Making a wrong project investment decision can carry severe penalties in lost production, inefficient processes and bottlenecks. And small companies often lack the resources, skills and accumulated experience that guide their larger counterparts.
One answer is to adopt a formal selection procedure. The machinery and process selection package published by AMTRI, for example, steers the smaller company through selecting, justifying and project managing the purchase of new or refurbished equipment.
The package has been designed to require minimum external support. A step-by-step procedure takes managers through drawing up a manufacturing strategy, developing the capital case,monitoring the equipment’s manufacture, its location and installation, and procurement procedure and audit trails.
The package, based on practical experience gained in large engineering companies, falls into three parts:
The first comprises an in-depth questionnaire designed to establish a better understanding of manufacturing strategy. It does this by identifying product lines, customers, suppliers and competitors.
Next comes a workbook, for use with the questionnaire, in which critical issues are considered in a structured manner.
The third part provides a facility to record data, analysis and the decisions made during the lifetime of the project.
A series of questions helps define manufacturing objectives, such as where acompany is, where it is going and how it is going to get there.
The answers are assessed for compatibility – how future investment squares up against existing factory layout; how layout will impact on factory flow; how process flow will impact on the output required; and whether workforce availability matches the skills/training needed. The objective is to establish a refined manufacturing strategy.
A path will need to be negotiated through a tangle of interrelated issues to put such a strategy in place. The only way of ensuring a clear path is by careful planning. The answers should confirm or redefine the plans. Companies must know what their market share is and their competitors’ strengths and weaknesses.
For the next stage there should be a structured approach, with a defined order of events. It could be worthwhile to discuss plans with suppliers and customers. New processes or equipment may depend on deliveries of materials and parts, while the planned investment may be aligned to existing customers or long-term contracts.
A process or equipment change might enable follow-on changes in design and manufacture favourable to customers.
Planning a new investment is a team effort, even in a small company. Often the end result will require a culture change. It is important to include those who will use the equipment and win their support early, and at all of the decision milestones.
A point of contact is advised – a project leader to be responsible for the timescales, budget management and for maintaining and reporting progress. Support from a consultant may be needed but the company should remain in charge.
Exchange rate changes may influence the decision to lease, rent or buy. Leasing may be preferred on short-term projects.
At the start and in the specification stage there may be a large number of potential suppliers. Through practical tests and commercial assessments the selection will be made and the order placed. External help may be desirable.
A formal mechanism to maintain records relevant to the project is recommended. The project leader should record for each activity the actions, relevant documents and their location. This will be invaluable in the event of a dispute within the company, or with suppliers and customers.