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Week of 8 January 2024: Beware the Package Deal

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Back when I started in the industry, one bought everything for their new machine, printing press, or flexofolder/gluer piecemeal. Yes, there was a primary machinery supplier, but the capital project team and the project engineers bought everything else separately and integrated it all into one concomitant system.

Due to growth of the industry, project teams became less experienced, and the system fell apart. Startup dates and startup curves were missed because of missing but vital components. Major machine suppliers had ready excuses for not meeting performance guarantees and there was a lot of finger pointing.

Owners started asking major equipment suppliers to provide complete systems and guarantee the package as a whole. Equipment suppliers were reluctant to do this at the beginning, but soon turned this into an opportunity. The next thing you know, the equipment suppliers developed the attitude that "if you don't buy everything from us, we won't guarantee it."

This entire evolution has happened in my career.

And it has been overdone.

The major equipment suppliers are good, even excellent, at their primary offering. Sometimes the other components they demand be included are not up to the same standard as their primary offering. I have worked on 22 new or significant rebuild projects in the last 32 years, and I cannot count the number of times owners have had to call in specialists after the project completion to optimize certain subsystems.

How else can one explain the many seasoned specialists making a good living in our industry fixing that which was supposed to be great to start with? I can easily count at least a dozen such specialists that I know personally.

So, what to do?

In your packaged negotiation phase, you must not spend your engineering examination time based on the capex costs of the equipment and subsystems, but on the operating costs potentials of the equipment and subsystems. This means your project team will likely need the input of seasoned operators and managers of select subsystems.

Another way to think of this is to not solely focus on the capital costs, but make sure you optimize the operating costs of the subsystems as well. This is a different set of skills than what the normal project team may have. In fact, you may just want to bring in one or more of those seasoned specialists I mentioned to sit alongside your project team as you specify your system. We all know that matters are less expensive when we redesign them in concept, not in steel.

Be safe and we will talk next week.



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