How to Balance Capacity, Quality and Budgets with Pre-Owned Equipment Congratulations, your newest product has developed into 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 beginning to spike. Furthermore, 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 ubiquitous quest for cost reduction has put a cap on your capital budget so adding new equipment is not an immediate option.
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’s time 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 operating quickly.
For example, when Sara Lee abruptly decided to go national with its winning Cheesecake Bites after just six months in test market, it chose to acquire pre-owned equipment in order to save time and money. “New equipment, a wrapper for instance, would have taken approximately six months to purchase. Pre-owned equipment from Frain Group, along with the set up and reconditioning performed by their engineering services, took 45 days,” said Fred Russell, project manager for Sara Lee. The company saved four month’s lead time and about $4 million.
This approach will address the timeline and financial aspects of your capacity challenges; but how can you be sure these machines will work — 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. Even small organizations have one or two pieces of idle equipment. A lot of it 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 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.
So why is it that some plant operators are leery of acquiring pre-owned equipment? The biggest reason stems from a perceived lack of reliability. 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 average age of Frain pre-owned equipment, for example, is 3.4 years. 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.
Plant managers should take into account several criteria when assessing the reliability of pre-owned meat 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
• What the brand of equipment is
Documentation of a machine’s comprehensive performance capabilities is one of the most important things needed to ensure optimal pre-owned equipment performance. This requires a set of the machine’s original specifications and a complete description of the features of the machine in question. A copy of the original operating manual should be supplied with each machine, and the equipment’s provider should also be able to offer counsel and training on its use.
For the food industry, a critical consideration in evaluating safety is the pedigree of the machine. Who owned it? What was produced on it? Maintenance is another important indicator. 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 and stringent cleanliness procedures 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 to an unsheltered area behind the plant and exposed to the elements for months is more than likely a problem waiting to happen. Buyers should insist on equipment that has been stored indoors in climate-controlled environments. Equipment that has been stored 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 to ensure 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 machines. Some have made clean-ability a key feature of their equipment. It only stands to reason that these machines will also provide more reliable service as a pre-owned asset.
When to Consider pre-owned
There are two types of situations in which purchasing or renting pre-owned equipment in the food industry is an ideal solution. These include: 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.
Business needs can change rapidly in the food business. As mentioned above, increases in demand for a new, existing or seasonal product is a common change. 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.
David Lewis, plant operations guru at Little Crow Foods in Warsaw, IN, is proud that he finds ways to produce Little Crow’s products very efficiently. “We compete with the big boys every day. I have always relied on Frain to work with me to achieve our goals,” said Lewis. The company blends and packages multiple sku’s of cereal, corn starch, coffee, tea, pancake and coating mixes, among other products.
In all cases, there is typically a dire need to obtain equipment quickly. And while a new machine can take up to eight months 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 comparable 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 meat 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. Oftentimes 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 especially a concern for food processors and packaging 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.
Pre-owned equipment provides meat processors and packaging companies of all sizes with a unique opportunity to cut costs, increase production and maintain high levels of quality and safety. Individuals will run into less problems 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. A reputable partner that specializes in processing and packaging equipment should be able to offer expert counsel on the type of machine being acquired to make sure it is a perfect fit for ongoing processing and packaging needs, provide copies of operating manuals that were originally supplied with the equipment and install and test machines on site.