Ben Potenza, vp marketing at EquipNet Inc., a global online marketplace for used manufacturing and production equipment, offers advice for buyers and sellers of second-hand machinery.
What are the drivers behind the current surge in demand for second-hand manufacturing and packaging equipment?
Potenza: The global economic downturn has had ramifications that endure today, and while the North American industry as a whole rallied strongly, ensuring business growth is backed up by operational efficiencies and prudent investment remains a priority for most organizations.
The United States, Canada and Mexico maintained their dominant position in the global packaging market during this challenging period. The increasing consumption of packaged goods across a range of consumer areas in these geographies continues to provide a major growth opportunity for the North American packaging market, which is predicted to rise to $186 billion by 2017 (1).
A number of key social and market trends have also had a major impact on developments in packaging in North America over recent years. The increase in smaller households has led to an accompanying rise in demand for smaller pack sizes. Continuing consumer demand for convenience has driven packaging developments in the food and drink sector, while the growing number of people interested in health and beauty products has led to packaging developments in the cosmetics and toiletries sector. Alongside this, growing sustainability concerns continue to drive manufacturers to reduce their environmental impact, and minimizing waste ranks high on the global packaging industry’s agenda.
Amidst these changes, businesses in this sector are now facing increasing competition from emerging economies and the threat of declining market share, with Asia predicted to represent over 40% of global packaging demand by 2018 (2). This puts increasing pressure on North American packaging firms to grow, while controlling expenditure on new manufacturing equipment in the face of the ever-changing demand for new packaging developments.
Businesses of all shapes and sizes—from cutting-edge research companies and burgeoning SMEs, to multi-national, multi-facility brand giants—are now recognizing the benefits and reaping the financial rewards of buying second-hand equipment, and selling or redeploying their own under-used equipment.
Figure 1: EquipNet’s ‘Value Control Model’ shows how redeployment, negotiated sales with managed pricing through an on-line 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.
Based on your years of experience in this market, what’s been developing in this field more recently?
Potenza: The heady pace of new product development (NPD) in consumer goods is changing the face of production lines on an almost daily basis. Manufacturing processes are constantly evolving as producers vie for consumer attention and spend in an increasingly busy marketplace. Packaging plays a vital role in the supply chain, maintaining product quality, attracting buyers at point of purchase, informing consumers and enhancing their product experience. Alongside the use of new materials and components in the products themselves, developments in packaging production are driving a similar transformation.
As new product lines and their associated packaging are launched and old ones adapted or replaced, or as companies merge, relocate and open new facilities, equipment can fall out of use. With the fast pace of NPD, it is not surprising that millions of dollars are now tied up in manufacturing equipment. Redesign of packaging and use of new materials for marketing and waste reduction purposes can all too easily lead to machinery being side-lined. Importantly, industry surveys suggest that an average of around 10% of a company’s asset base is lying idle, and that most do not have good visibility of these underutilized assets. This illustrates the size of opportunity for a proactive approach to asset management.
The rise of the internet has seen the birth of various websites to meet this growing demand for buying and selling used equipment. However, with many sites simply providing an online portal for buyers to dispose of unwanted items to the highest bidder, few of these add any value to what is often seen as a purely financial transaction. The human touch – which brings with it industry knowledge, expert advice and guidance to both buyer and seller – is sadly lacking.
Best practice in proactive asset management has been developing over the last decade. Specialist service companies staffed by industry experts and proven project management professionals have emerged to become leaders in this new field. They offer an approach and services that are significantly different from the ‘traditional equipment dealer or auctioneer’. As one of the preeminent vendors in this field, EquipNet provides a holistic approach to surplus asset management that balances the needs of both sellers and buyers. This is effectively illustrated using its ‘Value Control Model’ (above).
How have buyers found the purchase and use of second-hand equipment?
Potenza: Terry Geck is founder of Florida-based Stage Coach Sauces LLC, which specializes in bottling pourable food products. The company has been investing in second-hand packaging equipment (Figure 2) in order to upgrade the processes at its facility, increasing throughput by debottlenecking the packaging lines.
“The savings that can be made by investing in used equipment are significant - as much as 20 to 70 percent,” says Geck. “Re-using equipment can transform the economics of a re-tooling or upgrading project, but you need a trustworthy partner to source good kit. They need to know the market and the machinery inside out, and be able to set a deal at the right price for both the seller and buyer.”
“My biggest concern is that you will buy junk. Some of the equipment I have bought has been in the region of $50,000 - a significant sum. So establishing a quality supplier relationship is critical.”
“EquipNet was recommended to me by other companies and their professionalism and quality is now so valuable to us. They have been very good at researching any guarantees available from the vendor and in transferring them through to us. All the equipment we’ve purchased from EquipNet has been of really high quality and worked reliably.”
Next: Advice for machinery sellers and final thoughts