As your dairy business grows, you will necessarily reach a point where you have to decide whether to buy bigger processing and production equipment and if you want to buy used dairy equipment or brand new. This article is supposed to look at the advantages and disadvantages of used and refurbished equipment.
1. Possible Scenario
All the food producers out there will understand the following challenge:
The economic situation is very good, sales are going up rapidly and rather sooner than later we will not be able to meet the rising demand for our product. If we want to keep up with orders, we will have to expand our production capacity. In order to do so we have to buy suitable machines (let us assume that raw material/milk supply is no problem).
After analyzing the risks and opportunities you come to the conclusion that it would be smart to expand capacities in order to further grow the company.
But now another question arises: should you buy used/refurbished equipment or brand new?
The following points shall help you to make a profound decision.
2. Advantages of Used/Refurbished Dairy Equipment
2.1. Market Risk
As of this writing (06.07.2018), the milk price is once again under considerable pressure
and currently, no one knows at which price the next low will be.
Low prices at the supermarket shelf mean lower margins for the farmers and milk processors.
And here we can find an advantage of used and refurbished equipment. In the unfortunate case where milk prices suddenly are dropping drastically, the financial pressure is not too high on your company. The reason is that the price for used and refurbished equipment is rather low and you are free of expensive service contracts that original equipment manufacturers (OEM) usually impose on you when buying a new machine.
Already mentioned in the point above, the price is maybe the major factor why a business should decide for used or refurbished equipment.
Often second hand or refurbished machines can be bought for a fraction of the original machine price, meaning that you can save between 70 – 30 % depending on the machine at hand.
This kind of saving often does not even require any financing and could even be financed from the cash flow.
2.3. Delivery Time
It is often the case that when we discover an opportunity to further grow our business, we need suitable machines immediately or even better yesterday.
Well, ever requested an offer for brand new machines at a major machinery producer?
Then you know that the delivery times of one year or more for new equipment is not uncommon.
This is another big plus for used machines.
Delivery times are very short. Even if the machine you want to buy still has to be refurbished, delivery times are usually not longer than three months, in many cases only up to 6 weeks.
With the used machines you have the possibility to grow your business and earn money ASAP.
2.4. Service Contracts
Everyone loves and wants good service when it comes to machine maintenance. But do you really want to be “forced” into expensive long-term service contracts or choose a reliable partner and change whenever you like?
Buying new machines like for example cheese vats or separators, you will often find yourself signing a long-term service contract which is obligatory for the purchased machine at hand.
This is not the case for used or reconditioned dairy equipment. Businesses like “M&E Trading Weidner” will offer you doing the necessary service on the machines we sell, but we definitely will not urge by means of a contract to stick with us if you do not want to.
2.5 Stable Resale Value/Depreciation
At the moment you get a new machine delivered, 10 % depreciation
at the moment you have finished installation and start-up, another 20 – 30 %
That means at the time your machine has the first operating hour it has lost up to 40% of its original value. That is a shocking number, but the truth.
That is not the case for used equipment. Those machines have already lived through their most depreciating times hence only depreciate very little over time.
So if you decide to resell your machine after it has done the necessary service for you, it is possible to still get good money for it.
3. Disadvantages of Used/Refurbished Dairy Equipment
I think it is obvious that if you buy a used machine like for instance a cream separator
you cannot expect to have a machine that is nearly as durable as a new one. But how about a refurbished or renewed machine?
Even though companies like ours always strive to deliver best quality machines with the highest durability, it is still a fact that not in all cases refurbished or renewed machines can compete with new ones when it comes to durability. Even though it is not unusual that especially renewed or to be more precise remanufactured machines, are as durable as if they were new.
3.2. Term of Warranty
The warranty for a machine reflects the durability of it. Of course, you get the longest warranty for OEM machines.
Buying a used machine “as is” you cannot expect any guarantee at all. Buying “as is” you have to bear the risk that the machine could make problems already after a few months.
For refurbished and remanufactured machines many suppliers will already give you a warranty between 3 to 12 months, depending on the machine and scope of work.
3.3. Risk of Downtimes
Buying used equipment you have to be aware that you take the risk of downtimes early in the life cycle of your machine.
However, in our experience, it is not often that you have downtimes shortly after starting to produce with used equipment. Especially when you let your machine be refurbished or remanufactured you can usually be sure that there won’t be any severe problems in the short and mid-term. But without a doubt, this is another disadvantage compared to OEM machines.
Used dairy equipment comes with many advantages and is highly recommended when you need new solutions immediately or when you are on a tight budget. Without a doubt, the cost advantage is the most enticing upside of used compared to OEM machines.
Furthermore, it makes sense to go with machines from the secondary market if you are building a food start-up or want to test the market with for a new product line before investing in cost-intensive machinery.
From a quality and durability point of view, it is definitely worth thinking about investing in remanufactured or at least refurbished machines. You can save up to 70 % of the purchasing price for a new machine and you have something that is almost as reliable as new.
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