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Investing in new machinery can be a step on the path to growth and profitability. However, unless your approach is thoroughly planned and fully costed, there’s the very real risk of new machinery projects failing.
This guide highlights the issues you need to consider before committing to significant expenditure. It details the steps you should take for your investment decisions to deliver your goals. You will also find links to PPMA’s Machinery Finder to help you find suppliers of a multitude of different types of packaging machinery.
All equipment has a finite life. In the case of packaging machinery, life expectancy is generally in the region of 10 to 15 years. Business owners, managers and operators will be very well aware if an ageing piece of equipment has slowed down, or needs increasing maintenance, or if it is creating damaged or imperfect packs.
If the bill for remedial work is too high, or if repair work is not going to make the machinery properly usable, it is time to replace it.
You may also need to add equipment to increase capacity to fulfil the demand from your clients or to prepare you for expansion into new markets. You may be bringing the packaging function in-house from external packers. Or you may be making your entry into the packaging world in a brand-new venture.
Whatever the background for buying new packaging equipment, the issues and activities you need to be absolutely clear about are:
From the inception of a project involving a significant new capital investment, businesses need to commit to a thorough process involving key decision makers. It’s been said many times that the major cause of delays in projects is the time taken by the companies buying new equipment to reach internal agreements and make decisions.
Therefore, a thorough, organised approach from the outset will help avoid delays which can hold projects back and impact costs.
Well-run organisations will normally have a procedure for making a business case for any significant investment in new equipment. Many templates exist in the public domain including a thorough, downloadable business case template from gov.uk.
An outline structure for a business case is:
However formal or informal the actual presentation of the business case, time spent preparing it and considering the issues will increase the likelihood of a successful outcome for all.
The financial figures within a business case will give a firm idea of the expenditure needed for new machinery. The job of budgeting is to pin down where the money comes from, and how the spending fits in with the overall financial position of the business.
Some businesses will have an annual allocation for new equipment which could be used to cover costs. Others will operate on a case-by-case basis for investment. Whatever the approach to business finances, the project should not be a standalone consideration.
It may be that the money spent on one project means delaying another project. Competition for financial resources is part of business life, and the key factor in deciding what to spend on is likely to rest with the business cases put together for different investments.
To budget thoroughly, it is important too to drill down into the full costs over time using a net present value (NPV) approach. Ideally, project sponsors will have the support of a company’s finance team to ensure that NPV calculations are in line with the company’s thinking.
Key cost issues are:
The way the equipment is paid for is a further budgeting and cost consideration. Outright purchase is one option. But for less initial capital outlay, it is advisable to explore payment in instalments, and lease or hire arrangements. Each has its advantages, and your choice is likely to depend on the availability of finance within your organisation.
Once the business case and budget has been signed off, a clear and comprehensive specification has to be put together for the prospective equipment purchase. As a starting point, businesses should always define their requirements first, rather than being guided by the manufacturer’s equipment specifications.
Building a complete specification begins with clarity about the required function of the packaging machinery. What products is it required to pack and in what type of packaging?
If the project is a replacement for an existing machine, the answers may be very straightforward, but new equipment may present opportunities for enhanced functionality.
For example, machinery which could only handle one type of product, could be replaced by a machine designed with the flexibility to package a range of sizes and types of products. Or, there may be a case for equipment with a larger capacity, such as a twin-chamber vacuum packer replacing a single-chamber machine.
The three overriding criteria for equipment specifications are speed, capacity and flexibility. The nature of your business will dictate what is required in terms of:
Within the specification, the issue of quality also needs to be addressed, with minimal tolerances for spoilage, as well as targets for time in operation. All machines require downtime for maintenance, but the design of the machine and the quality of its component parts will have a major influence on how long any machine is offline.
The efficiency of equipment can be measured by taking the ‘official’ rates of packing quoted by the manufacturer and comparing them to the actual rates achieved over a specific period of time.
For example, a manufacturer may quote a packing rate of 1,000 packs a day, but if the average day rate is 900 packs a day, the machine is only delivering 90% efficiency. When it comes to discussing equipment with potential suppliers, it’s important to delve into the efficiency of the machinery you are thinking about buying.
Within a packing machine, individual parts of the equipment perform specific functions, and a specification for each one of these is part of the buying process. The importance of doing so is that the machinery as a whole is limited by the performance of its slowest, or least reliable, part.
The core components of packaging machines are:
Visit PPMA Machinery Finder for details of suppliers of each type of machine used in packaging.
Including a clear specification for each part of the equipment will help buying decisions and help suppliers understand exactly what you require. For buyers looking for guidance from suppliers, understanding the capabilities of each part of the equipment will result in more informed purchases.
