2015 On The Floor

For on the Floor: Capital Purchases — What Do You Want and Why Do You Need It?

Rick Carter | July 10, 2015

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The need to make high-dollar, fixed-asset capital purchases to keep production running and facilities habitable is ongoing in manufacturing. Good economy or bad, strong sales or weak, when key equipment reaches the end of its useful life, replacement or a major upgrade is often the only option. But the dollars involved and approvals needed to spend those dollars can complicate and lengthen capital-purchase processes. One way or another, however, they usually get made, as our Efficient Plant Reader Panelists confirm this month. Here’s a look at some of the important purchases made recently within our group.

Q: What was the most recent capital purchase your organization made, and what was its justification?

“We purchased an RFID system that we use for tracing material and tools. It assists greatly in loss prevention, and is also helpful for employees who seem to forget where they left their tools.”

… Maintenance Coordinator, Mid-Atlantic

Approval to make capital purchases of items such as industrial robots and other expensive equipment typically requires well-researched justification, often supported by input from maintenance.

Approval to make capital purchases of items such as industrial robots and other expensive equipment typically requires well-researched justification, often supported by input from maintenance.

“Our purchase of a new CMMS system is ongoing. We needed it because our current system consists of a couple of spreadsheets and the always reliable word-of-mouth. During my short tenure as the Maintenance Manager (I was previously the Process Engineer), I have been studying new techniques for making our equipment and team more reliable as we, along with most others, are doing more with less. The new CMMS will help schedule our workload more efficiently, assigning the correct personnel to the job, and manage our inventory better, particularly those items we use regularly. It will aid us in recording costs and tracking relevant information, such as cause of the problem, downtime involved, MTTF, MTBF, and other details.”

… Maintenance Manager, South

“We bought a parts washer in January for throughput improvement.”

… Sr. Facilities Engineer, South

“Our latest capital purchase was for more than $200,000, and included new automation controllers, updated instrumentation equipment, and some specialized safety guards. The major justification for it was safety. This new technology keeps our operators’ body parts totally out of the way of the high-speed equipment in operation, and will improve our manufacturing consistency and product quality.”

… Former Chief Maintenance Engineer, now Trainer, West

“We’ve made several new machinery purchases in our plants. The main reason was to keep up with the demands of our customers.”

… Maintenance Leader, Midwest

“We just purchased a bottling machine to fill compressor fluids in smaller packaging. It was purchased for an OEM customer who needed these smaller-sized packages for resale. We made the purchase to expedite packaging quickly and efficiently.”

… Vice President, Midwest

“We recently replaced our reheat loop at a cost of $4.2 million. This was needed to ensure plant reliability and availability.”

… Maintenance Supervisor, Midwest

Q: How would you describe your company’s willingness to make capital purchases and invest in the future?

“As at any large corporation, you must justify the reasons for the purchase and make a good business case as to why it is important. Having a one-year turnaround for an ROI does not hurt [its approval], either.”

… Maintenance Coordinator, Mid-Atlantic

“Ours was a hard sell because a CMMS is basically a soft purchase. There was no hard data on cost-reduction or equipment improvements to justify it, so getting upper management to buy in was a challenge.”

… Maintenance Manager, South

“Our company’s willingness to make these purchases is fair if payback or cost-reduction can be shown.”

… Sr. Facilities Engineer, South

“After the Board of Directors reviewed the acquisition proposal and discussed the benefits of these expenditures, they were very willing to proceed with the purchase.”

… Former Chief Maintenance Engineer, now Trainer, West

“It appears that if our shareholders see a need to upgrade machinery for outdated equipment or see a need to purchase equipment to meet customer needs, they are doing it.”

… Maintenance Leader, Midwest

“Our company is very willing if the volumes and business justify the need.”

… Vice President, Midwest

“The organization has no problem with capital purchases as an investment in the future as long as the return is within 10 years.”

… Maintenance Supervisor, Midwest

Q: What is your maintenance department’s influence on capital purchases and, if necessary, how could this be improved?

“Through reading, trade shows, and research on the Internet, we in Maintenance Services keep our company informed on ways to increase productivity and increase efficiencies through the use of modern technology.”

… Maintenance Coordinator, Mid-Atlantic

“Our maintenance department only makes suggestions. We do not have a big influence on capital purchases. We can recommend that a piece of equipment be replaced or overhauled, but unless we provide good data to back up our claims, it will go by the wayside. Most capital purchases come from above, pre-planned the year before. If the maintenance department was to be included in upper management, this level would have a better idea of what is really going on, what the problem areas are, and what can be done to help relieve some of the issues that affect the floor.”

… Maintenance Manager, South

“All purchase decisions go through our maintenance department, then to the owner for final approvals after a business case is presented, reviewed, and justified.”

… Vice President, Midwest

“The maintenance department and engineering department are the two top drivers of capital purchases. For those who are having difficulty, it is very important to properly communicate your needs and justification. Learn the language of business and finance.”

… Maintenance Supervisor, Midwest

About the EP Reader Panel

The Efficient Plant Reader Panel includes approximately 100 working industrial-maintenance practitioners and consultants who have volunteered to answer monthly questions prepared by our editorial staff. Panelist identities are not revealed, and their responses are not necessarily projectable. The Panel welcomes new members. Have your comments and observations included in this column by joining the EP Reader Panel. To be considered, email your name and contact information to rcarter@efficientplantmag.com with “Reader Panel” in the subject line. All panelists are automatically included in an annual cash-prize drawing after one year of active participation.

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ABOUT THE AUTHOR

Rick Carter

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