Crafting Success: How a Well-Written Business Case Transformed Manufacturing Capacity
Problem
Company Overview: The company, operating within the construction materials sector, faced significant challenges related to its manufacturing capacity and operational risks. The primary issues included:
1. Capacity Limitations: The company’s existing manufacturing capacity was quickly approaching its limit;
2. Operational Risks: The reliance on a single piece of outdated manufacturing equipment for a core product posed a significant threat to business continuity, highlighted by a past incident that halted production for several months and significant market share loss that took years to recover from;
3. Market Demands: With ambitious growth plans and new product launches, the company needed to expand its manufacturing capabilities to meet increasing customer demand and avoid operational compromises that could affect margins.
Solutions
Evaluation of Expansion Options: Stoke Consulting evaluated the best manufacturing options for the company’s expansion. The following options were considered:
1. Expand Existing Facility:
- Expand the manufacturing capacity with a second line at the existing plant.
- Move the expanded plant to a lower cost regional location.
2. Build New Facilities:
- Build a new manufacturing line in a different location while maintaining some existing operations.
- Establish a new manufacturing facility and scrap or mothball the existing plant.
- Relocate the entire manufacturing plant to a new location.
3. Do Nothing:
- Defer the investment and maintain the current setup.
Recommended Solution: After a thorough evaluation, Stoke Consulting recommended expanding the existing plant with a second production line. This option was favoured due to several investment factors including strong financial returns, substantial NPV, and a relatively short payback period.
Risk Analysis and Mitigation: A comprehensive risk analysis was conducted to address potential challenges such as business interruption, supply chain disruptions, and labour shortages. Mitigation strategies included establishing alternate manufacturing arrangements, developing a detailed project plan, and ensuring strong contractual relationships with suppliers.
Outcomes
The business case was presented to the company’s Global Board by the Regional Managing Director and was approved. Feedback from the Board was that the Business Case set a new standard in professionalism for the company and made an investment decision easy.
Benefits:
1. Increased Capacity: The expansion significantly increased the company’s manufacturing capacity, enabling it to grow volume by 36% within the first year and support new product lines.
2. Enhanced Redundancy: Introducing a second production line reduced reliance on outdated manufacturing equipment, mitigating the risk of business interruptions.
3. Financial Performance: The investment delivered robust financial returns with payback achieved in 18 months, driving long-term profitability and operational efficiency.
Conclusion: The consulting engagement demonstrated Stoke Consulting’s competence in constructing clear, logical and compelling business cases including evaluating and recommending optimal manufacturing expansion strategies.
Do you need help with the evaluation and de-risking of a difficult business decision, Stoke Consulting is here for you. Contact us today.
Stoke Consulting
Chris Read
Leveraging his extensive leadership and entrepreneurial background, Chris consistently leads high-performing teams of leaders to outstanding business achievements. He excels in unravelling the intricacies of challenging business scenarios, crafting strategic plans and business cases while fostering deep trust including during executive coaching. This comprehensive and high integrity approach significantly elevates business performance for his clients, helping them to exceed expectations. Chris’ experience includes successfully leading multiple $1B+pa businesses with full P&L responsibility across nine countries and 800 reports to starting, building and selling his own e-commerce business, all the while building high performing teams of leaders.
