Consider Total Cost of Ownership When Making Capital Purchases
In a previous blog, I urged customers to not lose a dollar by saving a penny. Now I would like explain how to quantify a premium product versus a low cost alternative:
Choosing a vendor for a capital equipment purchase can be a challenging assignment. One must consider the price, the ongoing maintenance costs, the down time to service, the end-product output quality and quantity, and the lifespan of the equipment. All too often when discussing a capital purchase a customer tells me they have been offered a lower priced extrusion plant. When this happens, I remind the customer that they consider ALL the costs of operation and not just the upfront price.
Recently, we started using a Total Cost of Ownership (TCO) tool that allows us to show our customers how much a piece of equipment will really cost. Here are a few considerations when calculating the TCO of a soybean extruder:
- The purchase price
- Capacity of extruder
- Operational Costs and Margin per ton
- Quality of Full Fat Soy (moisture level, digestibility)
- Cost of replacement wear parts per ton
- Downtime for replacing parts in hours
- Estimated life of equipment
With this information, we can compare the Insta-Pro Soybean extruder against any competitor. What we see in almost every scenario is after the end of the first year, the Insta-Pro extruder cost less due to the competitor extruder having increased spare parts and maintenance costs and lost revenue due to the extruder not running. Furthermore, there is a potential loss due to quality. If your full fat soy has high moisture and high levels of urease activity, you will not fetch market price. As an example, if you choose an inferior extruder and are required to sell your full fat soy for 2% under value, that comes out to be $46,200 dollars at the end of year one.
I challenge you to look at the whole picture, to look 10 years down the road and ask yourself if you are happy with your extruder purchase decision. In the case when a customer has chosen an inferior extruder, often after 2 or 3 years we hear from them again, expressing their regret for trying to save a few dollars.
Insta-Pro would love to help you make an informed decision regarding your extruder purchase. We can help you look at the numbers and compare based on the considerations above. Please reach out to your Insta-Pro sales representative for more information.