The link between the total cost of ownership and refurbishment and upgrade

When it comes to industrial machinery and critical equipment, the purchase price is just the beginning. For example, with induction motors, on average, only 3% of the total cost of ownership (TCO) is attributed to the purchase of the equipment. The remaining 97% of the total cost is accounted for by the costs of running, maintaining, and operating it over its lifetime.

So, the real challenge isn’t just making the right purchase but controlling the costs that appear long after the invoice is paid. That’s why when faced with high running costs or breakdowns, the smarter choice isn’t always replacement; it’s often refurbishment and upgrade.

Refurbishment and upgrade are also greener choices, but what really moves the needle is their capacity, as HAYLEY 247 DEXIS has proven, to achieve up to 10% more than manufacturers' efficiency guidelines. As every engineer, CFO, and business owner knows, improved efficiency results in a lower cost of total ownership.

TCO AND CHALLENGES
It’s easy to underestimate the TCO beyond the initial purchase, but it’s a strategic move that many businesses take to improve their bottom line. Tighter profit margins drive a shift to longer-term thinking amid growing costs and the need to gain some control over the unexpected.

It is helpful to consider the operational costs, including energy use, efficiency losses (especially in older models), maintenance, and unplanned downtime.

Additionally, there are other pressures to contend with, including sustainability targets, global disruptions, trade complexities, and secondary damage risks.

REFURBISHMENT AS A STRATEGIC CHOICE
Refurbishment is more than routine maintenance; it’s a strategic investment, and it’s pretty compelling when you start to see the data.

Refurbishment and upgrades are exhaustive, encompassing improved coatings, lubricants, tighter tolerances, sensors, and better designed components that reduce energy consumption and wear.

For example, a paint shop operation achieved a full return on investment within five months by refurbishing pumps instead of replacing them. Just one example of how focusing on TCO rather than upfront costs can unlock significant value.

Successful refurbishment requires technical expertise, which often involves reverse engineering, creating custom components, and working on equipment that can be decades old. Even historical machinery, sometimes over 100 years old, perhaps with a preservation order, can be brought back to full operational performance when approached with the right skill and care.

USING DATA TO MAKE SMARTER DECISIONS
As previously mentioned, data plays a big part in refurbishment and upgrades today, with monitoring equipment reporting on performance. If an engineer recommends a refurbishment and upgrade on one machine as a test, the enhanced performance results can then create a business case for broadening the scope. By collecting and analysing data, a business can spot potential problems early, schedule maintenance efficiently, and prevent costly downtime.

Using data to take a proactive approach to asset management enables businesses to protect operations, extend machinery life, and control costs more effectively, thereby increasing control and reducing the likelihood of profit-eroding events.

ADDRESSING COMMON MISCONCEPTIONS
One of the biggest barriers to refurbishment is actually perception. Many assume that buying new is always cheaper or safer. In reality, replacement brings its own hidden costs like installation delays, staff training, integration challenges, and supply chain issues.

Refurbishment, by contrast, can reduce downtime, enhance safety, and provide predictable, controllable costs, all while improving efficiency and environmental performance. That’s not to say that new isn’t the answer; it sometimes is.

TAKING BACK CONTROL
Taking back control starts with innovative asset management, which involves considering the full lifecycle of a piece of machinery.
Businesses can:
1. Assess: Evaluate existing assets for condition, risk, and potential.
2. Plan: Develop a clear maintenance and refurbishment strategy.
3. Act: Implement upgrades and refurbishment projects with the right expertise.
4. Monitor: Collect performance data to determine the success of refurbishment and upgrade, and continuously monitor, predict, and prevent breakdown.

LOOKING AHEAD
Refurbishment and upgrade are not just reactive solutions; they are long-term strategies. By working closely with refurbishment specialists and integrating lessons from monitoring and data, businesses can maintain efficiency, reduce environmental impact, and minimise unexpected costs.

The missing link is clear: the 97% of costs that come after purchase are best managed through thoughtful refurbishment and upgrade. For engineers, CFOs, and business owners, this is the opportunity to transition from reactive spending to proactive management, protecting budgets, safeguarding operations, and maximising the value of every asset.

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This article appeared in Renew magazine. To read more or request your personal digital or print edition of Renew, click here.