Sourcing cheaper foreign food processing and packaging equipment is more expensive than you thought.
Buy It Cheap, pay for it Twice!
Recently I have seen people buying equipment from the Far-East, usually making the decision based on the cost difference between British or European made equipment versus far-east appearing to be unjustifiable., But I think this is a mistaken view.
Why? Well, anything that is cheap is often cheap for a reason, but rather than criticise the foreign kit, lets discuss first the benefits of British and European processing and packaging equipment.
British and European manufactured food and drink equipment is among the best in the world. I say that as someone who has either worked for major equipment manufactures or someone who has bought from them.
Our Swedish, German, Italian etc. and British firms can offer strong residual-value in their equipment. Sounds obvious but the residual value in some of the far-east kit is often non-existent. Residual value isn’t a made-up notion: it is based on the fact that after 10-25+ years’ service, European kit will often be taken back in, updated and uprated and either sent back to the existing customer or, more often, re-marketed as an entry-level machine to a new customer. This is because it was built to last, made from quality materials and designed to be updated. Motors, control systems and user-interfaces all allow for newer, better, faster or automated operation. Often updated equipment is needed for speed, computerised integration or finer control to cope with new barrier materials or finer tolerances allowing different packaging.
Process equipment with more sophisticated processes (such as liquid processing) will need to be managed tightly to reduce interface waste and record processing for technical and accreditation reasons. The speed and accuracy of modern computer-controlled food and drink kit is eye-blurringly clever and often a prerequisite for doing business with major customers and markets.
I used to be a salesperson in food and drink businesses. Nothing impressed the clients of the food and drink businesses I represented more than a factory visit. Showing the quality and sophistication of the processing and packaging equipment we used was an order winner. It spoke volumes about the business commitment to being the best if you could see a well-invested site. Cheap equipment isn’t a great advert for the company ethos.
And who can forget the supply chain issues we faced during the pandemic when containers were in the wrong part of the world and shipping times stretched far onto the horizon, with some businesses waiting more than a year for much-needed equipment to arrive.
Faced with arguments such as these, it isn’t too difficult to make the case of re-shoring or near-shoring the manufacture of food processing and packaging equipment.
So, how do we afford all this expensive British and European processing and packaging equipment? Finance it!
But, it takes a little time and effort to put the business case for specifying and financing the best capital equipment. Good points to persuade financiers include:
Productivity gains. How much quicker, more efficiently, less wasteful in terms of product and energy will the kit be? Can that be quantified as more product produced in the same time and floor space? That efficiency is a direct contribution to overhead recovery and improved margins.
The incremental business that the equipment delivers; this could be new customers through process improvements or pack improvements, or additional volumes by removing capacity constraints for additional sales? This could include processing and packing for others either though own-label or contract/toll processing. Better utilisation means more competitive price points that attracts more sales.
The financials will need to show that the additional throughput covers the finance charges in revenue terms and that the cost of money (interest on the finance) is exceeded by the net margins on the product produced.
There you have it. Buying “cheap” kit might turn out to be more expensive in the long run, difficult to set up, not as flexible for size and product changes and reliant on support from different time zones. It might have no residual value so more expensive to finance, and the more distant the supplier, the greater the chance of supply chain disruption.
Buy It Cheap, pay for it Twice!