As a used equipment dealer, Federal Equipment Company’s business relies on having an inventory of equipment to sell to manufacturers who need affordable and flexible options for their manufacturing equipment. In order for us to have used equipment to sell, someone must buy it new, use it (or not) and then sell it to us if it becomes surplus or idle equipment.
Selling or disposing of surplus and unused manufacturing and packaging equipment can provide cash to your business from otherwise idled “assets.” That cash can be used for operations or new capital projects. Continued storage of that equipment costs your company money. Selling idled equipment can also generate significant cost savings opportunities for your business.
Here are five cost saving opportunities beyond cash generation that can be obtained by selling your excess capital equipment.
1) The cost of the space
All of your space, whether external storage space or internal manufacturing space has a cost that can be determined. Evaluate your equipment storage space and determine what you can save by eliminating that equipment. Can you eliminate rent or lease payments for storage space? Is the equipment taking up valuable manufacturing space that can be used by operations to make more product? Is the equipment occupying valuable warehouse space needed for inbound materials and finished goods? All of these costs can be saved by eliminating unused equipment.
2) Financial and physical depreciation expenses
Depreciation expense assumes that the depreciating asset is being used to generate income. Idle assets burden cost center managers with an unnecessarily high expense ratio while the asset is not being used to generate income. Eliminating surplus and idle equipment eliminates the depreciation costs and reflects true operational costs and performance.
3) Maintenance, Repair and Overhaul (MRO) Costs
Equipment requires maintenance to keep it operational. Maintenance requires labor and materials. Someone in the maintenance staff needs to be familiar with how to service the equipment while it remains in inventory or perhaps the equipment has a service contract that is renewed on a regular basis. Materials, consumables and spare parts required to service idle equipment may occupy shelf space in the MRO stockroom. Budgets may be inflated with unnecessary maintenance hours and materials for equipment that is no longer being used. Evaluate parts, materials, service contracts and hours attributed to surplus equipment and identify what can be eliminated.
4) Insurance Costs & Taxes
Removing equipment from your asset list can reduce insurance costs and lead to tax savings. Check with your property insurance policies to see what equipment is listed and what can be removed after you dispose of that unused equipment.
In many jurisdictions, property taxes are paid on equipment. If equipment is no longer in your possession, your property tax may be reduced.
5) Avoid new purchases
Idle equipment in one area of the plant may be needed somewhere else in the plant or somewhere else in your manufacturing network. Before a decision is made to sell equipment, make sure that no one else within the company is looking to purchase the same type of new equipment. This requires some coordination and oversight, but the cost savings make the effort worthwhile.
Our customers rely on us to have a ready inventory of equipment capable of meeting their needs. We are always looking to buy equipment to restock our inventory. Contact Federal Equipment Company to explore what the savings opportunities available from eliminating surplus manufacturing and packaging equipment.