Guide
How to build a capital equipment ROI case for a processing line
A step-by-step method for fruit and vegetable plants: set the baseline, price labor, yield and energy separately, add a conservative case, and state what the model leaves out.
By Dan Ghadiri · Updated · 9 min read
Key takeaway
A capex case that survives review prices labor, yield and energy separately from your plant's own numbers, counts the full installed cost, shows a conservative case at about half the expected gains, and lists what it leaves out.
Most capital requests in a processing plant don't get rejected. They get tabled, usually because the first questions in the room can't be answered: where did that labor number come from, what if we only get half the yield gain, and does the new machine cost more to run? The method below answers those questions before anyone asks.
1. Define the decision and the baseline
Write one sentence that names the decision, for example “replace the peeling step on line 2” or “add an optical sorter after the blancher.” Then describe how that step runs today: crew per shift, shifts per day, operating days per year (seasonal plants often run far fewer weeks than year-round plants), input volume, and the percentage of input weight lost at that step.
The baseline is the most important number in the case. Every saving is a difference from it, so use measured figures where you have them and label estimates as estimates.
2. Price labor savings
Labor savings are the hours the equipment removes, priced at the loaded rate:
annual labor savings = person-hours per shift × shifts per day × operating days × share of hours removed × loaded wage
- Loaded wage is the base wage plus burden (payroll taxes, workers' compensation, benefits). Use the figure your controller already uses.
- Share of hours removed should reflect redeployment reality. If two operators are freed but one moves to a new task on the same line, count one.
- Count only hours at this step. Don't claim labor elsewhere on the line unless you can name the change.
3. Price yield recovery
Yield savings are the extra saleable pounds the equipment recovers, priced at their value at that step:
annual yield savings = annual input pounds × yield points recovered × product value per pound
- The points you recover can't exceed the loss you have today.
- Value recovered pounds at what they're worth at that point in the process, not necessarily the finished-goods price.
- Don't double count. A price premium for better quality belongs in product value, not in additional yield points.
- For drying and grading decisions, “yield” may mean something different (water removed, grade-out rates). Model those explicitly.
4. Price energy and utilities as a difference
Energy is a delta, and it can be negative. Peelers, freezers, dryers and blanchers often use more electricity, gas or steam than the step they replace.
annual energy savings = (current kWh − new kWh) × electricity rate + (current therms − new therms) × gas rate
Use your own tariff, not a state average, and check whether a large new motor load changes demand charges. Add water and wastewater if the equipment changes them materially.
5. Count the full capital cost
Payback is only as honest as its denominator. The capital figure should be the installed cost: the equipment itself plus freight, rigging, installation, utilities tie-ins (electrical, steam, air, water, drains), controls integration, commissioning, training, and any production lost during the changeover. Note contingency separately so it can be discussed.
6. Add a conservative case
Show the case at about half the expected labor and yield gains, with the energy change unchanged. If the project only works in the best case, it isn't a case yet. An aggressive column (for example 1.5 times the gains) is useful context but shouldn't carry the decision.
Illustrative example
Illustrative example
Hypothetical round numbers for illustration only. Not data from any plant.
A hypothetical step runs 2 people × 8 hours × 2 shifts × 250 days = 8,000 person-hours a year. The new equipment is expected to remove half of them. Input is 10,000,000 lb a year, the step loses more than 1 point today, and the equipment is expected to recover 1 point. Recovered product is valued at $0.40/lb. The new equipment uses 50,000 kWh and 5,000 therms more per year. Installed cost is $260,000.
| Line | Calculation | Annual |
|---|---|---|
| Labor | 4,000 h × $25.00 loaded | $100,000 |
| Yield | 10,000,000 lb × 1% × $0.40 | $40,000 |
| Energy | −50,000 kWh × $0.10 − 5,000 therms × $1.00 | −$10,000 |
| Annual savings | $130,000 |
Simple payback = $260,000 ÷ $130,000 = 2.0 years. Conservative case (half the labor and yield gains): $50,000 + $20,000 − $10,000 = $60,000 a year, payback ≈ 4.3 years. Aggressive case (1.5×): $200,000 a year, payback ≈ 1.3 years.
7. State what's left out
Simple models leave things out, and finance will trust the case more if you say so. Common exclusions: maintenance and wear parts, downtime risk, depreciation and taxes, incentives, financing cost, and the time value of money. If the decision is close or the project is large, add discounting; see Payback, NPV and IRR explained.
8. Present it to finance
- One sentence: the decision and the recommendation.
- The baseline, with sources.
- Annual savings by line (labor, yield, energy), each with its assumptions written down and editable.
- Installed capital cost and what it includes.
- Payback (and NPV/IRR if your company uses them) in base and conservative cases.
- Exclusions and the main risks.
PlantBench applies steps 2 through 6 to your inputs and exports a PDF summary you can attach to the request.
Questions
- What should a capital equipment ROI case for a processing line include?
- A defined baseline, labor, yield and energy savings priced separately with written assumptions, the full installed capital cost, a conservative case at roughly half the expected gains, payback (and NPV if finance asks), and a plain list of what the model leaves out.
- What is a loaded labor rate?
- The hourly wage plus burden: employer payroll taxes, workers' compensation, benefits and other costs tied to each hour worked. Use the loaded rate your accountant already uses for labor savings.
- Should a yield gain be counted at the selling price?
- Count recovered pounds at the value of that product at that step, and don't double count: if the upgrade also earns a price premium, put the premium in product value, not in extra yield.