4 Needs and 1 Task for Equipment Investment!

At some point, acquiring new machinery becomes a necessity for a functioning business. Investments should be considered in light of the following basic needs and at least one task.

1. Need: Regulations and Laws

A. From time to time, there are updates in, for example, workplace safety legislation that may concern old machinery and their safety. This may even force you into investing.

B. Your assessment of future legal changes and safety.

2. Need: Ensuring Production, Key Machines

A. Should you refurbish an old machine or acquire a new one?

- The cost of refurbishment versus the cost of a new machine.

B. Does a new machine bring something that refurbishing cannot achieve?

C. The simplest situation is when you replace an old machine with a similar new one.

3. Need: Securing Your Market

A. New investment for increased efficiency.

-  Cost reduction.

- Production optimization.

- A more flexible way of operating.

B. With a new machine, you can produce more precise and versatile products.

4. Need: Capturing a New Market

A. New products for existing customers.

B. Attracting new customers.

1. Task: Calculate the Payback Period

The purpose of the investment is to, in one way or another, make money for the company or at least secure its position in the market. The payback period should not exceed 5 years; there are exceptions to this "rule" because it's challenging to convert all impacts into monetary terms.

As an example, consider the MULTICOIL thin sheet coil line and the transition from sheets to coils:

1. Material costs.

a.       Thin sheet coils are cheaper per unit than sheet materials.

b.       There is significantly less waste (compared to standard sheets for each job).

2. Labor costs.

a.       Significantly less material handling.

b.       Less production planning; nesting determines the blank size.

c.       Simplified and expedited material ordering.

3. Indirect costs.

a.       Reduced transportation costs.

b.       A decrease in various packaging materials and their handling.

c.       Reduced inventory value, less need for storage space.

4. Difficult-to-calculate costs.

a.       Better material availability since coils are used before sheets.

b.       More flexible and faster production; no lost deals due to delivery time.

c.       Enhanced company image: reliable, modern, efficient, reduced carbon footprint, etc.

d.       With new technology, employee motivation increases (after overcoming resistance to change).

In summary, the purchase of a new machine becomes relevant when one or more of the following needs are met: legal requirements, ensuring production continuity, increasing efficiency, cost savings, or venturing into a new market. When a purchase is imminent, remember to calculate the payback period and profitability.

The undersigned and our company can assist in these matters; please don't hesitate to contact us.

Sami Vornanen

Former sheet metal worker and entrepreneur, currently Sales Manager at Vaski.