 Hello, and welcome to today's webinar on Total Cost of Ownership from PMMI's OPEX Leadership Network. I'm Joyce Fassel, Editor-in-Chief of Pro Food World at PMMI Media Group, and I'll be moderating this discussion. One of the most significant challenges facing consumer packaged goods manufacturers and original equipment manufacturers is determining the initial purchase price versus the long-term cost of owning capital equipment. During this webinar, we will learn about the initial and negative cash flows of capital equipment investment, the ongoing negative operational cash flows required to utilize that investment, the future positive cash flows that occur as a benefit of the investment, and the eventual gain or loss on disposal or redeployment of the investment. This discussion will provide TCO criteria for both manufacturers and users of capital equipment for use by sales, operations, finance, and more, and also help you develop guidelines and checklists that include all major costs for acquisition, operations, and disposal. I want to let our audience members know that this webinar will also be available for archived viewing at profoodworld.com. You will receive notification when it's ready, and the slides will be available for download from there as well. Please feel free to ask questions at any time during the webinar by typing your question into the questions pane of the GoToWebinar control panel. We will take some time at the end of the presentation to address as many questions as time allows. Before we begin, we have a few words from our sponsors. All PACS designs and manufactures and supports the customized retorts for in-container sterilization and material handling solutions of package goods and beverages. AMEC Foster Wheeler designs and delivers and maintains strategic and complex assets for its customers across the global energy and related sectors. Smolly is a manufacturing industry leader in the design and manufacturing of material distribution systems. The core equipment can be customized to meet customers' layouts and specific production needs. Our final sponsor is a platinum sponsor for the OPEX Leadership Network, is Metler Toledo. They are the world's largest provider of in-line product inspection equipment, backed by global service. The systems deliver unmatched sensitivity with a total cost of ownership for increased profits and brand protection. Now I would like to begin by introducing our speakers. Medina Allen is currently serving as head coach for CAPEX at the FSO Institute. Previously, Medina was senior director of corporate engineering and technology for Snyder's Lantz, where she developed corporate structure and governance for engineering and technology across the company to include transformational change to capital planning, project management and execution, talent acquisition and development. She was responsible for comprehensive asset management of fixed assets totaling more than $745 million, providing technical leadership, direction and counsel to R&D, marketing, commercialization and other key leadership functions. Medina has also held leadership roles with Conagra Foods, PepsiCo Tropicana and Procter & Gamble. Terry Miller is a supervising staff engineer for Hormel Foods in Austin, Minnesota. His team of engineers and technicians specify and purchase all process related equipment for the company. Terry has over 30 years of experience in maintenance and engineering fields. And here his team has been involved in many different OPEX leadership network programs including total cost of ownership, factory acceptance testing, sanitary design and his team is presently working on the RFP process document with OPEX. Now I'd like to turn it over to Steve Schlegel, managing director of PMMI's OPEX leadership network who will provide some information about OPEX programs and tools. Steve? Thank you very much Joyce and good afternoon everyone, at least good afternoon from the East Coast. We welcome you to this webinar and it's a really in-depth presentation of information of how both organizations have applied the lessons learned from the best practices developed by the OPEX leadership network for broad industry use and adoption. You're looking at this word cloud that gives you a sense of the scale of the breadth and depth of the companies involved in the OPEX leadership network. There are over 250 companies who come together and collaborate and try to solve common operational challenges. These groups are made up of manufacturing engineering and operational professionals from both the CPG and the supplier community. What is great is that PMMI who founded the OPEX leadership network in 2011 has made a commitment to the industry to provide all of these best practices and protocols for free download for free adoption in the industry. It's important to note that how OPEX defines operational excellence and to provide some common framework by which we look at the work and provide the information to you. As you can see on the screen we're focused on the needs of the customer, empowering employees and optimizing processes. All three legs of the stool which are vital to operational excellence. Here you get a sense on this wheel of the overall focus of the OPEX leadership network is people process and technology. Nothing magic about that. Many of our companies utilize that verbiage. But here with the people, the focus on the human asset at the top of the wheel, here you have protocols and guidelines and best practices on workforce development, workforce engagement, worker safety, as well