Total Cost Of Ownership Delivers Best Analysis For Capital Packaging Equipment Purchasing

By Julian Stauffer

By Julian Stauffer, PTI Manager of Packaging Systems

When it comes to purchasing new equipment for a packaging line, many companies first seek to minimize capital costs. Managers are motivated to get the best bang for the buck, and low price is easier to justify than the overall quality of an equipment solution.  In fact, this “bargain” machinery may very quickly increase their company’s production costs.

Many U.S. companies are concerned with limiting capital costs in order to increase short-term profits. When reviewing machinery that is expected to have an expected lifespan of 15 to 20 years, corporate leadership often looks for payback within two years. By limiting machinery costs, they can conserve cash and boost short-term profits. But what happens over the long haul? High operating costs can make that penny-wise packaging line look pound-foolish.

The cost of new packaging machinery can easily be hundreds of thousands – if not millions – of dollars. These machines can be high-value, high-risk investments, which typically involve a number of senior decision makers assessing a wide range of criteria before a purchase decision.  For this reason, several global leaders in the packaging industry are using Total Cost of Ownership (TCO) as the primary justification for enhanced investment in equipment. Using TCO calculations, the senior decision makers can accurately capture the value of buying a higher-quality piece of equipment with a higher cost up front, demonstrating how the investment can allow for the most effective and efficient operation over the life of the machine.