Preparing equipment
Like Frain, AEK Packaging and Loeb Equipment dedicate a substantial amount of floor space to refurbishing. These dealers employ
engineers and technicians who prepare the equipment for delivery and recondition it as necessary.
Looking a bit like a trade show, the warehouse floor at Loeb Equipment displays used packaging machines and entire packaging
lines for prospective buyers' inspection. (IMAGE IS COURTESY OF LOEB EQUIPMENT)
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Equipment preparation varies, but typically involves a thorough cleaning; confirmation that mechanical, electrical, and computer
systems are in good working order; and replacement of wear parts, which often are sourced from the original equipment manufacturer.
If necessary, controls are upgraded and change parts crafted. In fact, "We have developed a global network of suppliers for
controls and change parts," reports Christensen.
Value-added services
Machines typically are supplied with complete documentation, including manuals and schematic drawings. Transactions also may
include guarantees, warranties, and right-of-return agreements.
Some dealers provide acceptance testing, setup, and training. Line integration and aftermarket service also can be part of
the vendor's package. However, postsale service typically requires a separate service agreement.
Deciding how to pay for a machine can involve almost as much thought as determining exactly which machine to buy. Options
include cash payment, leasing, and renting. Each choice presents a different degree of flexibility. Likewise, each has advantages
and disadvantages.
Many used packaging machines such as this Pharmacarton Coding System from Nutec Systems (Lawrenceville, NJ) have not seen
extensive operation. (PHOTO IS COURTESY OF AARON COMPANIES)
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Cash payment results in full ownership, but it represents a capital expenditure and requires a capital budget. In most cases,
accounting personnel must track depreciation for several years after the purchase.
Leasing, either directly through the dealer or through a third-party company, spreads payments out during a specific term.
At the end of the term, the equipment is returned or purchased for a price that reflects the lease payments.
Renting does not require a commitment of more than a month or two, therefore it provides the most flexibility. In addition,
rental fees are considered as expenses, so equipment can be purchased without touching the capital budget. Thus, renting is
particularly well-suited to addressing seasonal spikes in demand, product introductions, and contract packaging situations.
"Renting makes it possible to put a product on the market very fast and very economically," explains Christensen, noting that
it also "provides the opportunity to test a machine before you commit." If the new product is not successful, the equipment
can simply be returned. If the product succeeds, the rental can become a purchase. In that case, "we apply part of the rental
[fees] to the purchase price," says Madden of Frain.
Managing surplus assets
Dealers that sell used packaging equipment are always looking to buy late-model systems that have been properly maintained.
"We're probably offered 50 machines per day, but only pursue five to 10," says Christensen.
In addition to purchasing surplus assets directly, many dealers also offer asset-redeployment services. Frain, for example,
consolidates and manages surplus assets using a three-tier process that includes purchasing assets for cash, marketing them
on a consignment basis, and purchasing assets for credit toward a machine or service.
Hallie Forcinio is Pharmaceutical Technology's Packaging Forum editor, 4708 Morningside Drive, Cleveland, OH 44109, tel. 216.351.5824, fax 216.351.5684, editorhal@cs.com.
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