as PMMI has just launched the packaging and processing women's leadership network that is closely aligned with OPEX. To the right side of the screen are the process and here the focus is on the operational performance within the organization. You will find best practice guidelines on sustainability, OEE, food safety and product safety and soon to come out later this year on CIP for non-dairy products and cybersecurity or secured vendor access. So look for those in the coming months. And to the left side of your screen is technology. Here that is focused on the capital spend. And then by capital spend, the first one in engineering, we're talking about hygienic equipment design and to help you get literally designed the level of equipment that you need for the sanitation processes and procedures that you require. Factory acceptance tests. This is a document that will help organizations provide great clarity early in the project in order to have an understanding on how to make sure that you optimize what it is that US CPGs invest. And the purpose for our call today is on total cost of ownership. And more on that as we take a look at what's available for you. On the right side of the screen, you see an infographic. And fundamentally, that big circle right in the middle says that this playbook, the TCO playbook and the checklist that you're seeing to the left, really helps your company in four distinct ways. First of all, in the buyer-seller relationship. It creates the opportunity to have that engagement. And you'll hear from our speakers how they have experienced that and share with you some of their results. In decision-making, internal as well as the supplier decision-making. But for US CPGs, it's critical to have better, more accurate information so you can make better informed decisions. Internal engagement, where to get things done, bringing all of the key stakeholders on board and being aligned with the objectives of a capital spend, is critical for success. And certainly critical for achieving a vertical startup. So as a result, this process, this document, enables that to occur to facilitate communication internally. And last but not least, certainly is the financial benefits that accrue to the organization by following it. So you do get the biggest bang for the buck in your capital spend. The checklists that I referenced are what you see on the screen right now. On the left is the acquisition cost. So you can see the graphic behind these are the iceberg. And it's the proverbial analogy of the tip of the iceberg. Acquisition costs, top of mind to everybody, totally understand it. But what the TCO Solutions Group team did and created this best practice has enabled the CPGs and the OEMs to collaborate and have a better understanding on how their equipment, the purchase, performs not just on the acquisition costs, but on the operating costs. And we're going to go through some examples with you, and you'll get a sense of what that means. But again, before I turn it over to Terry, who will be our first speaker today, it's important to note that you can go to the OPEXleadershipnetwork.org and download these documents for free. They are being widely circulated and we welcome you to do that. And now, if I may, I turn it over to you, Terry. Thank you very much, Steve. And first of all, I want to thank you for your leadership in allowing CPGs and OEMs to get together with this one voice that's out there and provide these documents to the industry. It is valuable information. So what I'd like to do is actually go through some items that we've actually gone and done in our process looking at different pieces of equipment. Talk a little bit about the background that Hormel has, the culture that we have. Go through some case studies, some hurdles that we've had to go through, and then the long-range benefits that have come about by adopting the TCO principles in many of the applications that we purchase. So first thing I'd like to do is just talk about and say, you know, Hormel Foods has been committed to the process, actually, of the OPEX group all the way through it. In my bio, it talked a little bit about the different groups that Hormel has been involved in. And really, we came into this operation or this process very early on. I think the first document that was done was actually the sanitary design. And we've been committed to bring a standard method to capital equipment purchases and really sharing information throughout industry. We feel in the food industry that any black eye that any company gets is a black eye to the whole industry. And we do share quite a bit of items to be able to move everyone forward. So we are committed also to making sure that we educate our team on the total cost of ownership. We've had many different meetings throughout. Really, we have to have the team effort in the group. And we've got to educate everybody in regard to total cost of ownership to be able to have them buy into what we are looking for. And the one other thing is we buy quite a few pieces of equipment that are really specialized where there might only be one equipment manufacturer out there making that. And you kind of wonder why we would do TCO principles when there's only one out there. But we could learn so much from going through the checklist and working with the vendor and actually improve equipment, make it more reliable, make easier change outs. Many different things we've learned as we go through that allows us to be able to do a better job in our equipment choices that we have out there. So very