How to Know When Replacing Your Equipment Pays for Itself

When a certain piece of equipment starts getting a little too much attention from the maintenance team, it’s time to ask yourself the question, “Repair or replace?” 

While repairing equipment to avoid making a huge investment sounds good for a little while, there comes a point where you’re investing more into dying equipment than it’s worth. How do you know when replacing your equipment will actually be the better decision for your plant’s budget?

Here are some insights from our maintenance experts about identifying problem equipment early and knowing when it’s time to make a change for the better. 

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How to Identify End-of-Life Equipment?

Workplace surprises often aren’t the good kind. Learning that your equipment has run its course isn’t great news, but it’s much better to know months in advance rather than ten minutes after production lines are down. 

Most of your critical equipment should be tracked, so your plant can be notified of potential issues. Your maintenance team should be able to inspect your equipment without taking it offline to determine if the equipment is nearing the end of its life. 

When you have this information in advance, your plant can come up with a plan to repair or replace the equipment without suffering downtime or loss of production. 

Determining the Value of Replacement vs. Repair 

Purchasing new industrial equipment is an important business decision. A vital part of that decision is how much benefit your company will realize from the investment. 

Two things to consider when considering new equipment are the Return on Investment (ROI) and Payback Period (PBP). 

What is Your Return on Investment?

The first step is determining the cost of the new equipment. When calculating the expenses, there’s more to consider than just the equipment itself. Be sure to include the cost of:

  • Shipping, duties (if applicable), and taxes
  • Installation and training
  • Operating expenses, including utilities and supplies (ex. chemicals)
  • Inspections and maintenance
  • Debt servicing costs

But you should also consider the benefits! Newer equipment can reduce energy costs, labor costs and even save space if the new equipment is less bulky. 

Several years ago, we did a furnace fan redesign project for one of our clients. Upgrading four fans reduced the plant’s operating cost by $1.5 million/year and reduced associated carbon emission by over 34,000 tons/year. While the old fan design operated at a 15% efficiency, the new fans operated at a 75% efficiency rate or higher. 

Although this product was a redesign and not a complete replacement, the plant saw significant energy and cost savings within days of the upgrade! 

Payback Period

If your equipment is nearing the end of its useful life, newer equipment will eventually pay for itself. But how long will it take for you to pay off the equipment? PBP is calculated by dividing the investment cost by the annual cash flow, which is the amount of cash the equipment is expected to generate for your plant each year.

But just like with your return on investment, there are other factors to consider. Is your maintenance team spending a third of their week working on this one piece of equipment? Do minor production delays cause workplace frustrations for your employees? How much could you save in energy and production costs with new equipment?

Your ideal payback period will depend on the type of equipment and your industry. Still, a payback period of five years or less will usually signal that the new equipment would be a valuable investment for your plant. 

Redesigning Your Equipment for Increased Efficiency 

If you don’t need to invest in a replacement just yet, there are still ways you can get more out of your equipment. Like with the furnace fan redesign we mentioned above, our maintenance specialists can do equipment assessments on-site or contact your rep and ask about our “Inspect, Advise & Quote” program. We can determine if it needs repair and to what extent or quote out a replacement. For many types of equipment, we can design a rebuild that will give it a longer life. 

Learn more about our preventative maintenance services!
While repairs are excellent when possible, knowing when replacing your equipment will quickly pay for itself is essential. Your plant will benefit from increased efficiency, energy savings, reduced maintenance costs, and more. To request an equipment assessment or repair, or get a product quote, contact us today!