7 Factors You Must Consider in Purchasing Machines and Equipment

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

Check now

In this article:

1. Find the Match Between Production Output and Extra Value

Will the equipment or machine you're about to acquire potentially contribute additional value to your business? Consider how quickly you may recuperate your investment throughout its operational lifetime. While estimating the benefits can be challenging, a good practice is to think through both best-case and worst-case scenarios: What if production gets delayed? What if sales decline? Do you foresee additional operational costs that were not anticipated?

2. Knowledge and Training - How much will it cost?

It’s beneficial if you and your team have experience and knowledge in operating the machinery or equipment under consideration. If that’s not the case, be prepared for added expenses related to training your staff and familiarizing them with the equipment. Failure to understand the specific features of costly machinery may lead to increased expenditures in rectifying issues that arise during operation.

In such situations, it could be wise to seek an objective opinion from an independent consultant (as opposed to the vendor) to gather insights on the necessary steps to optimize operational efficiency with the new machinery.

3. Price and Comparison - Don't Jump on The First Offer (necessarily)

While it’s likely you’ll request multiple quotes from suppliers, opting solely for the cheapest offer may not yield the best results. Similarly, the most expensive option may not necessarily be the best fit either.

Make sure to verify:

• That all essential features are included in each quote you receive.
• That you aren’t paying for qualifications or features that are unnecessary for your operation.

Knowledge remains paramount for making informed decisions in this domain, so invest time in thorough research before committing.

4. Used vs. New Equipment - Not an Obvious Choice

Choosing between used and new equipment has its advantages and disadvantages. The most notable benefit of acquiring used machinery is the reduced cost, which is generally lower than purchasing new. Nevertheless, buying used equipment can sometimes lead to unanticipated additional costs, so it’s vital to thoroughly assess its condition. The seller's documents ought to detail its state, but conducting your own inspection before making a purchase is essential.

For specific types of machinery, such as vehicles and construction tools, always request maintenance records alongside other essential documentation, such as ownership history and warranty details.

Moreover, assess if there are parts requiring imminent replacement, and factor in how this will affect overall costs – including materials, labor, and potential downtime.

Remember, you might eventually sell some machinery, so ensure all documentation and maintenance history is well-organized. An equipment management solution like Itefy could be invaluable for this purpose.

5. Lease vs. Buy - Does Owe or Owning make the most sense?

Leasing machinery retains your capital but can lead to higher long-term costs. However, leasing provides better flexibility and might be the only feasible option for extremely expensive equipment.

Pros:

• Lower upfront costs that may facilitate a quicker increase in production.
• Leasing arrangements allow for rapid upgrades in equipment, particularly for high-tech tools such as servers and aircraft.
• Potential tax deductions.

Cons:

• Higher overall expenses in the long term.
• You do not truly own the equipment; thus, when the leasing term concludes, you might need to purchase it at a higher price than if you had initially bought it.
• Increased operating costs for the company, as you are committed to the entirety of the lease duration.

6. Running Costs vs. Payback - Will it Pay Off?

Depending on the type of machinery you’re considering, ongoing operational costs could significantly impact your decision. In sectors with tight margins, as seen in aviation, the efficiency of machinery can dictate profitability, especially during spikes in oil prices.

Remember that running expenses go beyond fuel or power consumption. Equipment made from lower-grade components may require more frequent repairs. Even if the replacement parts are cheap, the labor for replacement and resulting downtime could lead to significant costs. Investing in high-quality equipment with a solid uptime and reliability track record might result in lower long-term expenses.

7. Availability of Replacement Parts

Ongoing support from suppliers is crucial for costly long-lasting machinery. Opt for a reliable supplier with a proven history of supporting older models with both parts and technical knowledge.

Conclusion

The acquisition of machinery and equipment is not merely about finding, purchasing, and deploying them. To safeguard your time and financial resources, you should thoroughly evaluate all outlined factors for every piece of equipment you intend to buy. A well-considered approach will enhance the likelihood of achieving your initial goals for the machinery you intend to acquire.

As your equipment inventory and workforce usage grow, efficient management becomes imperative: understanding equipment location, operator responsibilities, maintenance oversight, and spare parts accessibility is vital. Implementing an equipment management system paired with a maintenance management system (CMMS) proves essential to:

• Manage and schedule usage to maximize equipment potential and prevent scheduling conflicts.
• Organize regular maintenance schedules.
• Maintain a comprehensive log of equipment usage through tracking systems.
• Keep track of equipment location changes.
• Ensure timely repairs to minimize downtime.

While using a simple spreadsheet is better than doing nothing (you may download our free equipment management spreadsheet template), if you seek a more sophisticated and automated approach, consider a dedicated equipment management system like Itefy. Such systems offer comprehensive features to ensure effective management and control of your equipment.