Ensuring your CapEx plans will yield the best return on investment is key to any successful business. However, the first step is not necessarily one that would usually spring to mind!
What Are The Core KPIs Of Your Company?
Identifying and subjecting your CapEx decisions to the core KPIs of your company is key to ensuring the best ROI for your capital expenditure. All too often, when evaluating and allocating CapEx budgets it can be easy to lose focus of the core company goals, and become diverted by projects that aren’t necessarily going to bring the best ROI to the company. Having identified the core KPIs of your company, you can then move on to;
What Is The Bottleneck That Is Stopping You From Achieving Those KPIs
Having a clear understanding of what is stopping you from achieving those KPIs is the first step to knowing what area you need to focus on. A bottleneck occurs when part of a process has a lower throughput capacity than the rest of the process. Identifying your main bottleneck can often be a very straightforward process, and may even be something you are already aware of. However, sometimes it can be a lot harder to identify, and you may need to create a flowchart of the process where you believe the bottleneck may be, and then work through this flowchart until you find the bottleneck. Bottlenecks can occur due to anything from a lack of capacity to process at the necessary speed, to breakdowns and breaks slowing the process down. Further details on identifying and exploiting bottlenecks are available here. Having identified the bottleneck you can then move on to the next process;
What Needs To Be Done To Exploit The Bottleneck?
Identifying the reason for the bottleneck and finding the best solution to it is often achieved by a team brainstorm session. Involving those that are closely acquainted with the current process is often the best way of clearly establishing what the weaknesses of the current systems are, and what solutions could be used to resolve these issues. With a clear idea of why the bottleneck is occurring, and some suggested solutions, it is then possible to gain an understanding of what needs to be done to exploit the bottleneck. This may be something as simple as streamlining your process, staggering staff breaks, or running a regular maintenance schedule. However, it may mean that you need to automate part of your process or purchase another machine so that you can produce parts faster. This then leads on to:
How Do I Calculate The ROI Of My CapEx Investment?
Calculating the ROI of your CapEx Investment to enable you to compare the ROI on different solutions is the next step. Once of the best ways to do this is to use a comprehensive ROI Payback calculator as this will take into consideration many different factors such as; current machine downtime, staff breaks, defect percentages and costs, etc. You will then be able to establish the payback period for each investment. It is also important to investigate the value of intangible benefits for your proposed investments as this will also play a significant part in the overall ROI that you can expect to achieve. Having calculated these figures for the different solution, you then have meaningful data that you can compare to enable you to see which solution is going to provide the best ROI for the company in the long run. Next step:
Find The Next Bottleneck!
Having found a solution to your bottleneck, you can then go through this process again to establish where the next bottleneck is that is stopping you from achieving your company KPIs.
Conclusion
Whilst this process may not be the most commonly used for identifying and allocating capital expenditure, it is one of the best methods of keeping your CapEx focussed on yielding the best return on investment for the company. Keeping you CapEx aligned with your company’s core KPIs ensures that you receive a direct return on investment that is in the best interests of the company. Using the same evaluation criteria across the company for your CapEx budget setting procedure will also give you meaningful, comparable data that allows you to quickly see what the best investments are going to be for your company.
More useful resources are available for download in our Robotics & Automation Resources Pack.
If manual palletising is one of your production throughput bottlenecks, you may wish to consider the Granta GA15 robotic palletiser.
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