The eCommerce industry is experiencing significant growth, with some reports predicting U.S. online retail sales to reach $2 trillion by 2030.
As you consider how to align your business with the massive industry growth, you will need to answer some questions. For example, what types of automated packaging technologies will best help achieve your goals and objectives?
From a financial perspective, how will you make a sound business case for your investments in packaging automation through capital expenditure funds requests?
Making Your Business Case for Capital Expenditures in Automated Packaging Solutions
Making the case for any capital expenditure (CapEx) can post a challenge, as doing so requires business leaders to think strategically, long-term and holistically in terms of in-depth, cost-related considerations. First, let’s consider the financial aspects.
What Is a Capital Expenditure?
A capital expenditure (CapEx) is an expenditure that a company incurs to create a future benefit. Businesses incur capital expenditures when they invest in themselves for future growth; such expenditures can include anything from new buildings to software and from hardware upgrades to automated packaging equipment.
What is a Capital Expenditure vs. an Operating Expenditure?
CapEx spending represents a company’s investment in its own long-term growth. A capital expenditure differs from an operating expenditure (OpEx), which represents the costs of running your business on a day-to-day basis.
3 Reasons Why Capital Expenditures in Packaging Automation Could Grow Your Business
Forecasts suggest that more than a half million mobile robots will be shipped to warehouses globally in 2030 in order to meet sustained order volume. However, only 5% of warehouses are using sophisticated automation equipment and solutions, such as robots and integrated systems.
Where is your organization in terms of automation maturity, and where are the gaps that illustrate why capital expenditures in packaging automation equipment is needed? For example, does your organization employ labor-intensive, manual packaging processes? There are likely opportunities to reduce costs, improve employee satisfaction and ultimately find greater return on investment through packaging automation.
Planning for future packaging needs can be difficult. It requires open communication among your sales, marketing, engineering, operations and management teams, as well as knowledge of industry trends (e.g., every $1 billion increment in eCommerce sales generates 1.25 million square feet in warehouse space demand
Your CapEx automation equipment requests for 2023 may change or increase by the time 2024 arrives (especially with the explosive industry growth), so it’s important to consider scalability and how to highlight the need for growth when making your business case for funds. Things to consider include the acquisition of additional warehouse space and modular automated packaging systems that can be expanded upon as order fulfillment demand increases.
Sustainability Initiatives in Packaging Automation
Consumers are increasingly rewarding brands for sustainable responsibility, especially those in the millennial and Gen Z cohorts. In turn, brands are committing to aggressive sustainable strategies (e.g., a number of large enterprise brands have publicly set 2025 as the year by which to meet their sustainable packaging commitments).
Whether you need to purchase equipment, retrofit existing equipment or incorporate sustainable packaging materials into your processes, the time to consider sustainable packaging solutions in your CapEx investments is now.
Tension Packaging & Automation is a leader in complete packaging and automation solutions for the eCommerce and pharmacy automation industries. Our offerings can help you achieve your automation, growth and sustainability goals for 2023 and beyond, and are backed by our ongoing service and support.