It’s essential to be clear about the exact location of the machinery. Issues such as load bearing ability cannot be overlooked, nor the heating, ventilation and air conditioning in place within the packaging plant.
Dust control and dampness are further factors which can affect machine performance and need to be controlled in line with the operating environment required by the machinery.
With a solid specification completed, it’s time to approach packaging machinery manufacturers and equipment dealers. The choices are numerous unless you are in a very specialised field of packaging, such as dangerous substances.
Who you approach for quotations is likely to be based on what you have heard from business contacts and what your research tells you about potential suppliers. The umbrella of the Automate UK can help you in your search, providing plenty of details online. This includes contact information and our web tool Machinery Finder besides the PPMA Group and PPMA Show websites.
The PPMA Show is a hugely valuable event for businesses considering new equipment, with working demonstrations and networking opportunities with suppliers and your industry peers. Stay in touch for details of this year’s PPMA Show.
New equipment is very often the first consideration for buyers, with a large number of equipment manufacturers to choose from, and a much larger number of machine types and models.
New machinery may be available with more finance options, including leasing and rental. However, lead times can be lengthy, since manufacturers tend not to have ‘off the shelf’ equipment offerings, except for smaller machines and components.
However, your business should not automatically rule out buying used packaging machines, because they could prove to be your most cost-effective option. Previously owned equipment is generally immediately available, and some have, in fact, never been used.
Pre-owned or not, second-hand machinery needs to be:
Furthermore, if modifications to second-hand equipment are required, you need to know what they will cost and how they will be done.
After completing your research, send out a request for quotation to a limited number of potential suppliers. Three to five will probably be enough and will allow you to assess each of their offerings without being overwhelmed. If none convince you, a further round of companies can be contacted.
As part of the discussion with potential suppliers, you need to cover the schedule for supply, installation and commissioning. Depending on the scale and complexity of the equipment, you should expect a 20 to 30 week lead time from signing contracts.
Allow further time for the delivery of the equipment, which may be a few days if it’s coming from within the UK to a UK site, and longer if it’s coming from Europe, the Americas or Asia instead.
The responsibility for managing schedules is usually best placed with a project manager appointed to oversee a successful outcome of the project. The project manager should be involved from the early stages, but will fully come into their own when the project goes live.
GANTT charts can be used to track and report progress, and to highlight blockages in the project which the project manager can focus on removing.
With good preparation and scheduling, installation should proceed with minimal problems under the control of the project manager working with the vendor team. There is, however, a need for clear staging posts for the new equipment.
Always seek a contractual agreement covering penalties for late or imperfect supply, as well as the obligations of the purchaser to sign off stages without delay.
Full and thorough testing needs to take place to ensure that the equipment works as set out in the purchase agreement. It’s usual for various snags to be put right during the testing phase, which could involve modifications of minor parts of the equipment to ensure it operates as specified. Formal sign-offs by the buyer are likely to be required before the machinery is commissioned and ready to start full operations.
Once the machine is ready to be used, supervisory and operating staff need to be fully trained, usually by the machinery supplier or their appointed trainers. The company buying the equipment needs to select staff who are suitable for the work (including, for example, lifting off heavy cartons at the end of the packaging line).
Training on most packaging equipment is relatively short. Although the time needed can be extended if there are complex controls and programmes to manage. A key part of the training will cover all health and safety issues specific to the new machinery.
After the equipment has been set up and signed off, the vendor is frequently contracted to provided ongoing support to their client. This can include a maintenance schedule and availability for resolving breakdowns and malfunctions. Details about the support are usually specified in a service level agreement which forms part of the purchase contract.
The cost of packaging equipment varies with the type of materials and technology used, and the size of the machinery. Simple entry-level machines for small, low-volume packaging operations can be in the low hundreds of pounds.
At the top end of the market, fully automated systems can come with a bill in the high tens of thousands of pounds, or even more. Leasing is an increasingly popular option for capital equipment and is a route to explore for packing solutions.
Packaging machines have been developed for every category and sub-category of product. So in total, there is an almost limitless number of types of machines. However, they all fall into two principal types: primary and secondary.
Primary packaging is the packing material that contains the product itself, such as a foil wrapper for confectionery, a bag for breakfast cereal, or a can for a beverage. Secondary packaging refers to the next layer of packaging material such as film wrap around confectionery or a carton for bags of cereal, or a paperboard tray and shrink film for a group of canned drinks.
For a complete guide to packaging machinery, see our comprehensive guide Machinery Explained. For details of packaging equipment and services from PPMA member companies, search for relevant information in Machinery Finder.