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The Essential Guide for ensuring successful CAPEX Approval in today’s Food Industry

10 January 2013

Introduction
The Food and Drink Industry is going through one of its most challenging periods of the last three decades. Cost containment is a key watchword and, as a result, investment, especially related to the factory floor environment, is closely controlled and restricted.

This makes it difficult for Project Managers to justify and gain capital expenditure approval, even though most recognise that shrewd investment in the right areas at this time can mean the difference between their companies being above rather than below average performers.

This guide outlines how to put together a cast iron ‘bullet proof’ case to gain CAPEX approval for the implementation of low risk - rapid return on investment projects that can significantly improve productivity, especially in the expanding ready meal and hand snacking sectors. By way of key questions, it gives a checklist to help Project Managers successfully manage such investments in a secure and timely manner - from initial project planning through to final execution – and all within budget.

Starting out
Firstly, it may be stating the obvious, but Project Managers need to understand, in broad brush terms, what they want to achieve for their company. For instance, this may involve qualitative and/or quantitive deliverables such as improving productivity, reducing direct labour overheads and improving overall product quality. Critical factory floor issues that have a direct impact on these issues can include:

• Reducing over-pack/giveaway through effective yield control
• Eliminating unaccountable losses
• Reducing waste
• Improving recipe formulation and product consistency
• Improving stock control


Trying to implement solutions for all these issues in one go can be difficult and expensive, but a future proof modular approach can be highly effective. Senior management will want straightforward justification for investment: defining the goals and key deliverables of the project is critical to success. Targeting areas that present the best opportunities for improvement has clear advantages. Answers to the following five questions can form the basis of a successful investment request and follow through:

1) How do you ensure a successful CAPEX sign off?
2) What key questions should you ask of your potential suppliers?
3) How do you ensure you deliver a ‘fit for purpose’ and effective factory floor solution? 
4) How do you get easy project ‘buy in’ from the operational team(s)?
5) How do you best present your post installation successes to ensure future investment approval from Senior Management?

1) How do you ensure successful CAPEX sign off?

• Do your homework and outline functional design specifications
• Identify potential suppliers
• Engage in preliminary trials to gather valuable factory floor data to form part of presentation
• Prepare ROI case – potential suppliers should be able to help with this
• Involve Board Level Directors, particularly Financial Directors when you can validate strong ROI

2) What key questions should you ask of your potential suppliers?
Selecting the right supplier(s) for a specific project can be a daunting task, especially with companies queuing up to bid for a ‘reduced slice of the cake’. However making the correct selection is crucial to the success, not just of the project in hand, but also future projects. Before any proposal for CAPEX can be consolidated, Project Managers should ask potential suppliers key initial questions.

It is important that any potential supplier should be able to provide ‘plain english’ answers to the following questions and they should also be able and willing to help put together that cast iron case for investment in their solution.

What percentage of the supplier’s business is within the food sector?
The Food Industry has unique and challenging operational requirements. This makes it very difficult to implement non-food specific systems and solutions within the food environment. Therefore the ideal supplier should be able to demonstrate extensive knowledge and experience within this sector. 
What is the expected ROI?
Low risk - rapid return on investment guarantee is critical to gaining your CAPEX approval. Your supplier should be able to calculate what this will be for your project based on certain criteria and in addition provide documentary evidence of effective ROIs from other customers.
Who will be ultimately responsible for ensuring the system is fit for purpose?
This will typically be a joint effort but the supplier should give firm commitment to ensuring the system meets defined key deliverables. Single source supply has a number of important advantages. Ideally your supplier should be able to supply the hardware, instrumentation and software without the use of third parties.
How will the supplier ensure seamless integration between the factory floor data and your management system?
It is essential that factory floor data provides dynamic, real time information. This can then be used to good effect, allowing management to be proactive rather than reactive.
What proviso will there be from the supplier to ensure future proof expandability?
Customer demands and changing market forces will mandate that today’s factory solutions will need adding to and upgrading in the future. Check that your intended supplier can support this essential requirement without unnecessary and expensive redundancy.
How will the installation of the new system impact on day to day production?
Additions to existing plant need to bring minimum disruption. Plug and play equipment modules together with wireless connectivity can significantly reduce installation times.
What training will be necessary for all parties concerned and what ongoing support is available?
Training for operators and management should be an integral part of any proposal. Given the fluidity of the food sector workforce, this can be an ongoing requirement.

When all these questions have been answered successfully and coherently, you should be able to work with the chosen supplier to generate a cast iron case for the investment that can be presented to senior management.

3) How do you ensure you deliver a ‘fit for purpose’ and effective factory floor solution?
• Involve all parties from the outset, including factory floor operatives (they can be a major ally)
• Appoint a ‘System Champion’ – give one person ultimate responsibility to make things happen
• Evaluate and set clear objectives based on the original specification
• Establish a documented installation plan
• Be prepared to be flexible as the project progresses – consider implementing Agile Project Management (APM) techniques that re-assess priorities/time scales on a scheduled basis
• Maintain tight control of budgets
• Supply required skilled resources where and when required
• Ensure effective information flow through defined chains of communication (internally and externally)
• Evaluate project progress performance through key performance indicators

4) How do you get easy project ‘buy in’ from the operational team(s)
• Adopt a Collaborative Approach – engage with all parties (internal and external) concerned. The key members of your team need to take ownership of the project by ensuring all relevant areas of the company feel part of the project and contribute to its success.
• Clearly explain to all parties how they will benefit from the planned improvements (e.g. reduced everyday production problems, improved job security etc)
• Partner with the vendor in this through the use previous case studies -encourage use of video examples of successes at other sites to demystify the solution on offer.
• Hold regular update meetings to discuss progress, road blocks and set forward objectives
• Involve senior factory floor personnel in the design of fit-for-purpose hardware and system layouts

5) How to best present your post installation successes to ensure future investment from Senior Management
• Ensure that you, as system advocate, know how to extract critical data that will be presented at debriefing
• Keep clear documented evidence of savings/improvements especially related to ROI
• Clearly demonstrate any ancillary benefits not identified at the beginning of the project
• Monitor and present the work force’s positive buy in and general attitude to the new system
• Provided you have documented evidence, show how ROI has been achieved and use the success as a platform for your next project proposal

Note: This white paper can be down loaded from the Marco website: http://www.marco.co.uk/en/downloads.php

Marco
provide Innovative Factory Floor Solutions that uniquely meet the requirements of the Food & Beverage, Fresh Produce and Flavours & Fragrances, industrial sectors.

Marco design, manufacture and install low risk – rapid ROI modular control solutions that:

• improve factory floor productivity
• improve product quality
• improve profitability opportunities


Marco offer fit for purpose systems uniquely tailored for specific industry requirements, based around proven technology developed and refined over the past 25 years. Over 350 worldwide installations for leading brands stand testimony to Marco’s expertise and knowledge. Modules can be installed individually or as part of a wider ‘fixed functionality’ MES solution that brings Total Control from goods in to goods out. ROIs of 12 months or less are typically achieved for clients.

Key deliverables are:

• Reduced giveaway/overpack
• Increased line speeds and productivity
• Elimination of unnecessary waste
• Improved stock control
• Reduced direct labour overheads
• Improved recipe formulation- elimination of spoilt batches
• Elimination of unaccountable losses
• Brand protection through centric focussed label error elimination


For further information, please visit www.marco.co.uk or e-mail info@marco.co.uk or telephone: 01732 782380
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