Capital Investment in a Recovering Economy

“In this economy and technological age, a bad decision can put a company out of business.” That’s how one participant in the NAPL Capital Investment Study puts it. He’s right, of course. Margins for error are shrinking across our industry. And while the return to making the right capital investments is greater than ever, so is the cost of making the wrong ones.

Over 350 companies, with annual sales ranging from under $1 million to over $350 million participated in our study. Topics included investment priorities for the next three years, priorities for the last three years (past priorities explain a lot about future priorities), investment rates, plans to invest in new equipment, in used equipment, to expand capacity, to replace capacity, the most trusted sources of capital investment advice, and where the capital investment process most needs to be improved. Here’s some of what we learned:

• By more than 2-to-1, participants in our research plan to invest less in capital equipment over the next three years than they did over the last three years. Uncertainty about the economy and our industry is part of the reason. But this is about more than waiting for the clouds to lift. It’s about a tough new mindset—born of an extraordinary recession—that will invest “only when sound measures of expected return justify investment, not because our competitors are investing, we’re getting a deal, or it’s new, hot, and going to make all the difference.”

• Digital infrastructure, bindery/finishing systems,Web-to-print and e-commerce, and variable-content digital printing are top five priorities for the next three years, just as they were for the past three years. Priorities vary by company size, but similarities across size categories are far more significant than the differences. For example, digital infrastructure and bindery/finishing systems are among the top five priorities in every company-size category.Web-to-print/e-commerce is among the top five priorities for all but companies with sales of $1 million or less. And workflow solutions and variable-content digital make everyone’s top 10, with at least one of the two in everyone’s top five.

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