Contract Rental Program for Analytical Equipment

Interview conducted by Stuart MilneMay 30 2014

Tom Davies, Sales Director at Instron, talks to AZoM about their contract rental program and how it can benefit their customers in today's economic climate.

Please could you give our readers a brief overview of the idea behind Instron’s new contract rental program?

Instron is one of the best known global providers of materials testing equipment. Our customers use our equipment and services in a wide range of quality control, product development, and applications testing.

Put simply, the contract rental program allows organisations to rent Instron machines and accessories for a fixed term, usually fully inclusive of all service and calibration requirements. This can be for a monthly or quarterly payment and without the need for upfront capital investment. As a result, organisations can start using modern testing equipment, such as Melt Flow Indexers from less than £10 per day, and Tensile Testers from less than £20 per day.

There are several financial and fiscal advantages to this type of agreement. For example, it often enables laboratories to start using the equipment earlier than with a capital purchase route, allowing them a quicker return on investment – all whilst fixing total ownership costs over the period of the lease. It also allows companies to keep up to date with the newest technology on the market, without having to drain capital resources.

How long have Instron been running this program for?

We began offering this program to our UK customers in the autumn of last year, so it's still relatively new. However, we’ve already seen a significant level of interest in companies taking advantage of the chance to quickly access quality new equipment. The UK economy has recovered well this year, and is now one of the strongest in Europe, but that recovery hasn't necessarily been sustained long enough for confidence in capital investment to return to pre-crisis levels. This program allows companies the option to meet their operating improvement objectives quickly and with a positive effect on their balance sheet.

Why does this program offer your customers a quick return on their investment?

In today's economic climate it is particularly important that businesses critically analyse the return on any investments that they make, and this is true for industrial organisations creating a justification for purchasing new testing equipment. Many companies in the current climate will decide not to invest right away, because they feel that they need to see a return now, rather than one that will come into fruition in a few years’ time.

The benefit of this program can be seen as a comparison between a small monthly investment vs an outright purchase. By renting new equipment that offers a lab additional testing capabilities, they will start seeing an ROI straight away. Assuming that the revenue this new system generates outweighs the monthly (or annual) cost of the system, then there's really no reason not to act sooner rather than later.

Can you provide our readers with an example where this program has resulted in significant benefits to your customers?

A recent example involves a product development laboratory within a very large multi-national chemicals conglomerate. They already owned Instron equipment and wanted to upgrade it as part of a new product development program. Despite having a solid investment case and being able to demonstrate how critical this was to the program, capital investment restrictions driven by the corporate financial controls prevented an outright purchase. By utilising our contract rental program, the customer was able to start using the new equipment immediately and contributed fully to the development program. In addition, the contract rental attracted the support of the customer's finance and procurement groups due to the fiscal and ROI benefits, and they are now expecting this to be the default option moving forward.

A potentially more surprising example is that we're seeing strong interest from the academic sector. With an increasingly strong commercial focus and the need to attract new fee-paying students, they see the acquisition of new teaching and research facilities as business critical. The contract rental program allows costs to be matched to future revenue streams, therefore providing a positive cash-flow impact, as well as ensuring that the equipment is frequently upgraded. This ensures that the best possible facilities are presented to potential students and research customers.

What flexibility does the rental program offer in terms of upgrading systems?

During the term of the contract the customer can add additional capability in the form of accessories, which are simply added to the rental contract agreement. In most cases, the incremental payments are very small and easily justified.

At the end of the contract term, Instron works with the customer to decide the next best option: retain the equipment as it is, return it to Instron, or upgrade it to the latest equipment usually without any significant increase in the monthly rentals that have already been agreed.

What support is offered to customers who invest in this program?

It can vary based on the customer's needs, but usually the best option is a full-service rental. This means that all service and verification requirements are included within the fixed monthly payments. The primary advantage of this is that all costs are known and there are no surprises in the cost of ownership. This is an increasingly attractive proposition to businesses as they seek to remove uncertainty, and is also a well-known model to consumers who increasingly use similar models for everyday items, such as vehicle ownership and computers or domestic technology.

How do you see this program developing as you move forward?

Based on initial interest in the UK, we're working on being able to offer similar programs in other countries. For those users already in the program, we’ll be working with them to help plan their investment options during and after the term of the agreement.  

How has the industry received this program?

We're on a mission to educate potential customers of the benefits. Some of our customer’s organisations are very future-thinking and have already adopted contract rental for a wide range of requirements. In some sectors, contract rental eventually became the default option (does anyone actually own a photocopier these days?), and in other sectors – like IT equipment and software – it is becoming increasingly common. However, the concept is still relatively new in laboratory instruments. We find that it’s important for customers interested in exploring this option to involve their finance teams who can add a great deal in determining the cost justification advantages of a rental program.

Are rental programs a trend that you are seeing across the industry in general and do you see these increasing in importance in the future?

To the best of my knowledge, this is the first, fully-integrated manufacturer program in our market, and we're pleased to be spearheading such a change. The benefits in many cases are undeniable, and in other markets, once the trend moved towards rental it became the dominant option. So yes, I think, you can expect to see this becoming a much more prevalent means of equipment ownership. There's no getting away from an increased focus on cost justification in the majority of businesses and this type of program provides an effective alternative to capital purchase with significant operating and financial advantages.

About Tom Davies

Tom is the Sales Director at Instron, covering Europe, the Middle East and Africa. He has been with Instron for 15 years, having worked in a variety of sales and business management roles across Europe, the US, and in Asia. He holds a degree in Materials Science and Engineering from Swansea University.