Whitham Mills Discusses Capital Expenditure: ‘getting what you pay for’
Managing director of Whitham Mills Engineering, Ben Smart, explores approaches to capital expenditure in the waste and resources sector.
Shaped as we are by the forces of policy makers, there are few absolute long-term certainties in our sector. You will be as familiar as I am about how we are required to bend to the will of the latest thinking, new rules or, for many, the lack of a clear long term strategic policy framework which would allow us to all operate with certainty.
One of the few certainties for resource managers is the inevitability of capital expenditure taking a significant slice off the bottom line. It might not be in the plan for the next quarter, or the next financial year, but it is on its way: the consequence of growth.
I’m constantly reminded of the old axiom that you get what you pay for. It’s a truth that should shape decision making for all investments large or small but too often does not. It is the system and the engineering support.
Our bread and butter is supplying conveyors and balers for MRF systems and it is a market with expensive pitfalls for clients. I’ve lost count of the amount of times that we have been brought in to redesign systems to replace unsuitable off-the-shelf systems which don’t do the job.
If you invest in a piece of kit without the supplier wanting to understand its context, feedstock and operating parameters, an alarm bell should go off in your mind. I’d argue that your supplier should have intimate knowledge of their products and understand what is and, critically, what isn’t appropriate.
You’d be amazed at the cachet that being British designed and British manufactured has. Our design engineers in the UK talk face-to-face with our engineers in the factory and the installation engineers on site. They touch the steel which makes up our systems, they design, measure and mark the welds, and agonise over every angle. It resonates with people and they understand that ‘British designed’ remains a byword for quality.
To understand the real return of capex, your accountant will explain to you that you need to factor in the ’Three Ds’ of depreciation, downtime and diminishing value. These can be offset with making informed decisions at the outset and understanding what level of support you will get from your supplier.
This often comes down to a question of confidence. Confidence both in terms of how much you believe in the sales patter of suppliers and how much confidence the supplier has in their product.
Like everybody’s, our systems break down from time to time. They do hard, mechanical graft under enormous pressing forces. But faced with a repair which necessitates a downtime of days while experience engineers are called on from abroad and one of hours while an engineers are despatched locally, I know which gives my customers and my bottom line confidence.
Ben Smart, Whitham Mills Managing Director