Capital Project Investing:  How to turn Complexity and Risk into Success

Posted by Pete Sherer on Jul 2, 2019 8:27:20 AM

Batch Process Equipment Food Industry

In business, it’s been said, “you need to spend money to make money.” This axiom certainly applies to capital investing, where market demands can be exploited with increased production through the careful implementation of new equipment.

The business owner who thinks strategically understands the benefits of installing more manufacturing capacity, of spending ahead to reap the rewards of greater revenues generated from a calculated uptick in goods produced and sold.

For the sake of our discussion, let’s cast you, the reader, as a young professional on a fictional plant floor, who has caught your boss’s eye, and who has earned the privilege of being named to lead the company’s just-announced expansion project. 

Your plant manager wants you to install some new process equipment, he thinks maybe the needed machinery could be on batch processing skids. You should be thrilled, right?  You are being thrust into the company limelight, as it were, and offered this great opportunity to help the company and advance your career. You have been looking for something challenging to do in your career…but you can’t help but be a little worried about how you are going to achieve the aggressive goals set forth for the project.

How will you be successful?

Establish goals.

For starters, you will want to sit with your boss and establish what his goals and expectations are for this pivotal project.  You will want to question him in detail about such topics as products to be produced on the new equipment, production volumes for these products, quality/yield goals for the line, project timing, spending limits, how much of the latest technology is to be considered, project justification…the list can be quite extensive. 

Ask around the floor.

In addition, you might want to speak with your peers in the company that will become stakeholders in the new facility, folks who work in operations, maintenance, production planning, etc. Their needs and wants should be figured in too, shouldn’t they? Establishing the Project Objectives and User Requirements are the first steps in defining what the project is intended to achieve, and in helping you as the leader understand what will ultimately need to be achieved for the project to be successful.

OK, so now we have down on paper (or maybe in Word) what we need this project to do for the company. You are starting to think ahead now, trying to determine the best way to satisfy what is being asked of you and your emerging project team.  You realize that you need help balancing or maybe optimizing the goals and requirements that fall into 3 categories:  Functionality, Cost, and Delivery Schedule. 

HOW will you get it done?

As you think about it, you are confident that you know WHAT you need the project solution to provide to the company. Your questions are now slanted towards HOW these needs are going to be met.  Some process and industrial engineering help would go a long way towards creating ideas for a suitable solution, but your available staff is already very busy with little discretionary bandwidth left over to help you.

There is a moment of realization now, that outside help is going to be required. Your next task will be to qualify, assess and select an engineering firm to analyze your goals and requirements, and respond to them with solution ideas. 

A firm with experience in the methods you use to build your products, along with a track record of predictable project performance, will be a must.

You realize that you want someone to collaborate with, as your needs as you have documented them leave room for a solution to take many forms.  You reach out to your Purchasing agent to determine who you should be assessing, and with their help, you design a process to evaluate the three or four firms that are deemed worthy of competing for your business.

What then begins to unfold is a choreographed series of events that might look something like this:

  • Qualify, interview, assess and select your engineering firm
  • Commission the firm to do a technology evaluation, select with you preferred method(s) to manufacture your product, and use these methods to build a system Concept Design. The Concept Design will be the vehicle that responds to the “What” of your Goals and Requirements with a “How” solution.
  • Perform a Concept Design Review with your team (including stakeholders) and your engineering firm. This review should demonstrate how the Goals and User Requirements are being met, plus give you a first look into capital cost and delivery schedule.  You will use this data to verify the project business case and payback.
  • If the business case is positive, you will then commission the next project phase (Preliminary Engineering). During this phase, you will expect to accomplish the following tasks:
    • Select equipment manufacturers and models. Solicit quotes from these OEM providers.
    • Generate first pass/single line utilities drawings
    • Design General Arrangement drawing
    • Generate Process and Instrumentation drawings
    • Document detailed execution schedule
    • Create a detailed equipment list
    • Generate a bottoms up project estimate
    • Document high level commissioning plan, Project Acceptance Criteria
    • Hold a Preliminary Design Review with your project team and stakeholders

The goal of Preliminary Engineering for you is to come up with your road map and budget to enable you to control the execution of the project and achieve the project goals. You will want these activities and deliverables to be constructed to help you do this, and to aid you in being able to take corrective action when the project objectives are in danger. 

There will be yet another series of activities upon the acceptance of the Preliminary Design Review (Detailed Design, Procure/Fabricate, Assemble, FAT, Install, Debug Commission, SAT) that will require detailed tasks, planning, and decision points along the way.

You are more confident as you track progress, interact with your project engineering firm, contractors and suppliers, and make daily decisions to keep the project on track.  You have exercised your ability to achieve little steps, that when completed according to your plans, add up to the project being on time and on budget…set up to be a success.

You have become a success story for the capital project execution methodology called Phases and Gates, and when the new line is turned over, you may even be asked to write a blog about how you did it.  


**Photo provided courtesy of Steve BonDurant and Once Again Nut Butter.

Topics: Mechanical and Process Services, Purchasing, Business, Skid Systems, Upgrades, Project Management, Engineering Services

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