Why do we need an Automatic Packaging Machine?

Right now we manually fill coconut oil in pouches and seal it. But with increasing demand for oil in pouches and my instinct to relook at everything we do. I thought of using an Automatic machine to pack oil in pouches. That machine is also called as F.F.S machine or Form Fill and Seal machine. Given a roll of plastic sheet, it Forms the shape of pouch, Fills it with exact quantity of oil and Seals the pouch within a matter of 2-3 seconds. I don’t claim the idea to be a stroke of genius as every big oil mill does it. But ours is a small unit and here are my reasons to still go for it -
1. Low manual labour – This is the biggest reason as lack of labour force is the biggest constraint for everybody (homes, farms and industries) in Dakshina Kannada. Manual packaging requires 8 man hours to pack 200 pouches. Automatic machine completely eliminates them. Still little work is required by somebody to just watch the machine operation and feed the inputs (oil and pouch roll) from time to time.
2. Excellent finishing – The finishing of the packets are so perfect that it gives a premium look for the product. This type of finishing helps in charging a higher price or selling more or lowering selling costs.
3. Less leakage – In manual case, there are a little chance that oil leaks even after good packaging. This leads to obvious loss of oil and presence of oil on surface of other packets. More importantly this leads to strain in trade relationships. We lost relationships with at least 3 retailers because of this and failing to acknowledge it as our problem.
4. Accurate measurement – In manual case, there is a variation in measurement of oil filled into the packet. The quantity filled is generally higher as anything lower would lead to rejection by sensitive customers. This variation can cost us maybe 2-3% of the value. Automatic machine would bring this variation down to less than 1%.
5. High speed – Even for slightly viscous liquids like coconut oil, automatic machines pack at 500 pouches per hour. The corresponding figure is 25 for manual packing. During peak season we had to pack about 2000 pouches a week. 80 man hours or 2 people need to work 5 days @ 8 hrs per day on packing. Automatic machine does it in just 4 hours flat! Because of not being able to pack in time, we had lost a few orders last year.
6. Lesser material cost – Material required for Automatic sealing is Low Density multilayered polyethylene film, that for manual is laminated 3-side sealed pouch. In manual case, because the pouch has to be sealed on 3 sides by material supplier, it costs about 35 paise more per pouch. So, automatic machine saves 35 paise per pouch.
7. Long term investment for growth – Benefit of automatic machine only increases with increased volume of packing. For the volume of packing we are currently dealing, it can be managed with a semi-automatic machine. But for the consumer demand for pouches and our growth plans it is better to invest now. It clears of this constraint that of packaging and enables us to tackle other growth constraints.

But the following are the drawbacks
1. High investment – The machine alone would cost 3-4 lakhs. The accessories like Compressor, Stabiliser, Cooler, Storage Tank and Pipeline would cost about 1-2 lakhs. Total investment of about 5 lakhs. Assuming that the machine lasts 10 years, rate of interest is 15% EMI comes to about 8,000 or Annual cash outflow of about 1 lakh. If we pack 50,000 pouches a year, machine cost is 2 Rs per pouch.
2. Risk of failure – This will be the first time we will be installing a machine of this nature. With multiple components involved and lack of experience there is a possibility of failure. If the machine fails there is no manual packaging backup as the material is not suitable for it.
3. Maintenance Cost – Any temporary failure will need a supplier company technician to repair. His charges per day are 1000 and charges for AC train to and fro and lodging.
I have anyway decided to purchase one and posted about 100 enquiries by searching on web and on B2B trade directories. I got about 15 responses within 3 days. I have tough task of now selecting a good machine for less price.