important that even if there's one out there, this is still a good process to go through. As far as the culture, again, it's a team effort both internally, externally. We need to have strong OEM relations to be able to work through every item that's in the checklist. There's a lot of things to consider and talk about when we go through and do one of these checklists. We've really got to let the OEMs know that we are going to go through this. We got to set expectations for what information we need, when we need it by. And another thing that we've got as a culture, as far as breaking our culture, is the least cost capital is not always the right decision. And so often our marketing group comes up and says, we've got a new application. We got to get this out in market. We got to get it out there fast. And they don't want to spend a whole lot of money to do it. And there's times that we have to step back with them and talk through that with them and let them know that always, you know, if it is something that really looks promising as far as a new product, that the cheapest thing or the least expensive piece of equipment is not always the right decision to be able to produce that product. We've got to break that culture that we have internally. And this document in Checklist actually allows us to talk through all the items that we have. So people look at things a little differently, and it helps us break that culture. One of the case studies I'd like to talk about is vacuum packaging equipment. Typically, Hormel Foods purchases 10 to 15 vacuum packaging machines per year. And we were purchasing pretty much one standard machine, had really good luck with them. But there's some things that we have to look at and make sure that we start comparing all the different machines that are out there. So we put a team together to be able to do that. We define that team. We put together specifications that are standard specification that each company could look at and put their best foot forward on a machine. We let them know that we're going to do the TCO Checklist along with their bid. And we work with those OEMs to define the requirements on the machine and then come back and look at all the items in the TCO Checklist. I put this work with OEMs twice because it is a challenge going through with some of the OEMs that have never gone through this process before. There's many questions come up that, why do you need this information? What are you going to do with this? And when you really explain it to them, they fully understand. But it is something that does take their time. It takes our time to be able to do it. We have to assemble that data, sort through it. And then one of the big things is, you know, so many people want to jump to the conclusions of what's the best, but really at that point, you've got to take that data and sit down with our internal teams, our operations teams, our marketing teams, our accounting teams and the engineering group to really look through all the different aspects of the TCO document to be able to get to that final recommendation on what is the best piece of equipment that will meet our needs going forward for many years to come and give us the lowest cost solution for that application. Some of the learnings that we actually got from our process, of course, we're able to identify that low cost solution for applications that are out there. We found many things in dealing with the vendors that were shortcoming specifically on their piece of machinery and were able to talk through some design changes or if the shortcomings were on support, negotiate certain things to be able to enhance that relationship and enhance the overall capital equipment purchase. We also improved communications internally with our operations and purchasing departments, so they know the process that we're going through and that we're looking out for their interest in the long run. And one of the intangible things that I put down on the bottom here, we have a younger engineering group, you know, I got 30 plus years of experience, but not everybody in our group is sitting with that. And what we really have to do is develop our talent internally and going through this document and seeing every aspect of that checklist and making that engineer think about all these things does wonders for allowing them to make the best decision on items moving forward. They ask the right questions. They follow through with what they need to follow through with. It really has done a lot to help us develop our talent internally on our engineering team. And I'm sure the operations team and anybody that's been involved in this process. Some of the hurdles that we have had to go through, of course, you got to put your team together and educate the team on the benefits. There's so many times that people just see that this is going to take time and what they don't realize is time could save a lot of money in the long run. So taking that time and being able to see out far enough ahead so you have the opportunity to take that time is really a great benefit. We've got a set of expectations. We did get quite a few pushbacks from OEMs. I had one meeting that really didn't go well with an OEM and they weren't really interested in doing anything in regard to this. You'd make decisions based on their ability and wanting to be able to help you out with this too. So getting the data collection put together internally and externally. Time constraints is another thing I talked about. Many times we are rushed to get into market with different applications. And