Baking & Snack - September 2010 - 115
ASSET MANAGEMENT
$
BY DAN MALOVANY
lame it on the economy, tight lending practices, rising commodity prices, a lack of consumer spending,
deep discounting by competitors or the penchant
by retailers and food service chains to pressure their
suppliers to do anything to offer them even lower everyday
prices. It's all part of a massive chain reaction that's making the payback time when it comes to buying equipment a
whole lot quicker compared with just a few years ago.
Granted, "invest to be the best" remains a longstanding philosophy for many companies, but the reality of the
marketplace seems to have created a new benchmark for
return on investment (ROI) in the current capital planning process, according to Bill Zimmerman of Zim's
Consulting, Gresham, OR, a longtime industry veteran
who has bought his share of equipment over the years.
"It's gone from three to five years to two years because
money is so tight," he said. "You've seen what wheat prices are doing. They're just going through the roof right
now. If we didn't just have the bad situation because of
the economy and consumers trading down instead of
trading up, bakers are going to have a tougher time operating with wheat prices going up."
At a time when margin-pinched companies remain totally
focused on the bottom line, two years may be good, but 12
B
115
the
PRiCE
is
Right
When it comes to
replacing equipment, the
ROI game has changed,
and some companies now
play by new rules.
months or less
is even better,
according
to
Gary Swymeler,
vice-president of
engineering, The
Long Co., Chicago, IL.
"If it's anything more than
a 2-year return on investment,
then it's looked at very hard," he noted. "If the payback is less
than two years, it should be a no brainer. When you look at
your ROI and determine that you eliminated breakdowns
and saved your investment in six months on just parts and
downtime, that's the piece of equipment you're going to buy."
ROI or "hurdle rates" can differ significantly, depending
on the company. While the cost of capital is fairly similar
for businesses across the board, financing capital investments to some degree has become more challenging with
the current economic conditions, asserted Rob Burch,
c.o.o., Labriola Baking Co., Alsip, IL "Whether you're a
small private entrepreneur or part of a large corporate organization, capital equipment purchases are being scrutinized
more closely by management, shareholders and investment
bankers," he said. "There's certainly an appetite for reduced
September 2010 / BAKING & SNACK
Baking & Snack - September 2010
Table of Contents for the Digital Edition of Baking & Snack - September 2010
Contents
Baking & Snack - September 2010 - 1
Baking & Snack - September 2010 - 2
Baking & Snack - September 2010 - 3
Baking & Snack - September 2010 - Contents
Baking & Snack - September 2010 - 5
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