When major operational changes require large capital investments, the unknowns of the outcomes can weigh heavily on an organization. Pre-capital consulting is crucial to delivering a successful project, especially for companies that have multiple departments with diverse responsibilities or functions.
Pre-capital consulting offers a highly customized evaluation of a business’ objectives, project concepts and timing against current industry construction costs. This thorough assessment helps to create confidence in how a capital investment should be utilized.
By laying everything out on the table, business leaders can more honestly evaluate their goals and needs through an objective third-party lens that offers several potential solutions and an evaluated return with each alternative. This way, the business can move forward knowing it has fully vetted opportunities and anticipated costs before selecting the right fit for a specific need.
Rate of Return
Capital investment planning looks at various levels of investment so the leaders of the business can determine how each level might create savings opportunities. This allows the business to compare each option before deciding on a path forward.
To calculate the rate of return on an investment, factors like equipment and construction costs, labor costs, and one-time impacts, as well as sales projections and avoidances, are considered.
Labor Constraints and Automation
In today’s market, the constraints on labor availability are higher than ever. Being able to understand how to reduce dependence on labor can have significant impacts on an operation. By evaluating automation opportunities and understanding the potential payback of those investments, it can be determined if and how a long-term investment will be beneficial. An experienced pre-capital consultant can also compare investments to see which one is a good fit. Additionally, automation specialists can perform a preliminary audit to determine if automation is right for your operation.
Production and Shipping Conditions
To assess production and shipping requirements, the current process within a business is first assessed to forecast ebbs and flows in the years ahead. An accurate picture of the current climate includes looking at volume and if the business is meeting customer demands within the existing capacity and timeline.
Next, in looking ahead, trigger points are identified that could cause volume to exceed current capacity. This could include growing demand, changes in shipping, launch of a new product or improvements in operational efficiencies.
With current and future conditions evaluated, existing systems can be assessed to determine if they will meet long-term demands. Even in a situation where volume is flat, adding new technology or automation could drive down labor requirements, making investments worth considering.
Sites and Their Locations
Over time, manufacturing organizations must keep tabs on the number of sites in which they operate, as well as their locations. If operating a handful of aging production facilities, it may be time to consider consolidating production to minimize facilities and increase capacity. A supplier might consider relocating so that it could be closer to consumers or customer growth areas.
These factors should be evaluated every couple of years to maintain a competitive edge in the marketplace.
When looking at improving efficiency, pre-capital consulting doesn’t always require a costly capital project. An experienced pre-capital consultant can identify whether an organization’s goals can be accomplished through simpler — and less costly — process improvements. For example, this could include taking steps to improve maintenance for production to reduce interruptions or breakdowns before jumping to a more robust option.
Our experienced team at Burns & McDonnell can evaluate the current process using tools that follow the flow of materials from the time they enter a facility, through production, all the way to shipment. This process identifies challenge areas where flow is being disrupted. It also highlights opportunities to increase efficiency, whether by installing new technology or improving operating systems.
Careful consideration should always be provided for capital investment projects. The comprehensive and individualized process of pre-capital consulting enables business leaders to utilize outside assistance and knowledge when identifying goals, evaluating financial returns and setting strategies for future success.