going through this process is something that we really don't have time to do. If we could see ahead of time and work with our marketing people and know some of this stuff is coming and have that open communications, we could be ahead of the game and be able to get this done by the time that they say, hey, here's the money, go buy this equipment. We've already done our research. Of course, many times our operations group or marketing wants you to have the least cost to enter market and the least cost isn't always the right thing to do. Unique equipment needs. Many times there's only one piece of equipment out there. So going through this process, some people ask why would you do that? I kind of explain the benefits of that. And then one of the last things I wanted to talk about, as far as hurdles, you can go through this whole process and look at all the different pieces of equipment that are out there, come up with a solution. But yield, if one piece of equipment may provide you one percent yield increase over another piece of equipment that you'd have to measure out, that might just be the driving decision over all the time that you have that machine. One percent on 10 million pounds per year makes a big difference. And that cost may just drive your decision not really looking at the actual operating costs or utilities or something like that. Benefits to our group was we go out and buy a lot of equipment. And sometimes you get familiar with equipment and you just go buy it because it's worked before. We really have to look across the board at the same pieces of equipment to make sure that we are still buying the best thing out there. As technology increases, other people might jump ahead of the curve on technology and come out with something completely different or a lot better than what the other competitors are. And we've got to keep ahead of that. And that allows us this whole document allows us to keep out there and understand what everybody's doing. Of course, it gives us a document and method and gives you that one voice. So OEMs in at some point in time as we roll this out and get it out to OEMs and CPGs and we're all talking the same voice. This is going to be something that we could just say, hey, we got to do a TCO document, OEMs will understand what we're talking about. Education, we talked about that. Just educating our team on capital equipment purchases, making sure that we do the best thing moving forward. We drive our OEMs to partners to improve their equipment. And really in the long run, we're here to improve the bottom line of our company by providing that best solution for the piece of equipment that we have to purchase. That's really the driving factor behind all of our jobs and hopefully what this will do for each person out there as they utilize these documents moving forward. With that, I guess I'm going to introduce Medina Allen from the FSO Institute. Medina? Thanks, Teri. So now that Teri has provided a real-world example of how formal is utilizing TCO, I will cover a few other applications of TCO across industry, which include case studies on base analysis, very similar to the vacuum pack example that Teri just covered, program analysis and equipment continuity analysis as well. When we think of base analysis, it is a comprehensive view of acquisition and operating costs of the TCO playbook that can provide perspective on points of differentiation, that can impact an organization's long-term fixed asset costs. As we shift to looking at program analysis, it provides a platform to review and continually improve existing work processes, such as RFP, FAT and engineering design workflows. By leveraging TCO, learning can be used to identify and resolve gaps that may exist in any system. Lastly, we will look at a standardized approach to equipment continuity, which leverages TCO principles to maximize current assets and avoid new capital purchases when the organization has viable existing or idle assets that can be used. The goal of all of these applications is to improve the value of capital, provide better visibility and management of fixed assets, as well as create the ability to avoid capital spending that is not required. Now we'll take a look at a few of the case studies in each area. In the first case, we will be evaluating a new packaging line that is currently in a traditional work system. The project must deliver new equipment, new product, and a new work system for operations to successfully blend people, process and technology. Additional expectations of the project include creating internal model of operations work system, internal and external teamwork, partnership cross-functionally, TPG to OEM, OEM to installation contractor, as well as leveraging TCO methodology to acquire best asset to support new operations work systems. Based on deliverables and expectations, the key areas of TCO that were focused on by the team during this case included, but were not limited to, maintenance, OEM customer service, spare parts inventory, ease of cleanability, operability and changeover, warranty and FAT. Based on this case, the team learned how to strategically apply and adopt the TCO tool, the value of analyzing TCO cost of acquisition as well as projected operational cost. The team also learned the value of key differentiators and selecting vendors and that teamwork across CPG and OEM is paramount. Now we will transition to a case that applied the tools to a significant infrastructure project for plant, wastewater treatment. In this example, the system design must