Become a member
Take advantage of exclusive member benefits, world class events, networking and specialist support
Before you make the final leap into signing for an expensive new piece of packaging machinery, you need maximum certainty on how the purchase will benefit your business. Clarity comes from detailed planning covering financial, operational and human factors.
As a tool to aid the buying process, we have put together a PPMA pre-investment checklist which can be downloaded below.
We’ve also broken down key considerations which can, if thoughtfully applied, lead to robust and profitable decision-making for your business.
A machinery purchase begins with someone having an idea about what’s needed to do things better. The usual benefits businesses seek are speed, accuracy, efficiency and lower costs. In most organisations, the responsibility for ideas comes from the top tier of management or owners.
However, there are many examples of business improvement which come from anywhere in an organisation. Ideally, your business should give a voice to everyone – and by that, we don’t just mean a suggestion box!
More effective forums need to be created, with online channels providing a wealth of options in addition to group sessions and large-scale meetings. Ideas can be prompted by seeing competitors doing things differently, peer communications, or keeping up to date with new options in the packaging machinery market.
A perfect way of covering all of this ground is by visiting trade shows such as the PPMA Show where live demonstrations, networking and face-to-face contact with suppliers can open the door to new ways of improving your business.
Most organisations, especially larger enterprises, have a purchase methodology which requires a business case. Informal purchase decisions happen all the time but rarely give the same solid base for deciding what to do.
Successful business cases hang on the benefits outweighing the costs and are usually based on:
Different organisations will have different standards for their business plans. However, a thorough approach to machinery purchases would cover the following:
Smaller businesses might make purchase decisions on what the owner or Managing Director wants, and that can be a fast and effective way of getting on with the task at hand. However, minimal scrutiny comes with greater risks. Within any organisation, there should be involvement of colleagues, preferably at all levels, often including operational staff.
In more developed companies, equipment purchases are usually signed off up to certain levels by different tiers of staff. For high-level expenditure, a sign-off might be required by the operational director and the financial director, as well as the chief executive.
Whatever the procedure, every organisation needs clarity on who signs off what, and that there’s a clear allocation of responsibilities for doing so.
The financial impact of machinery purchases needs thorough exploration. The budget for expenditure is a fundamental factor and needs to be aligned with multiple other considerations.
A primary question is where the money comes from. An organisation with a healthy cash balance might choose to dig into its bank account and pay outright for new machinery. Others may prefer to borrow all or part of the cost with scheduled repayments, or to lease the equipment if that’s an option.
It’s important to understand the capital allowances which could apply to the purchase so you can benefit from any available tax relief. That’s clearly a question for the finance team and the company’s accountants, but it’s an important consideration for the project sponsor too.
The rate of depreciation also needs to be considered, including the appropriate period it covers. A further issue is whether the equipment will still have any value as operational machinery at the end of the depreciation period if the business continues to use it, and whether it will have any resale value on the used machinery market.
A critical part of your pre-investment check concerns suppliers. It’s likely that you’ll have a range of potential suppliers to choose from. Identifying the best option from a list of packaging machinery manufacturers is important.
First and foremost, the machinery itself must be fit for purpose. It also needs to have verifiable credentials for reliability and be supplied with a suitable warranty. The supplier should also be able to provide support when needed, either under the terms of the supply contract or as a chargeable service.
You’re much better off buying from a business with a solid reputation for doing what they say they will do. A reputation in the packaging industry and online reviews may help you establish this, but it’s better to talk directly with existing customers.
Ideally, you will also be able to form a good working relationship with the supplier, forming a clear channel of communication with relevant individuals in the business.
Shopping around is important, and can help price negotiations. However, the lowest price will not necessarily be the best option, and buyers need to exercise careful judgement before deciding which way to go.
Sourcing the right equipment involves creating a clear specification and finding suppliers who can meet it.
The questions any organisation needs to ask include:
In terms of operating the equipment, there are further questions such as:
Our pre-investment checklist gives an outline of the factors to consider for your machinery purchase. Further information about equipment specification is available in our Guide to Buying Packaging Machinery, which covers key types of equipment for wrapping, filling, labelling, cartoning, inspection and palletising.
The prospect of new equipment being installed to enhance the performance of a business is always a cause for excitement, but it’s worth bearing in mind a few things.
While some staff might embrace new equipment, others may be resistant to changes in the way they have to work. To overcome any negative reactions, it’s worth taking the time and effort to reinforce the benefits of new investment and to provide thorough training.
It’s also important, when it comes to decision-making, to put your decision under the spotlight and hold back before you commit with unreserved enthusiasm. It’s always a strong move to take a cold, hard look at the equipment and how it will fit into your business.
If there are any issues to be resolved, it’s better to bring them to the surface so that they can be properly addressed without impacting your plans.
Sustainability is another issue to be aware of. For the packaging industry, environmental issues come to the fore in the type of packaging material used. Businesses are increasingly looking for plastics, boards and papers that are recyclable, recycled, compostable or biodegradable.
Not all equipment has the ability to operate using materials which do not perform in the same way as conventional, well-tried ones. With an eye on future demand, it’s important when buying machinery to know what materials it can, and can’t, handle.
Lastly, if you’re choosing reconditioned packaging machinery, it’s essential to ensure it’s safe. Sourcing from a reputable supplier will help you to do so.
For a complete guide to packaging machinery, see our comprehensive guide Machinery Explained. For details of packaging equipment and services from Automate UK member companies, search for relevant information in Machinery Finder.