Transcript TCO PMMI PackExpo Talk - Simplex Filler Company

TCO
Dennis Bertolucci
Two Worlds…
• “Sure, we do the analysis…”
• Based on my thirty years in this business,
everyone talks about TCO, but few really look
at it in any true detail.
John Sparra, Sparra Packaging Machinery, Thorndale, PA
What is TCO* ?
•
•
•
•
Tool to analyze new machine or line
Compare existing v new, 2 - suppliers
‘Apples-to-apples’
‘Opportunity costs’
– Lost production, setup, changeover
– Training, operator, maintenance costs
*Total Cost of Ownership
Typical “TCO”
Spoils
Other
First Costs*
Spares
OT
Overhead
Lost
Production
*Costs of acquisition, initial provisioning, less salvage, etc.
More Good Reasons…
1. Justify the investment… don’t want
headache of keeping inferior equipment
running
2. Too many options, narrow down some of
the operating assumptions
3. Vendor/supplier quotes are different…
how to compare “apples-to-apples”
Reasons NOT to do TCO…
“I’ve got all the money I need”
“We’ve standardized on
XYZ…”
“We’ll need a cost-accountant”
“Can’t predict the future!”
Credit: EC Publications' Mad Magazine
Trends
• Relentless drive towards…reliability, accuracy,
speed, simple changeover and operation, package
innovation, just-in-time batch runs and package size
flexibility
• Complex decisions: Manual, semi-auto or fully
automated? Servo or PLC? Rotary or Inline?
Offshore manufacturer or domestic supplier?
• Like autos, aircraft, consumer appliances… these
new technologies have a “learning curve”
VIDEO
TCO
Best Practices
The ‘Right’ Questions
• When do I need it?
• What information will I need?
• Keep it simple
• Don’t put it on the shelf!
When do I need it?
• After you have a handle on the capacity you
need and the specs of the job(s)
• Before you get too far down the road in
negotiations or final selection
• A very good idea to establish up-front with
your supplier(s), anyone who must approve…
what are the most important assumptions
What Information?
• Obvious perhaps… capacity, sizes, materials,
changeover, maintenance schedules, operator skills
• Harder to get… MTBF’s, references to similar
applications, training & support, parts & documentation,
shipping, setup and typical contract terms
• Your production assumptions… how you calculate the $
value of lost-production, interest rates for capital
investments, depreciation schedules, lease-v-buy etc.
Basic assumptions
Line
A
B
C
D
E
Assumption
Cost of Money
Fixed Overhead (OH)
PV of Overhead
New Gross Capacity: (hrs)
New Gross Capacity: (units)
3% escalation
"today's dollars"
hours in a year
hours times line rate
F
G
H
I
K
L
M
N
Less: Sched TO (hrs)
Less: Sched Mtc (hrs)
Less: Unsched Mtc (hrs)
Less: Changeover (hrs)
Net Capacity Available (hrs)
Capacity Utilized (percent)
Net Production (units)
Net Production (dollars)
by labor contract
mtc during time-off
historical MTBF
per schedule
D - (FGHI)
K/D
LxE
M times $/unit
O TOTAL Production
Note
"today's dollars"
Present
Value
Year
1
8%
(100,000)
2
8%
(103,000)
10
8%
(130,477)
TOTAL
(1,146,388)
(755,013)
8760
8760
8760
Planned
production
23652000
23652000
23652000
(2,502)
(2,502)
(2,502)
(120)
(120)
(280)
(550)
(550)
(550)
5,588
5,588
5,428
64%
64%
62%
15087600 15087600 14655600
$ 196,139 $ 196,139 $ 190,523 $ 1,941,557
$1,305,237
Line
TCO Calculation
P First Costs
Q
Equipment Acquisition
R
New Equipment Finance
Equipment Net Salvage
Startup & Engineering
Initial Provisioning
S
T
U
V
W
X
Y
Z
ZZ
LifeCycle Costs
Floorspace Allocation 10%
Operator Labor (3 shifts)
Schedule Mtc & Clean
Training
Insurance & Taxes
Spare Parts
Depreciation (non-cash)
Material Spoil
Downtime (Lost Oppt'y)
OT Labor Costs
TCO TOTAL Cost of Ownership
Net Profit
Note
First Costs
initial cash outlay
(none)
residual less ship
line setup
new fixturing
(150,000)
10,422
(9,000)
(6,000)
10% times C
(75,501)
4.5% escalation
4.5% escalation
in-house yrs 4 out
contract
estimate @mfr's list
assume no tax benefit
test runs
40% of (FGHI)
estimate historical
-
-
22,500
Life Cycle Costs
(443,950)
(53,274)
(12,991)
(9,193)
(48,984)
(3,012)
(303,181)
(31,076)
"today's dollars"
$ (1,135,739)
"today's dollars"
$169,498
10
(55,880)
(6,706)
(6,000)
(1,370)
(7,300)
(453)
(44,535)
(3,912)
10
(58,395)
(7,007)
(2,000)
(1,370)
(7,300)
(453)
(44,535)
(4,088)
15
(80,665)
(9,680)
(1,000)
(1,370)
(7,300)
(440)
(46,781)
(5,647)
(678,961)
(81,475)
(17,000)
(13,700)
(73,000)
(4,481)
(453,281)
(47,527)
Other ‘Tips’
• Consider ‘optimistic’, ‘pessimistic’, most-likely
scenarios
• Ask associates, suppliers, those experienced
for their ‘rule-of-thumb’
• Look at the TCO numbers—when cumulative
annual expenses equal cumulative annual
production—you have ‘payback’
• When things change, consider re-running the
numbers (what spreadsheets are for!)
Q&A …
[email protected]
Simplex Filler Company
640-A Airpark Rd.
Napa, California 94558
800-796-7539
PH: 707-265-6801
FX: 707-265-6868