support a multi-plant site that has different manufacturing processes with varying wastewater loads. In this design, the system has to consider current and future manufacturing needs with a special consideration for new permit requirements, resource conservation and remote management. Additional expectations include more efficient equipment with consideration for operational costs, partnership cross-functionally CPG to OEM, OEM to contractor, as well as leveraging TCO methodology to acquire the best asset to deliver the site goals. Based on the deliverables and expectations, the key areas of TCO that were focused on by the team during this case included, but weren't limited to, system design, technology vetting, chemical usage, staffing requirements, permit requirements, as well as environmental consideration. As a result of this case, the team learned, team alignment on the project goals is critical throughout the life of the process. The TCO tool helped to uncover vendor capability and identify strategic partnerships, as well as leveraging TCO for major infrastructure projects can help with best investment of capital and business continuity. We have now covered two examples of base TCO analysis and application and we'll move on to programs. As we looked at program application, it was key that we looked across all processes that have connectivity to TCO as an input or an output. For standardization purposes and adoption of TCO checklists, each organization is able to right size the tool to fit within its existing early management, engineering workflow or procurement workflow. Key expectations as it relates to this application included, key stakeholder engagement and alignment on differentiators, incorporating and refreshing existing processes to have comprehensive view of assets, as well as strategic decision making on capital versus expenditure. The main focus areas of TCO covered in the program scenario were to interconnect RFP and FAT and also to apply methodology of acquiring and operating an asset on the front end of an acquisition. Some of the key learning and outcomes from this program analysis included creation of a framework for value added discussions on assets, opportunity to identify partnering relationships, an opportunity to improve processes to be more integrated to ensure that any gaps are identified and filled, as well as management of capital more effectively by identifying the needs early. TCO also aligns very well with early management and engineering methodology. So now we'll shift gears and we will talk a little bit about how do we apply this tool to a standard work process of equipment that is currently in operation to ensure that we are leveraging the tool in a way that helps us to maximize our capital value. So what we would do is we would leverage the checklist to evaluate equipment, identify the best candidates internally of that equipment. The next step would be to leverage an equipment continuity matrix that lays out the status of the equipment, new used or modified by normally modified means that it's something that has been improved by the CPG and in some cases it could be CPG and OEM. Also, we would look at information relevant to the operation of those unit ops such as rate, cleanability and operability safety are all considerations. The next step in the process is to leverage it with a new project as a vetting tool to determine do we have the capability existing with an asset or do we really need to go and purchase new? And what we would do is identify the best candidate should we have internal assets available and evaluate it thoroughly through the TCO checklist. Next, we will look at how we would apply a potential matrix. This example has a packer and it basically states where it's located in the organization, the last update it received, things critical to the current operation and performance of that asset that would help you to understand whether or not it would be appropriate to repurpose it internal to the organization. Now we will transition to closing this webinar out by sharing some key takeaways and based upon the cases that Terry and I have shared, we want all of you to walk away with the key point that TCO is a team effort internally to the CPG as well as a partnered approach with CPG and OEM. It is not meant to be an adversarial type of engagement, it is meant to drive strategic partnership. It also helps to establish the one voice between the CPG and OEM very early so that we can minimize changes that happen later in the project that TANTA calls lots of money. Also TCO educates the entire organization on assets, overall value and versus its initial cost. In doing such, we can look at TCO from the perspective of base program as well as equipment continuity and improve how capital is delivered to an organization. So with that, I will turn this over to our moderator, Joyce Fassel for questions. Okay, I'd like to thank Medina and Terry for a great presentation on total cost of ownership as well as I'd like to thank our sponsors, Metler Toledo, M.X. Foster Wheeler, Smalley Manufacturing Company in all packs. And now we're going to take some questions from the audience. The first question says, is it normal to experience continual education on TCO as the organization is adopting TCO? Terry here, I guess I would say yes. We as an organization have a promote within culture and many people are changing jobs from one to another. My operations group probably every two to three years has new people that move from one spot to another. And I do see this as a continuous