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jul. 06, 2022

How to Calculate Industrial Potato Processing Equipment Payback and ROI

High-quality tailor-made industrial potato processing equipment is designed to last for decades and slice dollars off your running costs every day. As capital investments go, however, it’s no small

High-quality tailor-made industrial potato processing equipment is designed to last for decades and slice dollars off your running costs every day. As capital investments go, however, it’s no small potatoes, so accurate upfront calculations of return on investment (ROI) and payback calculations are crucial.

Adding or upgrading machinery is always a big step. New equipment promises improved yields and efficiency, higher quality, and reduced labor and maintenance costs, but knowing how much to invest, and when you’ll start to see bottom-line gains, is key.

Let’s look at what goes into a good ROI decision.

Making Smart ROI Decisions

Whether you’re a small processor stepping up your capacity or a major player looking to maintain yields and minimize waste, now is the time to look at your whole process and decide where your investment is best spent.

Equipment Total Cost of Ownership

What is the total cost of your planned investment and where is the money really going? Take a look at the total cost of ownership over time. This includes:

  • The machine sticker price
  • Additional accessories and customizations
  • Freight and installation
  • Ongoing technical service costs
  • Aftermarket parts and maintenance

Current Performance and Costs

Now take a good look at what your current setup is already costing you. This includes:

  • Labor—Remember this is a long-term decision, so try to look at your employment and hiring needs over the same period, including wages, training, benefits, and insurance.
  • Process—What is your current way of working actually costing you? Are you buying pre-processed products or ordering in smaller quantities to meet equipment constraints?  Are there existing integration problems? What about inputs like water and power?
  • Rework/Giveaway Cost—How much are you losing to improperly processed products and scraps. How much is it costing you in time and money to work around these issues? Are you struggling to meet customer specs or deliver orders on time?
  • Maintenance—How much is it costing you to keep your current equipment running?

Uncover Opportunities

Now consider how new industrial potato processing equipment could help you increase production and access new business opportunities, through, for instance:

  • Higher capacity—Take your business to the next level with a higher throughput
  • Improved quality—Trusted equipment from one of the oldest manufacturers in potato processing which helps you get consistent product each and every time
  • New products—Access new markets by adding finish peeling, polishing, or hydrocutting (among others)
  • Better integration—Modern equipment combines washing, scrubbing, and peeling
  • Lower labor costs—Reduced handling and supervisory needs
  • Less downtime—Reduced cleaning and maintenance

Vanmark's industrial potato processing equipment peels potatoes perfectly

Get a Handle on Your Manufacturer

Do your homework on the reputation and service levels offered by processing equipment manufacturers. For instance, can they:

  • Understand and meet your exact needs?
  • Provide equipment for exactly what you need?
  • Support their equipment, even decades into the future?
  • Provide manuals, guides, and additional training resources?
  • Ship the right parts to you quickly? 

Get the Specs

Now it’s time to kick the tires on what your manufacturer offers in terms of potato processing equipment. Find out about:

  • Production—What capacity matches your needs, now and in the future?
  • Customization—How can the equipment be built to suit your needs?
  • Functionality—Does the equipment combine previously separate processes?
  • Integration—Will the equipment take more or less line space? Will it integrate with your existing line or will you need to build additional infrastructure?
  • Maintenance and sanitation—How often does the equipment need to be cleaned and maintained? Are special tools and training required?

Crunch the Numbers

The answers to these questions will help you build up a good picture of the likely cost of investment now and in the future. The more numbers you can plug into your calculations, the more accurate your final estimation will be.

Happy Returns?

The standard formula for calculating ROI is:

 ROI - (EXPECTED EXTRA PROFIT /TOTAL COST OF INVESTMENT) x100

This will tell you how much extra your investment will add to your bottom line over the particular period for which you calculate earnings.

Payback Time?

The standard formula for calculating the break-even payback period for your investment is:

PAYBACK PERIOD = INITIAL INVESTMENT/ADDITIONAL ANNUAL CASH FLOW

This will tell you how long it will take to absorb the costs of your investment in new equipment.

Decision Time

With hard numbers in hand, you will be well placed to answer tough questions about your planned investments, including:

  • How will the new equipment affect profitability?
  • How soon will the new equipment pay for itself?
  • Is it the right time to replace or upgrade your equipment? 
  • Is it worth investing now to access potential new opportunities?

Investing in industrial potato processing equipment is, however, a long-term commitment. Working with a well-established industry partner will help ensure your high initial investment will continue to yield results for decades to come.

Vanmark Industrial Potato Processing Equipment

Vanmark's industrial potato processing equipment in action peeling potatoes

Vanmark produces durable custom-built industrial equipment for small producers and the world’s biggest potato processors. Our equipment is the industry gold standard for combination peeler/scrubber/washer machines, specialized cutters, and storage and transferring equipment.

At Vanmark, we offer:

  • Integrated lines for your key processes — from peeling to hydrocutting and everything in between
  • Consistent results with maximum yield
  • Reduced waste and water usage
  • Close relationship with industry OEMs, and
  • Full service for the long life of our equipment.

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