To answer these questions a rationale mindset is needed to provide realistic and understandable guidelines for making monetary decisions and justifications for machinery and equipment projects. Impacting factors include: 1) constant beverage equipment technology improvements and advances; 2) changing agency regulations and compliance issues and 3) increased competition in the beverage marketplace.

Before considering possible rationales, it is important to review a mindset and process necessary to answer the “best solution” question that arises when refurbishing and replacing alternatives are on the table. How is this determined? First, evaluate capital availability and economic position as the basis for any equipment “expenditure rationale.” Second, develop a factually based rationale to be used as a guideline for budget preparation and equipment projects. Third, utilize the rationale by ensuring that functional department personnel understand application requirements. These essential steps provide the proper mindset and project procedures related to equipment “refurbish or replace” situations. It helps getting the “best solution.”

The “refurbish or replace” rationale means using agreed upon guidelines to compile facts that will dictate a decision. Budget time is a real time starting point to apply any given rationale. These steps will help: 1) Use machinery and equipment manifests to develop a potential “refurbish or replace” list; 2) From the list, categorize by equipment or system (capital or expense) and prioritize major projects (what needs to be done) and 3) For each project consider whether replacement is necessary (it is obsolete) or refurbishment can extend useful life (it still works). Two scenarios illustrate the point.

Scenario I—Original cost is $100,000 (without depreciation), repairs range from $50,000 to $70,000; therefore, the rationale applied here is: a) if repairs exceed 65 percent of original cost, replace and b) if repairs are below 65 percent of original cost, refurbish.

Scenario II—Technological advances have surpassed existing equipment in the production line; therefore, the rationale applied here is: a) mandatory replacement and b) determine return on investment. An alternative might be refurbish and buy time before replacement.

Using a refurbishment/replacement rationale will vary depending upon conditions, but there are a wide range of applications. Even though conditions and factors are many, guidelines are essential to establish the proper roadmap for decisions.

From Beverage World June 15, 2010