improvement that we do have to do the education to inform everyone why some of the decisions are made the way they are and why we make recommendations the way we do. If everything was static, I think that that could be minimized but we don't live in a static world. We live in a world where we have to continuously make sure that we grow talent and bring new people up to understand the ramifications of the decisions that we all make. Hey, Terry, I'd like to echo those comments and also add that it is quite normal to have the education piece, especially when you have large teams that span across different generations of how capital was used and is now currently transitioning to be used across industry. So I think that will continue and it is totally normal to feel like, I feel like every time I'm talking about TCO I'm learning something new because you will be. And as we continue to socialize this and adopt it across CPG and OEM, naturally learnings come out of that process across the board. Some of them will be common, some of them won't be common and they will feed back into the overall picture to help us get better cohesively. Okay, our next question says, is it recommended to utilize TCO on small capital projects such as building improvement of welfare areas such as the locker room? Hey, Terry, I'll take that one. I would hear on the side of caution with applying TCO to something in that space because as I look at TCO, I'm looking at major capital or major infrastructure that's required to deliver cases of product and albeit welfare space is very important. I view that as a go-do versus TCO. We need to analyze what type of locker we get. I agree with that comment. And I look at what projects that we would actually look at and it would be larger equipment processes that we've got that are really going to be a huge impact as we go forward, usually building and welfare. This is your cost that you put into it and there isn't that ongoing savings or additional costs moving forward and many of those applications were the machinery that you have producing products, probably have more of an impact on overall cost over the life of that asset. Okay, our next audience member wants to know, based on the case studies that you've shared, you've shown that TCO has been leveraged in a few applications. What is the best way to start using the tools? Terry here, what you really have to do is be committed to it and jump into it and pick something to start the process. Again, this process is, there's a lot of aspects of it and a lot of education that has to be done to be able to get into it and the only way really to do it is to pick a project and start working on it. Familiarity, again, you go back to that and you could order equipment based on what you've ordered in the past, but really when you open up your eyes and see all those items that are in that checklist and start really crossing the T's and dotting all the I's on all the aspects of the cost of that machinery, that's when the light bulb goes off for a lot of people and they realize that this is really something that is a benefit to be able to go through and you just have to be committed to it and start moving forward and pick something that you're working on and start the process. I would echo that as well, Terry, and I would just add that in most organizations there is a critical project where deep analysis financially and on the business imperative strategic side needs to happen. That would be my starting point because you're gonna automatically get a certain level of organizational support to do a different level of analysis. So I would focus on a high impact project because you're gonna definitely have that level of commitment that you spoke of. Okay, the next question talks about your approach to TCO and this person says, in order to have an adequate approach to TCO is there a need for the organization to embrace lean thinking? Yes, Terry, you wanna take that one first? Well, I'm just lean thinking you've got to embrace that and you've got to think about that moving forward. TCO is somewhat detached from that. As I think about that, the best process moving forward moving forward might be a little bit away from the lean thinking mode when you come down to it. Lean as far as inventory, lean as far as people, those are all items that we talk about in the TCO checklist that get put into the overall decision of what you are doing. So really if you're following through with the checklist that is one of the items that you are considering before you make the recommendations on what you wanna do moving forward on the piece of equipment to embrace it completely. I don't know if that's the case but really you have to take that into consideration before you make your recommendation and that is brought forth in the checklist information as you fill this out. I would add to that that strategically organizations align on what continuous improvement philosophy they want to champion and lean is one of those that a lot of people are gravitating to which to Terry's point and in any of the work that we're doing with TCO we have to consider that and it's a part of you going through the analysis. So it's somewhat baked into that process. You can't necessarily decouple it and still deliver an organization's expectation around lean. And so I would default to each organization has its platform and how we leverage this tool needs to align with that platform. Okay, our next question says how do you evaluate the cost of specific design criteria you request in comparison with an