Capacity Planning for Capital Projects: How to Realize the Best ROI for Equipment Upgrades
This paper focuses on the use of various engineering tools to more accurately determine capacity planning requirements & productivity requirements when specifying MHE to achieve the best ROI.
Excerpts from the White Paper are as follows:
Many capital projects start their life as an observation of a problem. “This equipment seems always to be backed up,” a shift manager notices. “This belt is always stopping when I am trying to unload cases from the truck,” an associate confirms. The problem is reported to upper management as a request for an equipment upgrade.
A maintenance or operations manager is tasked to seek quotes for upgrades or replacements to the equipment. A vendor provides a proposal for a replacement unit that will run at twice the speed that the existing equipment currently runs. For the initial investment provided in the quote it appears that the new equipment will achieve twice the throughput as the old equipment, and the labor eliminated will payback within 2.5 years. Perfect, problem solved. The project is approved.
The new equipment is installed and started up. Even though the shift manager who initially noticed the problem receives fewer complaints about the line being backed up, he notices that associates who load the line are still often waiting for the equipment to free up space. He looks back at several weeks of production numbers since the new equipment was installed to find out if the improved productivity that was expected was actually achieved. As it turns out, equipment that runs at twice the speed of the old equipment does not necessarily result in twice the throughput.
There are a few common drawbacks to using the high-level rationale to define ROI on an equipment project:
- Real-life operational inefficiencies are often overlooked
- The benefit may be based on unrealistic runtime or quality conditions.
- Equipment may be over-specified for the intended purpose, incurring unnecessary initial capital cost, or under-specified for the range of materials to be handled, resulting in add-on fees to fix the issue during start-up.
Read more by downloading the white paper below:
About Johnson Stephens Consulting
Johnson Stephens Consulting, a division of Hy-Tek Integrated Systems, is a supply chain operations consultancy that provides clients with cost-effective, service-focused solutions. Opportunities include Supply Chain Network Optimization, facility planning & design, WMS, TMS & LMS services, LEAN distribution, and operations excellence. Since 2003, JSC professionals have completed over 400 projects and served over 200 different retailers, wholesalers, e-commerce/direct to consumer companies, 3PLs, and consumer product distributors.
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