A transformational capital investment project marks the start of an exciting new chapter, bringing fresh opportunities for any food and drink company to gain a competitive advantage.
When embarking on a capital investment project, it is natural to focus on the assets and building first, especially when deadlines are tight. In the race to secure land, planning permission and finance, before co-ordinating asset procurement and building work, project managers sometimes lose sight of the potential unforeseen costs often involved in large-scale transformation.
A company will have budgeted rigorously for a multimillion-pound capital investment project yet could go on to spend a significant percentage of this getting an asset operational and ensuring there is no disruption to service.
Issues generally occur during the transition, commissioning and ramp-up phase if they have not been forecast as part of the evaluation. Wasted raw materials, packaging and labour, for example, can soon push up operating costs, as can terminating or re-negotiating contracts with suppliers, recruitment, staff training and decommissioning existing assets without the necessary planning beforehand.
Other issues – such as not having sufficient labour with the right skillset – mean companies are forced to deliver at any cost or let down their retail customers and inevitably lose contracts.
By not factoring all this into the cost-to-achieve budget, the new facility or supply chain is unlikely to deliver the expected value in the first 12 months or beyond. As well as eating into profits, investors are certainly likely to question whether those at the top are in control of the company finances.
Project transition planning is designed to value these activities by providing a roadmap for every stage of the project, with defined and costed tasks at each stage.
Executed well, the plan sets out the business’ goals and how they will be achieved, ensuring there is buy-in from stakeholders at every stage. It involves assigning tasks and responsibilities to the right people and, importantly, providing cost estimates for each activity, so there are no surprises further down the line.
Rather than looking at the new manufacturing processes, systems and structures in isolation, transition planning should look at how teams should be organised around them.
By taking a holistic approach, it is possible to identify potential risks to business continuity and future success and then develop contingency plans in response. A good transition plan is always underpinned by a clear communications strategy, so senior management, investors and customers, as well as the wider workforce, knows exactly what is happening at each stage of the transition.
No business wants to invest in an asset, only for it to fail to deliver the projected ROI. Lack of transition planning in the evaluation phase can quickly cause costs to spiral and negatively impact commercial performance.
For details on how our team can support your transition planning, get in touch here.
Nigel Devine, Associate Project Director.
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