Optimation Blog

Buy yourself time to successfully execute capital projects

Posted by Steve Beyer on Sep 5, 2017 11:47:59 AM

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Very often commercial and industrial decision-making whether to outsource or not is governed by the time value of money, cost savings, and potential for productivity increases. But what if we look at another dimension, that is the opportunity to explicitly buy time?  Who doesn't want more?! 

We recently heard of a study that was aimed at behaviors regarding spending on services to "buy time" and how it produces greater happiness compared to spending on material purchases. It got us wondering if this example of personal consumer behavior would translate to commercial and industrial activity.  Specifically, we will examine correlating engineering and construction services to the consumer service-buying experience that produced the positive results in “happiness” and satisfaction.

To paraphrase the study abstract, greater happiness or satisfaction can come from time-saving purchases rather than spending on materials. Using money to buy time can provide a buffer, it says, "against a rising sense of time scarcity." This can help alleviate the stresses caused by our increasing sense of time pressures. Therefore, if this is true in our personal lives how can it be applied in our business?

Capital project applications and benefits

We will look at one area where the examples may be more amplified and therefore some parallels more easily drawn.  In many capital projects, large dollar volumes are involved, stakes are high, and time is usually tight.  In commercial and industrial applications, such as those in which Optimation is involved, there is often a great deal of equipment to be either designed or purchased and integrated to accomplish a given outcome. Teams are organized, specifications are developed, projects and milestones are defined, and budgets are approved and scrutinized so that the necessary business goals can be achieved.  Available resources get quantified and tested for their suitability and capacity.

Contact Steve Beyer About Capital Project Management

Applying the logic and the train of thought of the study work, we might see that greater team satisfaction, hence performance, may come from buying time through the outsourcing of services that free up the sponsor’s own. Often times, the clients or sponsors tend to want to utilize their own resources first and only outsource the drastically overcapacity state on an as-needed, worst-case basis.  Or in some cases, subject matter expertise dictates that extra resources do that work. A balance will need to be struck between outsourced services and capital equipment purchases for instance, it is often argued.

But the findings of the survey study suggest that when translated to our industrial scenario, spending on services offer a greater probability of a path to satisfaction than does spending on capital equipment. This leap of faith into this analogy requires further thought and study, but raises the question: given a fixed budget for a capital project in an industrial setting, how do you break that out? Do you spend on services to acquire knowledge, expertise and capacity or do you attempt to purchase machinery, facilities or other assets?

Take a recent capital improvement project we completed with a client of ours in the food and beverage industry. The client wanted to increase production capacity, which meant the buildout of a new facility, and purchasing multiple pieces of new equipment and parts. Prior to working with Optimation, the client’s own resources were executing projects themselves and were disappointed in the results. They experienced trouble with coordination and with responding to changes in the multi-phase improvement plan across various suppliers. The project effort was too big for the team to take on in addition to their other responsibilities, and so the project suffered. They realized they weren’t going to be able to get this complicated scope completed efficiently without hiring outside help. When they did, the project was completed and met their production goals, while they were able to focus on day-to-day operations and current production.

Buy time with services, increase your satisfaction

Spending on engineering services and construction services offers flexibility, scalability, and focus; there is the inherent ability to adapt and modify with relative ease and with greater control end guidance. That should produce increased satisfaction on the part of the customer or sponsor.  Spending on the materials produces relatively rigid and inflexible equipment and facilities. These are not changed easily nor quickly, and must be justified over long periods of time, often introducing greater risk and heightening potential dissatisfaction as circumstances change over time.

Attempting to morph this consumer-oriented paradigm to an industrial one is not perfect. Indeed, trying to make this a metaphor for industrial projects satisfaction very clear has some holes. However, It strikes us that there is something to be said for buying time which is always precious and in short supply in high-value projects. Choosing wisely between services and materials can lead to not only successful projects but also to increased satisfaction throughout the performance as well as with the final outcome. To read more about the study by Whillans, Ashley et. al. click here.

Topics: Mechanical and Process Services, Manufacturing, Upgrades, Project Management, Engineering Services

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The goal of this blog is to be helpful to readers by providing useful information about applications in industrial engineering, design and skilled trades, as well as industry knowledge. We're passionate about manufacturing in the United States. We have a little fun with it too.  

 

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