for new equipment.

To be sure, business needs can change rapidly in the food processing business. As mentioned above, increases in demand for a new, existing or seasonal product can push production infrastructures beyond capacity, leading to lost sales opportunities. Another common problem involves the sudden collapse of an existing machine that can no longer be repaired economically. Forward-thinking companies also might realize that more updated packaging equipment or advanced processing machines can bring significant cost savings through greater efficiencies.

In all these cases, there is typically a dire need to obtain equipment quickly. And while a new machine can take up to a year for delivery and installation in extreme cases, pre-owned equipment can typically be delivered within weeks. Pre-owned equipment can be rented for short periods of time to meet short-term needs or purchased outright for as much as half the cost compared to new machines. Either option provides companies with high-quality machines that are available in a short period of time, while simultaneously offering a variety of cost effective means to flexibly meet short- and long-term demand.

Long-term Benefits

Redeployment of machinery assets brings capital spending into line and presents the number one long-term benefit to food processing and packaging companies. This is particularly the case for large corporations that have hundreds and even thousands of capital equipment assets in operation at multiple plants. Often, a machine that has outlasted its book value still has a useful service life of many more years. These machines can be redeployed to other locations throughout organizations if there is a program in place that organizes the process. They can also be sold or rented to other non-competing companies, which turns these idle machines into a source of revenue rather than an aging asset with no book value.

Financial incentives are also a primary long-term motivator for smaller companies. The primary long-term benefit offered here is the flexibility to procure the right equipment to address shifting demand. This is specially a concern for food processors and packing companies that need to increase production to address new product launches or seasonal demand.

Renting a machine to address these opportunities is a fiscally responsible approach in both cases because the equipment being used can be returned if demand for a new product fails to meet expectations, as well as when orders for seasonal products run their course. Purchasing pre-owned machines is a more aggressive strategy that still mitigates financial risks considerably when compared to the cost of buying new equipment.

Conclusion

Pre-owned equipment provides food processors and packaging companies of all sizes with a unique opportunity to cut costs, increase production and maintain high levels of quality. There are numerous pre-owned machines available that offer reliable alternatives to production operations at a fraction of the cost of new equipment.

Few problems will occur with qualified, pre-owned equipment when they know what type of questions to ask and insist on machines that are maintained, refurbished, stored and shipped properly.

The one common denominator to successfully acquiring pre-owned equipment is a reputable partner that specializes in processing and packaging equipment. These professionals should be able to explain how machines work, demonstrate service life track records, install and test machines on site and provide copies of operating manuals that were originally supplied with the equipment. They should also offer expert counsel on the type of machine being acquired to make sure it is a perfect fit for ongoing processing and packaging needs.

K.C. Christensen is a sales engineer for Frain Industries, Inc., a dealer of used packaging and processing machinery. He can be reached at 630-889-5747 or kcchristensen@fraingroup.com.

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