SMTA International Conference Proceedings


CAPITAL EQUIPMENT JUSTIFICATION AND APPROVAL

Author: Michael R. Weekes
Company: Hamilton Sundstrand / UTC
Date Published: 9/21/2003   Conference: SMTA International


Abstract: At one time or another, usually one weeks before the capital budget review is scheduled, manufacturing and process engineers are asked to prepare capital equipment requests for approval. As "process people" engineers seldom have the training on the financial aspects of capital equipment and how to judge the return on investment.

This paper includes a review of the financial aspects of investing in capital so as to make this business aspect of getting the machine you need an easier and less intimidating process. In earlier days, I will never forget the warnings I received as an engineer, that "I will never get the comptroller to sign that off".

Receiving approval for capital equipment you are recommending should not be difficult, if you understand the world that the finance and accounting community is coming from. The engineer, competent in the technology of the process and equipment, should have business tools he or she can use to justify capital investment successfully.

This paper will enable the reader to further judge the return on the investment, above and beyond replacing an old machine, meeting a new production requirement. The engineer needs to remember that the capital equipment they are recommending should satisfy the company’s goal of maximizing shareholder equity.



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