Balancing Capital Investment with Long-Term Sustainability Goals
When processors make major capital investments, a lot of questions have to be answered.
Among many others: How does this piece of equipment fit in with our existing production strategy? What else might need to be adapted or modified? What’s the total cost of ownership vs. the upfront cost? How do we make sure that this investment will meet our current and projected needs? How long do we expect it to last? What are the maintenance requirements?
If you look at all of those questions from the perspective of sustainability, they can be summed up in one question: Will this piece of equipment still help us meet our sustainability goals as it gets closer to the end of its life?
It’s a tricky question, and it doesn’t have an easy answer. In fact, figuring out that answer is a big challenge with potentially costly results, because if you end up with the wrong answer, you could find yourself way out of line with your sustainability requirements. Or you might end up replacing a very expensive piece of your production equipment sooner than anticipated.
Although answering the question requires some upfront legwork, it’s not necessarily a hard question. Every processor with requirements for sustainability—or pieces of sustainability, such as energy or water usage—knows how to calculate the different parts of the equation. Putting them all together and getting the right answer can be the challenging part.
“Equipment purchase decisions are often based on their ability to meet very short ROI demands, but limitations on depreciation periods can leave an asset with substantial book value for a product no longer viable,” says Kenneth Gruenhagen, PE, PMP, division manager, SSOE Group. “The equipment must have the ability to be easily repurposed to manufacture another product.”
To get the right answer—and ask the right questions—processors need to break down the “will this machine do what we want for as long as we want” equation, then put it back together once they have the information they need for each of its variables. Tricky, but not necessarily hard, as long as you take an honest look at what your goals are, as well as whether they’re feasible now and in the future.
The decision is not as simple as buying what costs the least right now, says Ryan Bequette, senior project engineer, food and consumer products group, Burns & McDonnell.
“It is very easy to look at initial capital investments and choose the lower-cost option, but if that option requires more downtime to maintain or uses twice the amount of utilities, the owner is going to carry a higher overhead to cover the additional operating costs,” says Bequette.
The challenge with sustainability efforts in food plants is that there’s always a baseline amount of power and water that you’re going to need. You can’t miss regulatory targets to cut down on power or water usage, and you likely won’t be able to really push the envelope with resource conservation strategies that might work in an office building or nonproduction areas of your plant.
That means you have to start by developing realistic, achievable goals for sustainability. Saying “we will cut energy usage by 30 percent” is great, but not if it means you can’t get food up to the kill temperature. The more narrowly and clearly you can define your sustainability goals, the better, because that makes it easier to determine where you can and can’t push harder on energy and water savings.
The starting point should be an in-depth analysis of how the key stakeholders prioritize criteria for equipment, says Bequette. Those criteria include:
- Development of equipment
- Startup and integration
- Ongoing support
- Design of the equipment
Based on the input from stakeholders, you can develop a baseline of your current status.
“What is the current age of the equipment? What are the utility usages? What is the uptime of the equipment? What do my yields look like? What does historical data say about the equipment’s ability to improve or maintain its level?” says Bequette.
When you have that information in hand, you can start to make decisions about how to tackle your sustainability goals.
It might be the case that you need to make a capital investment, or, as Bequette points out, you might be able to make changes in areas such as package design or SOPs to help bring your operation into line with your sustainability goals.
As an example of this, consider dryers. They are major capital investments with long lifespans, and they use tremendous amounts of energy. But Tyson Witte, president, The Witte Company, says that examining the specifics of how you’re drying your product can help you decide whether you need to make a new capital investment or help you refine your requirements to more accurately specify the new equipment you need.
“With continuous operating equipment, any steps that can be taken to make the process more uniform generally allow more efficiency and lower energy consumption,” says Witte. “In the case of continuous dryers, parameters are often set for the worst-case scenario or when the drying load is at its highest. This often leads to over-drying a product and wasted energy. If steps can be taken to reduce process variability, the drying process can be fine-tuned to eliminate over-drying.”
Another element of this initial baseline process is to take a look at the specific application and evaluate whether you can reduce the number of resources needed to perform an operation. Some processes will naturally require multiple pieces of equipment, but in other instances, you may be able to streamline or combine steps to eliminate some equipment, says John Overwine, senior project leader, manufacturing engineering, Hixson Architecture and Engineering.
“For example, some manufacturers use three individual pieces of equipment to perform case erecting, case packing and case sealing operations,” says Overwine. “These operations can be combined into one erector/case packer/sealer, thereby saving floor space, utilities, maintenance, spare parts and lubrication, to name a few.”
Specifying and purchasing
Once you’ve identified the variables, evaluated your processes and decided that you need to make a new capital investment, the next challenges are identifying what specific capabilities you need from equipment, how it’s going to be operated and what that means for its lifespan in your facility.
The question of how it will be operated is more complex than it may seem. Ideally, you’d buy a piece of equipment, install it, train operators and never have to worry about operations again. In reality, that’s a pretty unlikely scenario.
Operations is a huge part of the sustainability puzzle, because equipment is only as efficient as its operation. If operators are staying perfectly in line with what the equipment is supposed to do, then it will hit its sustainability targets. Equipment that is mostly automated will stay pretty close to where you need it to be.
But introducing the human element always creates the potential for operational inefficiencies. Operators may find shortcuts that they weren’t supposed to find, or find other ways to operate the equipment in a less than efficient manner.
