We’re living in uncertain times. Markets are volatile. Product demand fluctuates. As does the supply of raw materials. And in between it all, natural disasters are making it even harder to expect the unexpected. More than ever, agility is key. Both operationally and on your balance sheet … Any procurement decision should therefore consider your ability to adapt quickly, mitigate risks and safeguard your bottom line.
Procure … what now?
Procurement is described as all the activities related to obtaining goods or services a company needs to support their daily operations. Think about planning, negotiating, purchasing, receiving and inspecting goods, sourcing, financing, …
When the entire supply chain is under continuous pressure, there is a risk of impacting the quality of your processes as well. By reviewing your utilities procurement, you can realize cost savings without impacting your quality levels. In other words, strategic sourcing of your utilities improves your profit levels.
6 situations when owning utilities impacts your bottom line
Usually utilities such as air compressors, dryers, nitrogen generators, power generators... become part of a business’ fixed cost structure when they are bought. When your demand is stable, ownership is a valid option.
However, as we already mentioned, demand isn’t always as stable as we need it to be. When that is the case, you might want to consider switching (part of) your base utilities capacity from ownership to usership.
Make the shift from owning to using
The total cost of any investment is a much bigger and more complex picture than the purchase price alone. You need to consider all kinds of hidden factors from transport and running costs to maintenance, inventory, depreciation, and divestment costs … to name but a few.
Your total cost of usership takes all of these factors into account.
Interested to learn more? We wrote an article on the ins and outs of total cost of usership:
We’ve listed 6 reasons to consider renting:
1. Fluctuating demand
As markets shift and demand fluctuates, so does your production. Which makes the rate of use of your equipment harder and harder to predict.
- When your production goes down; you can shut down unused utilities. However, the depreciation will remain a fixed cost in your books.
- When your demand increases: investing in new equipment is a time-consuming process. From the initial investment requirement to the final commissioning can take several months.
Renting gives you speed and control over your operations and your capital.
2. Increasingly stringent legislation
New restrictions on noise, emissions, operating hours and more can render your equipment obsolete or non-compliant overnight! Renting provides easy access to the latest new technologies, further lowering your operational costs.
3. Unpredictable global events
Natural disasters, financial crises, pandemics … it seems as though uncertainty is now the order of the day. To cope, you need flexible, cost-efficient, and predictable solutions that limit your exposure and liability.
4. Changing demographics
Volatile markets are just an indicator of deeper shifts in demographics that also impact your workforce and customer base.
5. Decentralized production
Global logistics are becoming increasingly complex, forcing many companies to restructure their processing and production streams as well. Renting (part of) your process critical equipment gives you the extra flexibility to increase the global spread of your operations without massive capital investment.
6. Technological advancements
Investing in the latest technology lets you enjoy state-of-the-art installation and all benefits that accompany it. However, innovation is constantly driven by trends in sustainability, digitalization, and legislations. And at the same time, investments lose value over time as your assets start to age.
By renting the latest technologies, you continuously benefit from the new opportunities it brings with regards to cost reduction. Think about higher capacity, faster performance, greater energy-efficiency ... Opportunities that can only be booked as missed opportunities when you own your own equipment.
Rely on usership, bring agility to your operational costs
When you rely on usership instead of ownership
- Your utilities are transformed from a fixed to a variable cost: your costs are directly linked to your consumption.
- You are not subjected to long delivery times: rental assets can be commissioned very quickly.
- You will always have access to the latest state-of-the-art equipment and technologies to further lower your operational costs.
Should you use or should you own?
Of course, renting and buying need not necessarily be mutually exclusive. There is a well-defined tipping point at which renting your process-critical equipment becomes significantly more advantageous than buying it. Not sure when to rent, when to buy or when to do both?