Things To Be Consider for Purchase A New Equipment ?

Usual replacement criteria for the process equipment are when all the depreciation is absorbed and the service life has come to an end. Other possibilities of replacement can be:

1. Drastic changes in the process plant may necessitate the replacement.
2. Advances in technology may make the replacement necessary.

The purchase or replacement of equipment can be viewed on the Following different considerations.

1. Economic considerations.
2. Performance evaluation, competitive alternatives.
3. Additional changes are necessary from a process point of view.
4. The true cost of the new unit.

If the new equipment reduces production costs considerably, it becomes inevitable to replace the existing equipment. The existing equipment can be sold to prospective buyers to generate some funds for the purchase of new equipment. The balance fund has to be raised from reserves or operating budget. In all circumstances, the purchase of new equipment should not become a liability, because if it affects the operating budget, fund scarcity can hit the process plant operation.

If additional changes are necessary for the replacement of equipment, it should be critically analyzed and its impact is assessed.

The true cost of equipment replacement depends upon freight charges, local moving costs, hiring of outside skills for the installation, the additional cost of power, utility lines, etc. Site preparation cost has also to be considered.

If the new equipment is much heavier than the old one, plant floors, substructures to carry additional weights need to be modified.

Also, some financial considerations may be necessary for accessories required, safety installations for the new replacement equipment.

A replacement has also to be considered in terms of performance evaluation such as:

1. Production capability.
2. Technical soundness.
3. Plant layout considerations.
4. The versatility of the equipment.
5. Produced improvement.

The product improvement, enhanced capacity achieved by replacement should not be too costly.

Reliability and maintenance factors are considered in terms of testing, repairs, and equipment parts needed.