Aetna UK compares the economics of cost per pallet rental schemes with those of leasing a pallet stretch wrapper from a supplier.
IN recent weeks there has been some debate on the pros and cons of the cost of wrapping pallets from the point of view of just paying a cost per pallet rental type scheme, which seems to be anything from 70p to £2 per pallet, versus 34p to 48p when owning your own pallet stretch wrapper either by buying the machine outright of purchasing it with the help of a finance house. Owning your own machine of course allows you to purchase the film from existing suppliers competitively.
Paddy McCartney, National Sales Manager of Aetna UK Ltd and Becky Goy of First County Finance, who have worked with Aetna clients for many years, have made the following observations on the subject.
Paddy commented, ”In some ways the idea of simply paying a cost of 70p a pallet seems reasonable. However the more pallets you wrap the more it costs you.
A part pallet and a film break during a cycle will also count as a pallet wrapped at 70p.
50 pallets/day is 12,000 pallets/year and the cost would be £8,400.00/year
125 pallets/day is 30,000 pallets/year and the cost would be £21,000/year
You are, however, locked in to a contract. If your business grows then the fixed cost of rental can become a real burden for your business. Most financial commentators are saying that the UK economy is now on the turn after four long years of relative hardship, so to put yourself into a position of stifling growth could end up being a double whammy on your business.”
Paddy continued, “I would like to outline some observations on the above.
For a customer wrapping 50 pallets a day this amounts to 12,000 pallets per year. If a customer takes a three-year lease purchase with an Aetna three-year parts warranty, this will cost £224.69 a month. The machine amortised on an annual rate of 12,000 pallets would then cost 22.5p per pallet with film costs of under 25p per pallet, a total cost is 47.5p per pallet.
12,000 pallets/year = £5,700.00
If the customer was producing 125 pallets a day, 30,000 per year, the same machine cost would reduce to 9p per pallet and even if you kept the film cost the same this would bring the cost down to 34p per pallet.
30,000 pallets/year = £10,200.00
At the end of the lease you own the pallet wrapper. Of course this means that no further payments are made for the machinery and the cost per pallet falls to under 25p/pallet.
Long term calculations
As you can see from the above examples, continually paying a fixed fee of 70p per pallet can be very costly. Over the short term it may seem convenient but by making the comparison with leasing a machine and arranging your own supply of film the ‘pay per pallet scheme’ is very detrimental to cash flow and budgets. Furthermore the long-term costs of paying per pallet show that customers could actually end up paying for the machinery several times over. “
Becky Goy continued, “The computations clearly show the lease purchase option is of real benefit to any user, giving complete control over where you buy the film, in addition to after-sales and service support to a company that has to-date produced 130,000 machines.
We have worked closely with Aetna UK helping customers with Lease options, and it is by far the most cost effective solution for any business now and in the future.”