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Buying and Installing Box Making Equipment Properly
October 4, 2008 By: Mark Arzoumanian Official Board Markets"I'm old enough to say, 'Do what I say and not what I did,'" Dean Mitchell, president, The Mitchell Group, says with a smile. He discussed in detail what needs to go into purchasing corrugated box making equipment at a morning session of TAPPI's Corrugated Packaging Division Conference, held last week in Atlanta. His many years in the industry have given him a wealth of firsthand knowledge about how to buy machinery with skill.
Any integrated (or independent) box maker contemplating a major machinery purchase must preplan the project, he stresses, through analysis, developing details, and getting input from the organization. He recommends a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis.
Strengths include understanding your plant's core competencies and market strengths. Financing, cash flow, and operator skill sets should all be considered as potential weaknesses. Opportunities would be classified as identifying customer and market needs and looking for new customers to increase market share. A competitor matching your (potential) new machine capability, new technology, and a limited market could be considered threats.
Financial analysis is also critical. This involves:
*Determining net present value, which allows you to consider the time value of money;
*Depreciation;
*Payback period analysis;
*Accounting rate of return; and
*Cash flow analysis, which proves you can make the loan payments.
Any box making executive should be well aware of the hidden costs involved in purchasing new equipment. If not considered early in the purchasing process, they can lead to significant dollar overruns. These include:
*Installation;
*Training;
*Maintenance and repair;
*Utilities;
*Taxes; and
*Payroll and benefits for new employees.
Know your plant's layout and product flow before buying that new four-color flexo, Mitchell adds. Staffing (think skill sets), support (as in personnel), inventory (think spare parts and raw materials), and environmental issues (think OSHA or the Environmental Protection Agency) must also be part of the purchasing process.
Once the machine is acquired, vendor support is critical, whether it be through manuals or the Internet. It's also important to establish quantifiable financial, production and sales goals. Once results are gathered, post and discuss them. And always strive for continuous improvements.
Take Full Advantage--
Greg Garbarini, president, Garbarini Corrugated Consulting LLC, Orlando, Fla., told the 70 attendees that they should take advantage of all available personnel sources when installing equipment, including engineering staff, procurement personnel (usually at integrated companies), erectors, and consultants. They must be identified, trained, informed, and held accountable. The key to getting started on an installation is selecting one individual as project manager and then assign key team members. It's also important to have insurance coverage and build in project safety.
Establishing an installation sequence involves:
*Pre-wiring;
*Removal/demolition;
*Building a foundation;
*Optically aligning the equipment;
*Interfacing (this takes the most time);
*Test run;
*Production run; and
*Full production.
Factors that cause variance include poor workmanship, planning, and communication; using old or outdated estimates; changes in the economic environment (think rising energy costs); and seasonal variations.
"Set expectations for [machinery] performance early in the process," he states. "Make goals challenging but attainable."
