Unlocking Business Efficiency within the European Food and Drink Industry through Proactive Asset Management
In this article, Ben Potenza, VP Marketing at EquipNet Inc., the company operating the world’s leading specialist marketplace for used manufacturing and production equipment, takes a look at how European food and drink manufacturers can reap the benefits of buying and selling surplus and idle packaging equipment.
As featured in food Marketing & Technology, December 2016
The second-hand machinery market
The global packaging industry is growing year on year. Within this market, the European food and drink packaging industry is projected to grow by 3% per annum to 953 billion packages by 20201. The constant release of new food and drink products means that more packaging is required and is often needed to protect products or reinforce a brand. A further use for packaging is for its visual appeal to customers in a retail environment.
Additional reasons for the rise in the European food and drink packaging industry include the continued need for a variety of pack sizes (both larger and smaller), as well as packaging that is easily recyclable and includes clear information; both of these factors appeal to customers. These aspects will therefore have a major influence on the packaging production process.
A common way to purchase production assets, including packaging equipment, whilst keeping costs low, is to utilise the second-hand market, including equipment dealers and auction houses. This is also popular with sellers who no longer have use for their production assets and are looking to recoup on their original investment. The problem with many second-hand auctions, however, is that often much of the equipment is not valued correctly. Buyers could, therefore, be paying over the odds, or sellers not recouping the full value of an instrument. Furthermore, it is common for companies with multiple manufacturing facilities to sell surplus equipment on the second-hand market without ascertaining whether these instruments could be redeployed to other sites within the business.
In recent years however, forward-thinking businesses have been keen to better manage their idle and surplus equipment. New companies on the second-hand market providing surplus asset management solutions, such as EquipNet, have emerged as leaders in this field. Relocating assets to a different facility or selling equipment that has fallen out of use through a surplus asset management company can deliver a significant return on the original investment of an instrument, freeing up capital. The proactive asset management solution has therefore emerged as key for companies within the European food and drink industry.
A dynamic value control model
Businesses looking to obtain returns from their surplus assets need time and knowledge from industry experts. However, many of these companies do not have this. Execution of an asset management strategy can therefore be implemented through a partnership between the company and a specialist provider.
Asset management experts can provide useful information, relating to budgets, specifications and risk mitigation (e.g. how reputable a supplier is) to clients. Furthermore, industry experts can help buyers with possible purchases, and obtaining any existing warranties, as well as provide follow-up support to the customer, helping the process remain as smooth and efficient as possible.
EquipNet provides a surplus asset management solution for both sellers and buyers. This is illustrated in the EquipNet ‘Value Control Model’ (Figure 1). The value control module, based on time, can be customized using a central tracking platform that provides communication and workflow tools and ensures the exposure of assets throughout the business. Various disposition channels which include redeployment, negotiated sales with managed pricing through an online market and competitive auction events can also be used. Clearance, disposal and scrap programs, customized specifically for each individual company are also potential options.
In order to redeploy equipment and keep track of surplus assets, a partner should possess a software platform to list all assets in a company. These programmes allow tracking of all assets belonging to a business in various locations worldwide.
EquipNet’s ‘Value Control Model’ shows how redeployment, negotiated sales with managed pricing through an online marketplace, competitive auction events and clearance programs fit together to deliver a consolidated service that ensures a ‘seller’ company achieves maximum return and at the same time sees equipment come into the channels that are used by a ‘buying’ company. In many cases, a business is both a seller and a buyer at different times.
A seller’s perspective
Often redeployment cannot be achieved unless a central tracking platform is installed in all company locations. This software will allow users to post, track, identify and internally redeploy equipment that is not being used in its current location, before deciding whether an external sale or the purchase of a new piece of equipment is necessary. A great example of a tracking platform used in this area is EquipNet’s Asset Redeployment Management System (ARMS™) platform. This program features workflow management and various access levels for employees across a business, including plant managers and executives. ARMS’s search functionality and specifications listing provides information on the equipment the company owns and where it is located.
If redeployment is not possible following the use of a tracking platform, then the company should look to achieve the maximum resale price. An auction is a reliable way to achieve this goal and also allows buyers to enhance their own library of packaging equipment. However, negotiating the auction process – whether buying or selling – is difficult, and success depends on many factors. An asset management partner can advise on the correct approach for each individual customer; and using a company with specific industry experience and a solid reputation is crucial to success.
If assets have little value and redeployment or resale is not possible, clearance by donations, scrap and environmental recycling are the best option. Sometimes the scrap value of idle equipment can generate the highest return. EquipNet often advises clients in this area.
A buyer’s perspective
With new packaging instruments constantly introduced across the food and drink sector, the examination of these machines can often show evolution rather than revolution. Therefore, although designs and materials can change, the manufacturing processes for packaging often remain the same. Older machinery can consequently often be adapted and re-used elsewhere. This eliminates the cost of disposing of equipment that can still be of use, or purchasing new replacements.
Buyer companies therefore often invest in good second-hand equipment, which helps improve processes. Maintaining a low cost-base is important for companies and purchasing second-hand equipment allows them to keep products competitively priced whilst improving services. An asset management partner can inform customers of a relevant auction and help them set up for the bidding. Once an instrument is purchased all that needs to be arranged is collection and delivery.
As the European food and drink packaging industry grows, businesses are looking to take advantage whilst keeping costs low. Many have turned towards the second-hand equipment industry to both buy and sell packaging machinery. Through the use of a reliable asset management partner, businesses can ensure that idle equipment is dealt with, either being redeployed or sold, allowing a seller to recoup the maximum amount of their original investment. Buyers are also able to obtain high quality products for a fair price. An asset management partner can therefore provide the best possible solutions for both buyers and sellers, whilst simplifying the process considerably.
1. Smithers Pira - http://www.smitherspira.com/industry-market-reports/packaging/end-use-markets/european-food-and-drink-packaging-to-2020