Rental service could be small firms' route to automation

29-Apr-2013 - Last updated on 01-May-2013 at 10:42 GMT

Renting automation kit could enable small firms to cut packaging costs

For firms seeking to reduce labour costs and improve efficiency, packaging automation is a logical step. But with many smaller companies strapped for cash and starved of loans, could equipment rental prove to be the rational route to avoid capital expenditure?

One UK engineering firm thinks so. David Jahn, director of end-of- line equipment maker Brillopak, said: "There is a growing niche of manufacturers where capital is either scarce or in demand for many potential uses."

He explained: "With the economy the way it is, we're not going to be cash-rich for some time to come." But the situation was proving very different for small-to-medium-sized enterprises (SMEs) and larger businesses which, he said, often had no need to borrow. When they did require loans, he added, they were more likely to obtain them, and at very low interest rates.

Can't release the capital

"For SMEs, capital is the commodity they increasingly have to look after most carefully," said Jahn. "They can see the benefits of automation and the payback, but simply can't release the capital."

On this basis, Brillopak has introduced a rental service contract for its Compact C211 robotic palletiser. Importantly, the fixed rental charge includes preventative maintenance and all spares.

There are other suppliers that rent, said Jahn, but not many that are quite so transparent about the total cost of ownership. "We're transferring the risks associated with depreciation from the customer to ourselves," he added.

Rental means that the item does not appear on the customer's balance sheet and, where there is a straight swap with operator costs, it is likely to make a net positive contribution to working capital. Regarding the robotic palletiser, he said: "Over two shifts, this means you'll save money from day one."

Not viable

Historically, firms have spread the cost of capital investment via lease purchase. This remained a good option, Jahn argued, and not enough firms were aware of it. "But for firms that have an 18-month contract with a particular retailer, a three- or four-year payment period on a lease is not viable," he said.

So is this rental option symptomatic of a downturn in demand for packaging equipment? "Actually, overall for businesses offering automation, things are really good just now, not only in the UK but for export, too," said Jahn.