The Cost of Poor Packaging Equipment Pricing

Posted on November 18 2016 by Matt Rose

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With another Pack Expo come and gone, it’s important to remind buyers of potential pitfalls associated with requesting a quote for a packaging machine, and expecting the person on the receiving end has a pre-packaged one ready to go — without having even a fraction of the project information needed to provide an accurate estimate.

Most equipment manufacturers would agree, throwing around a six-figure number based on a two-to-ten minute conversation about the requirements for a complex, highly involved capital purchase is a bit rash.

However, when a quote is provided under these circumstances, the following issues typically occur:

  • The price – and possibly the equipment being proposed – is wrong for the application
  • The price becomes the default pricing for the rest of the project, even if it’s not anywhere near realistic
  • Different vendors each propose a different machine and price based on what they understood the needs to be – which sometimes can be drastically different – causing the buyer to compare apples to oranges

To remedy this type of erroneous pricing request (which frequently occurs during or immediately after industry trade shows), we first must identify why the nuts-and-bolts of the project are commonly missed.

Here are the five most common reasons:

  1. The customer isn’t comfortable divulging project or company information
  2. The complete project scope is not yet known
  3. The customer believes they just need a price first, and can work out the details later
  4. The customer is not comfortable discussing their true budget
  5. A third-party integrator or equipment distributor/representative is involved and project details get watered down

How Do You Get To a Realistic Capital Equipment Price?

Obtaining a realistic, accurate, and useful price requires that you address each of the problems noted above head-on in order to build a well-documented project scope. To help you do that here are some suggestions:

  • Complete a confidentiality or non-disclosure agreement so both parties can have open and comprehensive conversations/emails. Sharing vital information such as product rates, plant layout drawings and product dimensions is paramount for developing an accurate pricing model and, ultimately, a successful project
  • Identify as much of the known project scope as possible, including communicating any future plans for your operation
  • Provide the project details first and the price quote request second. By focusing first on the project details and ensuring all the information is made available, an accurate price can be calculated
  • Providing the vendor with the budget so that you and the vendor can have an honest financial discussion of what can and cannot be done — otherwise the vendor has to throw darts blindfolded
  • Consider having a third party involved. This is not an uncommon occurrence and the key is to facilitate open communication among all parties, such as having a project review conference call so everyone can be on the same page

If you’re at the initial stages of a shrink packaging project and are getting to the point where dollars are starting to come into question, please contact us. We’d be happy to talk with you and share with you some forms and articles that will help your team define the well-documented project scope required to build a detailed request for proposal (RFP).

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This entry was posted in Packaging System Upgrades, Pack Expo