industry standard based equipment design? Well, that's a fun one to deal with all the time. Hormel Foods has a basic equipment specification that we send out for all capital equipment purchases. Many OEMs get a hold of that document and say well that isn't how we build our machinery. So I'm going to go ahead and go ahead and go ahead and go ahead and go ahead and go ahead and go ahead and go ahead and go ahead and go ahead and go ahead and go ahead and go ahead and go ahead and go ahead to that machinery. And we say well, we need that machinery built to these requirements. Sanitation is really something that we can't compromise on, we have to have equipment built specific ways to be able to do that. So what we try to do is level the playing field knowing that our bar might be set up a little bit higher than somebody else's with standards anymore. What we ask in a bid package when it comes back, do you meet these specifications and if there is any deficiencies, please note that in your bid package itself. Then we have to take a look at that and really look at what the cost of that increase is. Face it, there's times when we need a piece of machinery and they want it fast and the only thing we can really do is purchase something that is industry standard but we really work with our OEMs out there to be able to put that bar up higher and we understand that it's going to cost in the long run it's going to cost us less by doing those things to be able to allow us to clean machinery better, to support the machinery better, to have better reliability in that piece of machinery over the life and the asset itself. Again, what we do is we stand back and we say here's our bar, let us know if you don't meet it and we actually have to look at the risks then if they don't meet it and determine if that's what we want to do moving forward so we understand there's going to be increased costs and we have to look subjectively at the costs we're doing those specific things that we're asking for. Okay our next audience member would like to know as engineering groups get leaner how do you quantify the value of adding time and resources to exploring TCL? I'll take that one. I think this has to become a part of the workflow process so it's not new work it's an integral part of how you go about doing the work that's already there so it's a tool to be leveraged with existing processes more so than it is recreating a process and with any introduction of a new tool there is time required for the education piece there is time required to implement and sustain the knowledge that is required to move fast with using a tool like this so I would expect that if people are experiencing you know time crunches with being able to get through the information it may be due to the newness of it and it will go away once the education and the socialization internal to the company and external to the company is elevated so yeah Terry any other comments? And I agree with that as far as the time base and as we educate our engineers you know we look at so many different pieces of equipment and for every piece of equipment do you have to actually go through the 15 page TCO checklist be honest with you probably not but to have that background and understand the documents and be able to ask the specific questions that you need to on pieces of equipment you could really narrow some of this down though we don't want to change we want everybody to work off of the checklist as is but we also want to make sure that we could streamline that process and sometimes be able to make educated decisions based on specific questions maybe not every question and having to meet without marketing and operations group but be able to come up with our internal group the best decision on what we do moving forward and again education being one of those benefits out of this whole process that allows my engineers to look at a piece of equipment I mean we could go out to a trade show and we could learn so many things just by looking at a piece of equipment and not actually having to go through a TCO document but just understanding what to look for when we're out there looking at stuff okay our next question refers to time speed to market and project timelines so this person wants to know how does full TCO implementation deal with issues involving speed to market and project timelines well I could go through a case study that we're dealing with right now we had a marketing group that came in and said that they wanted a new product put out and we told them how much it would be based on our best decision and the equipment that we would say would work well for that another organization came in it was a kill packer and said well we could get you into market with this product for this much less by using other equipment that Hormel probably wouldn't have purchased in the meantime we started this process up and I've had a director product manufacturing manager three engineers in this facility for I'm going to say in the neighborhood a total three and a half months of time between all that group trying to get a line started up because we put in equipment that probably Hormel wouldn't have purchased ourselves being a lease cost solution the cheapest thing doesn't always get you to market faster the most expensive thing doesn't always get you to market faster but being able to understand the best piece of equipment with the best support that's out there if you are under a real time crunch to get something to market you really have to look at that aspect and understand that we don't have