The Capital Equipment Purchasing Steps to Success

As consumer and brand demands evolve and technology continues to advance, package printers and converters are going to need to find ways to keep up with the increasing pace of the industry. Assessing and purchasing the latest in capital equipment will be essential to ensure businesses are performing at the highest level, but navigating the purchasing process can be a challenge.

On June 6, packagePRINTING hosted "Capital Equipment Purchasing: Are You Overwhelmed?" a webinar sponsored by BOBST, which discussed both the procurement and financing sides of the capital equipment purchasing equation. The first speaker, Lane Burkitt, director of professional services at ISM Services, opened the event with a walkthrough of the procurement process.

To start the journey along the capital equipment acquisition path, Burkitt outlined three essential steps — recognizing the need for capital equipment, specifying the need for capital equipment and searching for potential sources of the equipment.

Burkitt explained that these three steps should occur before a buyer reaches out to a supplier so the purchaser can be familiarized with what exactly he or she needs prior to any contact with potential suppliers.

Another important element of the procurement process, Burkitt said, is understanding the differences between buying based on price versus buying based on cost. In capital equipment purchasing, he explained that buying based on price is rare. Price-based purchasing occurs primarily when timing is limited or if there are several suppliers to choose from.

Cost-based purchasing on the other hand, occurs when large expenditures are in play. This is because with such a substantial buy, the overall total cost of ownership needs to be assessed.

“You’re not sitting down one day and deciding to spend $1.3 million,” Burkitt said. “That’s a decision that’s made over time with lots of discussion among leaders in the business. When you have that kind of time, you should spend some time figuring out what that overall cost is going to be.”

In addition to the essential steps in capital equipment procurement, the webinar covered the financing aspects that package printers should be aware of. Vincent Cuzzo, founding principal of The CLP Group provided an overview of how to prepare to seek financing, how today’s economic environment impacts financing, methods of financing, and the pros and cons of both bank financing and third party or vendor financing.

According to Cuzzo, current economic trends to be aware of include the low unemployment and interest rates. Because these rates are low, Cuzzo explained that short term interest rates and the value of the U.S. dollar are liable to increase. Because of the increased value of the U.S. dollar, Cuzzo stated the import price of equipment will likely decrease.

In terms of financing capital equipment, Cuzzo outlined the four viable methods and the nuances of each. These include:

• Operating Cash Flow
• Working Capital Lines of Credit
• Application Only Financing
• Financial Statement Supported Financing

Finally, he outlined the advantages and disadvantages of bank financing, which tends to be less expensive to obtain, but rarely offers fixed rate financing, and third party or vendor financing, which can be more expensive but can be obtained without the purchaser being impacted by liens or covenants.

To find out what you need to know to make your capital equipment purchasing process stress-free, click here to view the full webinar on-demand.