Training is a big part of overcoming this, as a lot of operational deviations come from operators not fully understanding what a piece of equipment can and can’t do. Or, if not properly trained on new equipment, operators may use it the same way they used the old piece of equipment. Handing an operator a manual or conducting a quick instructional session probably won’t be good enough, so don’t overlook training to ensure your equipment is operating in the desired manner.
Hand in hand with operations is maintenance, another important consideration when evaluating how much a big capital investment is truly going to cost over its lifespan. Sticking to the maintenance plan and keeping equipment properly running are key to getting the expected life out of it and keeping its use of power, gas or compressed air at expected levels. When new equipment is under consideration, make sure that you not only have a plan in place for preventative and predictive maintenance, but also the budget and staffing needed, says Bequette.
“Too often, processors will prioritize production over maintenance and end up using more raw materials, labor and utilities to produce the same or less product compared to properly running equipment,” he says.
Another element is evaluating what you will need to perform the maintenance. If you replace a 15-year-old conveyor motor with a new one, the maintenance requirements could be drastically different. Newer equipment may require less maintenance, but the maintenance it does require might not be the same as your previous system.
“Does your maintenance staff have the skillsets required to maintain more complex equipment?” says Gruenhagen. “If the company doesn’t make the investment for proper training to support a step in technology, the time required to diagnose and address issues can quickly negate the improved efficiencies the more complex equipment provides.”
In a lot of cases, skilled maintenance technicians are hard to find, which has put the onus on equipment manufacturers to eliminate some maintenance requirements. That doesn’t mean that maintenance isn’t needed, says Antonio deLourdes, product planner of industrial refrigeration, Emerson, but that maintenance and lifespan are becoming considerations in the design process for equipment. As an example, he points out that single-screw compressors are being designed to last longer, with refurbishment and replacement less common.
“Furthermore, with the unfortunate decline of skilled refrigeration technicians in the field, single-screw compressors require significantly less maintenance,” says deLourdes.
Commissioning and flexibility
There are a number of steps that processors can take to ensure that their equipment is operating the way it should for as long as it should. But one of the most important pieces of the puzzle takes place before the equipment even leaves the factory in the first place.
“Manufacturers have begun to evaluate their equipment commissioning process and protocols as sustainability goals focus on maximizing efficiency and reducing waste,” says Overwine. “Commissioning is a systematic process that governs the equipment procurement process from concept to operation.”
Commissioning isn’t a new concept, of course, but as Overwine points out, its focus has shifted as sustainability has become more important for processors. It’s not enough to simply check off the boxes for proper equipment operation without any consideration for other factors.
Although the commissioning process may vary somewhat based on exactly what piece of equipment is involved and what the operating parameters are, Overwine offers the following list of general principles:
- Equipment does not ship from the supplier’s facility until testing has confirmed that the system functions as intended.
- Static and dynamic testing are completed before startup and commissioning runs.
- Startup testing ascertains that system controls integration is debugged for each product and rate.
- Ongoing checks during commissioning runs are made to verify product is being produced at specified rates and meets quality criteria, and that scrap rates are within specified limits.
Another important element of the equipment specification and manufacturing process is flexibility. While equipment has specific uses and operating parameters, those change as product lines change. A piece of process equipment that can only handle one size or shape of a product runs the risk of quickly becoming outdated as processors adapt to their customers’ demands, so equipment capabilities need to be considered in the context of not only what you’re doing right now, but also what you’ll be doing in the future.
“Products are discontinued or are modified; how readily can the equipment be repurposed?” says Gruenhagen. “Package sizes continue to change. Inventory costs continue to drive shorter production runs or build to order. The ease of changeover between products must be considered as it has a large impact on line availability.”
The bottom lines
Major capital investments are exactly that—major. Cost is a primary consideration and always will be. Although processors have been used to the idea that “cost” isn’t just the price tag for quite a while, sustainability and energy efficiency initiatives mean expanding the definition of what cost is and accounting for a number of different factors when it comes time to decide what to buy, how to maintain it, how to operate it and what to expect from it over its lifetime.
Defining all of those variables and using them to make the most informed decision possible are critical for processors, because buying a piece of equipment that doesn’t fit into current or future sustainability requirements is a mistake you can’t afford. So is buying equipment without taking into account how much and what kind of maintenance is required, or without fully understanding what the equipment can or cannot do.
Overall, the decision-making process has become more refined and accurate, because sustainability, or components of it such as energy efficiency and water reduction, has become such a big part of day-to-day operations for processors. But as sustainability initiatives continue to set more aggressive goals, processors have to be able to adapt their thinking to fit not only today’s plans, but also tomorrow’s goals.
“For some time, processors have closely scrutinized major energy users and other utilities, such as water conservation, in the context of reducing costs and being environmentally friendly,” says Gruenhagen. “Today’s social environment pushes corporations to consider their responsibilities in a much broader context.”
For more information:
Kenneth Gruenhagen, SSOE Group, www.ssoe.com
Tyson Witte, The Witte Company, www.witte.com
Antonio deLourdes, Emerson, www.emerson.com
Ryan Bequette, Burns and McDonnell, www.burnsmcd.com
John Overwine, Hixson Architecture & Engineering, www.hixson-inc.com