Baking & Snack - November 2020 - 93

OPERATIONS

CONSIDERING

Calculating TCO

PMMI's OpX Leadership
network's Total Cost of
Ownership guide helps any
operation account for the
myriad variables at play.

by Tom Egan, PMMI
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.
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.

Calculating total
cost of ownership is
critical when thinking
of purchasing new
equipment or upgrading existing machines.
√ā¬©fotostudiocolor24 - stock.
adobe.com

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