7 factors when Acquiring Equipment & Machines for your Business

Having the right equipment and machinery can make the difference between profit or loss in your company. Here are 7 key factors you should consider before acquiring.

Production output

Production output and extra value

Will the equipment or machine you're about to get, potentially give extra value to the company? How quick will you earn back what you will be spending during its lifetime? Although it can be difficult to calculate the benefits, a rule of thumb is to consider both best case and worst case scenarios; What if production idles. What if sales stall. What if there will be additional running costs you didn't consider.

 

Learning how to use new equipment

Knowledge & Training

It's an advantage if you and your staff know and have experience in operating that exact machinery or equipment you consider to obtain. If not, there may be additional costs related to just getting to know the equipment and how to operate it. Another danger of not knowning the exact properties and characteristics of new, expensive machinery is that you might end up having to spend even more resources just to make it work the way you need it to.

In such cases it might be a good investment to ask for a second, honest opinion from an independent consultant (not the seller) and get the insights you need, in order to decide if or what it will take to get the machinery to work for you.

Price comparison

Price & Comparison

You will probably collect a few offers from different suppliers, but it might not be the smartest idea to just go for the cheapest deal. Or the most expensive for that matter.

Make sure to check:

  • That all the features you need are present in all the offers.
  • That you don't end up paying a lot for features you really don't need.

Again, knowledge is key to success also in this area, so make sure to take your time and do the research properly up-front.

Product comparison

Used vs. new equipment

Buying used versus new equipment and machinery has both some pros and cons. The main benefit of buying used is obviously price, which is usually much lower than buying the same thing new. However, buying used can still end up being more costly, so make sure to check its condition properly. The sellers documents should include a condition description, but you should always perform an inspection yourself before buying.

For certain machineries, like vehicles, construction machines, production machines etc., maintenance history should be provided as well, along with other documentation like owner history, warranty information etc.

You should also figure out if there are parts that will have to be replaced soon, and how that will inflict the total cost - both in material expenses, manpower and downtime.

PS! You're probably going to sell some of your machinery sooner or later too, so make sure to have all documentaton and maintenance history tidy and collected in one place. An equipment management solution like Itefy might become useful for this purpose.

Leasing agreement

Lease vs. buy

Leasing equipment, machinery and tools preserves capital, but might be more costly in total. On the other hand, it gives more flexibility. And in some cases, for instance when it comes to very expensive equipment, it's the only option.

Pros:

  • Lower initial expense, which might give you the opportunity to step up production more quickly.
  • Leasing agreements may enable rapid equipment upgrades, which can be crucial when it comes to high-tech equipment like servers, aircrafts etc.
  • Tax deductions.

Cons:

  • It will cost you more in the long run.
  • You don't really own the equipment. So even after having spent lots of money on it and the leasing period is over, you either have to buy it (ending up having spent more than it would cost by purchasing it in the first place), or return it.
  • Higher company operating costs, because you are obligated to pay for the entire leasing agreement time.

Aircraft running cost

Running costs

Depending on what kind of equipment or machinery you're getting, the running cost might be a big factor. In industries with small margins, like in aviation, the fuel efficiency of the fleet can mean the difference between make or break, especially in times when oil prices are high.

However, running costs include more than just fuel or power efficiency. Equipment built with cheaper parts and materials might have to be fixed more often. And even if replacement components itself might not be very expensive, the manpower required to perform the replacements, and the downtime, may cause high expenses.

Considering acquiring more expensive equipment and machinery with a good track record then it comes to uptime and reliability, may cost less in the long run.

Replacement parts

Availability of Replacement Parts

Long-term support from the supplier is critical when it comes to expensive machinery that is ment to last for years or maybe decades. Consider selecting a solid supplier that has been in the market for a long time, and that has a good track record of supporting older models with both parts and knowledge.

 

Published | By Morten TangerĂ¥s