time to spend three and a half months worth of our labor trying to get equipment up and running in somebody else's facility to be able to hit a market launch for product okay we have a number of questions that are referring to how you make your estimations using tco this person terry said you mentioned facing your decision because of a one percent difference and on determining tco are there any estimates estimations that you use that could impact the outcome of your decision and how do you ensure that these estimates are as accurate as possible experience is one thing that really does make a difference being able to let's say with yield we would actually want to bring a piece of machinery in and determine with a real life test if that actually meets that requirement face there's a lot of people out there that say they could slice cheese sideways and backwards and every which way and when you really bring the machinery and it doesn't quite do what they say that is one thing that we really have to do is make sure we bring in live equipment and be able to test you know when you when you go through a lot of the other items utility costs and that's pretty much fixed cost determining change over times that's another item that's in there you know changeovers are huge not just the time to change it over but then dialing the machine in to get it to operate afterwards and you really look at you know how organized they are what do they have for tools to be able to set up changeovers are there dial indicators to be able to place everything and get it back into position how many parts are we doing when we do changeovers and a lot of that is being out in the field and working with this machinery and understanding what it takes to do that and the complexity of some of the things that we have to do so there is some subjectivity in regard to this really it comes with experience so to be able to put some of these numbers together our next couple of questions have to do with equipment suppliers do you find that this person wants to know do you find that you are working with the same suppliers project after project to build a relationship or are you always looking at new suppliers it's a combination I would say it's a combination so you have OEMs that are standardized and preferred but you're always trying to make sure that you are competitive at looking at technology as well as cost with the climate being what it is across food cpg and the pressure to deliver more with less you have to always balance that looking at the same versus looking at new OEMs and so Terry I'll I'll turn it over to you to see if there's a different perspective on that well we work with a number of preferred vendors we take the opportunities that the trade shows to be able to look at a lot more vendors in it out there and then we pick the the cream of the crop out and what Hormel's actually done is put together a equipment vendor summit where we bring in like vendors that really make the same piece of equipment and we've sat down with them and laid out our requirements for capital equipment purchases you know we might have four vacuum packaging companies in that and some other similar companies where we sit down in the same room let them know exactly what our requirements are and and work with them we tend to not migrate a lot I mean we don't deal with one vendor but we may deal with four vendors and we keep everybody honest and we go through bid processes required to be able to make sure that we've got the best piece of machinery out there for the least cost of ownership over the life of that machine okay have OEMs started to adopt TCO beyond the playbook and checklist I would answer that as a yes they have but it is a slow start um the CPG commitment to implementing TCO will help to speed up that slow start with the OEM from what we've heard or what we've seen out there we ask are you guys familiar with total cost of ownership in the Apex group and a lot of them say we've heard of it and that's about all that they have said then we start bringing forward the documents and start talking to them and it seems like a lot of their senior leadership probably has experienced with this and has seen it and heard of it but it hasn't probably gotten down to the individual regional sales managers that we end up talking with until it comes through their channels and the two of them meet up and start discussing what's required so it's out there I think that like say that they've heard of it but like said it probably isn't down to the level where the sales managers understand what's going on or know what's coming at them when we ask that we're going to go through a TCO checklist on a capital equipment purchase well we have time for one final question and what would you say is the biggest benefit of adopting and actively applying TCO? The bottom line of the company is really what it comes down to being able to educate our people to make better decisions and really to be able to leverage that capital equipment purchased to make the best benefit for the company I mean that's really what we're here to protect is our company's bottom line and make sure that we do the best decision making that we can for those purchases that we've got. Well once again I'd like to thank Medina and Terry for their great presentation on total cost of ownership and for the latest news about engineering and operations and food and beverage manufacturing and to view news about our upcoming webinars visit profoodworld.com. Thank you for attending this presentation and have a great day.