What is ROI?Return on investment (ROI) is a ratio between net profit (over a period) and cost of investment (resulting from an investment of some resources at a point in time). A high ROI means the investment's gains compare favorably to its cost. As a performance measure, ROI is used to evaluate the efficiency of an investment or to compare the efficiencies of several different investments. In economic terms, it is one way of relating profits to capital invested.
When purchasing capital equipment, if you're not careful, common mistakes can eat away (and even kill) the machine's return on investment.
This is especially relevant to packaging machine purchases. You are making a rather large investment in equipment that will affect your company's profits for years, even decades, to come. Make that investment count.
So today we're sharing 5 things we see time and time again that consistently eat away at potential profit and efficiency gains when our clients invest in packaging automation. Let's start with the top culprit:
1. Post-purchase redesigns or change orders
We've said it before and we will say it again, one of the main ways we see PACKAGING MACHINE PROJECT costs balloon (and lead times increase) is unexpected configuration changes and redesigns after machine manufacture is underway. These things usually happen because important project details were either ill-defined, undefined, or changed at the last minute.
Most packaging machines are custom built to your unique specifications. Sometimes changes can be accommodated without much time and effort, but once the machine manufacture is underway, consider every change you request to have dollar signs attached to it. If your change orders involve programming, engineering, or reconfiguration of key components, those dollar signs can add up to a substantial cost increase and push out your lead time by weeks or even months. This makes no one happy.
So how do you avoid this? DEFINE IMPORTANT PROJECT DETAILS AT THE START, preferably even before you reach out to a packing machine manufacturer for a proposal. The earlier you have internal discussions and come to a consensus about things like bag sizes and types, required machine speeds, and system configuration, the better.
DOWNLOAD A FREE PACKAGING MACHINE PROJECT PLANNING CHECKLIST >>
2. Not knowing your numbers
One of the best ways to make a packaging machine purchase decision more black-and-white is to reduce it to numbers. Mainly, by calculating machine return on investment (ROI).
Often times it is, but there are certain situations (like when a company's throughput needs aren't high enough or their process is too complicated to automate at a reasonable cost) when purchasing packaging equipment is not a good idea. Machine ROI calculations will tell you all of this.
So where do you start? First, you have to have reliable data about your current packaging process, which means you should be tracking key KPIs. If you're not, start today.
To do some solid capital equipment ROI calculations, here are the data points we recommend tracking at a minimum:
Throughput. How many packages per minute do you produce right now?
Packaging labor costs. How much do you spend on labor costs for your current packaging process? Remember to take into consideration not only wages but the cost of benefits as well.
Waste and scrap. How much money goes down the drain because of quality issues?
To CALCULATE THE ROI OF A POTENTIAL PACKAGING MACHINE PURCHASE, you compare the internal data related to your current packaging process with data you receive from packing machine manufacturers related to their packaging automation solutions.
PLUG YOUR NUMBERS INTO A FREE EQUIPMENT ROI CALCULATOR >>
3. Neglecting to prepare your facility
So your packaging machine is manufactured and ready to be delivered to your location. You're excited. But are you prepared? You may think so, but there might be a few things you haven't thought of.
These are some common things we see when commissioning a new machine at a customer facility that result in additional costs to the client both directly and indirectly:
Not mapping out your entire packaging process. Do you need infeed or outfeed conveyors? Is your product being transported downstream for further processing? Basically, it must be clear where the new packaging system fits in the process and which party is responsible for which parts of it.
Not considering integration with existing equipment. Do you have current packaging equipment that you would like your new system to integrate with? If yes, your packaging machine manufacturer must be aware of this for planning and design purposes.
Not being prepared to transport and hook up the equipment within your facility. Do you have a forklift rated for the weight of the equipment? Do you have a path planned out for moving the equipment from your dock to its new home? Do you have adequate power and air hookups?
Not planning for future upkeep and costs. Your packing machine should need minimal maintenance and wear parts replacement. But that doesn't mean zero. You will need to plan for periodic maintenance and stocking high wear parts at your facility.
DOWNLOAD A FREE PACKAGING AUTOMATION SITE PREP CHECKLIST >>
4. Inadequate staffing or training
Now your new packaging machine is installed, tested, and ready to run. After the packing machine manufacturer's technicians leave, who is going to run and troubleshoot it? Are they technically inclined? If not, can they be trained?
If you have multiple shifts, you must have an adequate number of trained staff on all shifts to operate the equipment efficiently. Modern packaging machines need little human intervention, but when they do, that human must be well-trained. If they're not, machine downtime will be the result, and you will watch your profits decrease in real-time.
If staff is not well-trained...machine downtime will be the result, and you will watch your profits decrease in real-time.
Often a packaging machine manufacturer will offer training as part of their startup and commissioning package. We highly recommend taking advantage of that unless you have a well-trained, experienced workforce.
5. Neglecting machine preventive maintenance
Once packaging equipment is in production at your facility, you must make a plan for preventive maintenance to keep it running smoothly. If you chose a quality machine, maintenance and repairs will be minimal. BUT LIKE A CAR, giving it a check-up a couple of times a year is vital to its longevity and performance.
If you only maintain the machine after it's down, that eats into your production time, which directly affects your profits. Be proactive and make a PREVENTIVE MAINTENANCE PLAN that works for your needs.
Often packaging machine manufacturers will offer COMPREHENSIVE YEARLY OR BI-ANNUAL MAINTENANCE PACKAGES that include a trained technician visiting your facility to audit the equipment and address any small issues before they turn into big ones. Yes, it usually costs extra but can be well worth it for peace of mind and to better plan your maintenance expenses.
LEARN MORE ABOUT MACHINE PREVENTIVE MAINTENANCE
Start maximizing your packing efficiency and ROI