In every bakery or snack facility, the investment in capital equipment eventually becomes a major consideration. This is true for both primary and support equipment that will be purchased to ensure the effective, safe operation of the production line. 

There are many more aspects, beyond the initial capital commitment, that are required to completely evaluate any equipment investment. These include training, energy usage, spare parts, sanitation requirements, materials costs and operator staffing. When these are taken into consideration, then the business leadership has made a full total cost of ownership (TCO) determination.

TCO is an understanding of what a business invests over the life of the equipment. The initial purchase is only a percentage of the total cost and most likely less than one-third of the TCO. Thus, using a robust process, like the OpX Leadership Network’s TCO best practices, can be an essential guide to making the most informed decision. Convened by PMMI, the OpX Leadership Network brings together experts from around the industry and provides networking and tools to facilitate communication between suppliers and end users. 

Imagine, for example, a project where the company receives two proposals. The first proposal has a higher initial purchase price, perhaps 15% more than the second one. With only an initial equipment price consideration, the decision is clear. However, a very different decision could emerge using TCO, as the business owner will evaluate many additional factors and operational costs. 

Calculating TCO, total cost of ownership, PMMI

For example, in the first system with the higher purchase price, think about the TCO impact if the first 24 months of service are included at no charge. Two years of free service may significantly reduce the initial purchase price differential. The business leadership also receives professional service assurance and some operator updates during these first two years.

With turnover, a change in the workforce can impact the efficient and proper operation of the machine.  Now, the training provided by the OEM has a critical and very relevant impact to the overall equipment purchase. 

Utility costs over the life of the machine also impact the total cost. For example, the first machine uses a certain amount of compressed air and power for various functions. For this example, the second machine under consideration needs 10% less compressed air and power. Now we have an even more complex decision. Recognizing that utility costs do accumulate during the entire operation of the machine, a 10% reduction may influence the total cost dramatically. 

When PMMI and the OpX Leadership Network released the TCO guide, it represented an important and beneficial approach to evaluating all aspects of the total cost. With the updated user guide for the CPG industry, the OpX Leadership Network is providing lessons learned and leadership guidance for the whole of this best practice. Some improvements include information on remote access, cleaning and sanitizing and information on training. There can be many examples; this touches on only a few of them.  

The information bakers need to consider is much more than just the initial equipment price. Use the information in the TCO user guide for the CPG industry available on to assist in making this decision.