Packaging Machine Total Cost of Ownership: A Comparison Framework

Purchase price is the easiest number to compare and often the smallest part of what a machine costs over its working life. Two offers with similar prices can differ widely in how much labor, energy, compressed air, material and maintenance they need, and in how much output is lost to changeovers and stops.

Comparing offers on a lifecycle basis means listing every cost component, filling in one table per offer, and testing which assumptions change the ranking. The sections below do that, with an example built on invented numbers. IEC 60300-3-3 is a relevant reference for life cycle costing methodology, and the method here is a simplified use of the same idea.

What total cost of ownership includes

Total cost of ownership (TCO) is the sum of all costs attributable to the machine over a defined period, such as the planned service life or a fixed number of years. It groups costs into five parts.

Acquisition covers price, freight, installation, integration, validation and training. Operation covers labor, energy, compressed air, materials and waste, and consumables. Maintenance is planned work, spares and any service contract. Downtime and changeover cover lost output and changeover time. End of life is decommissioning cost less resale value.

Costs that the supplier controls, such as price, are usually quoted. Costs that depend on your plant, such as labor and changeover frequency, you have to estimate. The framework puts both kinds in the same table.

Where the hidden costs sit

Acquisition costs outside the machine price are often left out: foundations, utility connections, conveyors, guarding changes, software for integration, trial material, and staff time for the acceptance tests. The RFQ checklist asks suppliers to state scope and exclusions so that these items show up in the comparison.

Downtime and changeover costs are also easy to miss because they appear as lost output, not as invoices. A machine that takes longer to change over, or stops more often, reduces the output you can sell. Constraint thinking helps here: a loss counts in full only if the machine is the line’s constraint, as explained in the guide to packaging line bottlenecks.

Comparison table to fill in

Create one column per offer and use the same period for all of them. Use consistent units and note the source of each number: supplier quote, your own records or an estimate.

Cost component	Items to include	Offer A	Offer B	Source or assumption
Acquisition	Machine price, freight, installation, integration, validation, training
Operation	Labor, energy, compressed air, materials and waste, consumables
Maintenance	Planned work, spares, service contract
Downtime and changeover	Lost output, changeover time and labor
End of life	Decommissioning cost less resale value
Total over the period	Sum of the five rows

Fill the rows with annual values where costs recur and multiply by the number of years. Keep one-time and annual items separate so the arithmetic is visible.

Data to collect for each offer

The numbers behind each row come from the supplier and from your own plant. Ask for the supplier’s figures and the conditions under which they apply; they are claims to verify, not measurements made by this publication.

• Operators needed per shift and their time on the machine
• Energy consumption under defined load, and compressed air consumption at the supply pressure
• Consumable and wear parts list, with life expectancy and the basis for it
• Recommended spares for the first period, and the preventive maintenance schedule
• Changeover time per format, and what you need to change parts or tools
• Expected scrap rate under the product and material you run
• Service contract options and exclusions
• Warranty duration and conditions

Worked example

In this example the two offers are almost level, which is common. The decision rarely rests on the total alone. It rests on which assumptions you trust and how far they would have to move to reverse the ranking.

Sensitivity: what changes the answer

Change one assumption at a time and recalculate. Keep the other values fixed so you can see which one matters. The following changes use the same invented numbers as the example, in CU.

Changeover frequency

If the plant needs only 125 changeovers per year instead of 250, the annual downtime and changeover cost halves for both machines, because the cost per changeover stays the same.

• Machine A: 125 × 0.20 = 25 per year, so 25 × 5 = 125 over five years. Total: 400 + 300 + 75 + 125 + 10 = 910 CU.
• Machine B: 125 × 0.10 = 12.5 per year, so 12.5 × 5 = 62.5. Total: 520 + 275 + 100 + 62.5 + 0 = 957.5 CU.

The ranking reverses: Machine A is now lower. A machine with faster changeover has more value in a plant with many formats and less in a plant that runs long campaigns. Estimate your own changeover times from records, not from supplier data alone.

Scrap rate

If scrap cost doubles for both machines, the scrap row grows by its own five-year value: Machine A adds 16 × 5 = 80, giving 1,115 CU; Machine B adds 15 × 5 = 75, giving 1,095 CU. The gap between them hardly changes because the assumed scrap difference is small. Scrap would matter more if the offers differed more in how they handle your product and material, which only a trial with your real material can show.

Energy and compressed air

If energy and compressed air prices double, the energy row adds its five-year value again: Machine A adds 12 × 5 = 60, giving 1,095 CU; Machine B adds 8 × 5 = 40, giving 1,060 CU. Machine B gains a little. Compressed air is often a costly utility to generate, and leaks and pressure settings affect consumption; the U.S. DOE compressed air sourcebook is a relevant reference for system efficiency, leaks and energy use. For motion systems, the difference between servo and pneumatic actuation affects both air use and machine capability, so ask each supplier for consumption data under stated conditions.

Other variables to test

• Planning period: a shorter or longer period changes the share of the acquisition cost
• Number of shifts and utilization
• Labor rates and operators per machine
• Spare parts prices and service response
• Resale assumptions, which are uncertain and should be tested at zero
• Price of the downtime hour, which depends on whether the machine is the line’s constraint

Questions to ask suppliers

Request the data that fills the table, and ask how each figure was derived.

• What consumption of electricity and compressed air do you state, and under what load and conditions?
• Which wear parts need replacement, at what interval, and at what cost?
• What is the changeover procedure and its stated time for each format, and what tools are needed?
• Which spares do you recommend for the first operating period?
• What does the service contract include and exclude, and what is the response time?
• What training is included, and what costs extra?
• What is the expected life of the main components, and what is it based on?
• Which upgrades or format additions can be added later, and at what scope?

Also check that the figures can be verified at acceptance. Link the stated figures to tests in the acceptance plan so that a number claimed in the quotation can be checked on the machine.

Limits and on-site verification

A TCO model is only as good as its inputs. Supplier figures for consumption, wear life and changeover time depend on the product, the material, the settings and the operators, and they are not measurements made by this publication. Verify them with your own product and material on the actual machine, and update the model with your records after startup. The numbers in the worked example are invented and must not be used as estimates for any real machine.

Maintenance planning depends on the machine manual, your failure history and your site risk assessment, with qualified personnel; see the preventive maintenance checklist for how a task list is built. Maintenance terminology is covered by EN 13306, and ISO 22400-2 defines manufacturing KPIs such as OEE, which you can use to track the downtime and loss assumptions after startup. Financial treatment, such as discounting, depreciation and tax, belongs to your finance team.

Related decisions

Put the same cost structure into every quotation request, starting with the RFQ checklist so offers are comparable. After the order, tie the main figures to tests so the claims behind the model can be verified.