According to a 2019 survey from EY (formerly Ernst & Young Global Limited), only 38% of manufacturers take a formal, strategized approach to allocating their capital. Unfortunately, that means nearly two-thirds of manufacturing companies may be leaving money on the table, missing out on opportunities for increased growth or making suboptimal investments.
You don’t have to have an endless budget to create innovative solutions for your manufacturing plant. In fact, we think it’s best to do more with less. When you use a tool to identify the most beneficial and strategic ways to allocate your capital, you can save funds up front while also continuing to provide value down the road. We’ll explore more of the potential long-term benefits of strategic capital allocation below.
Avoid Investments with Mediocre Results
In any business investment, there’s an expectation that the venture will financially benefit the company and eventually pay for itself. However, without a systematic approach to capital allocation, there is no guarantee your manufacturing plant will see the returns it needs.
An advanced planning tool can help you create a virtual model of your unique plant, allowing you to test different scenarios with new pieces of equipment or technology. By working through scenarios with various investment options, your organization can discover exactly which assets will underperform or fail to generate profit at the needed rate before making an ill-advised purchase and wasting valuable funds.
On the other hand, testing a wide range of investments may also uncover previously overlooked opportunities that will actually produce remarkable returns. With an advanced planning tool, schedulers can rapidly run through thousands of scenarios, a feat that would be impossible to accomplish manually. These capabilities help organizations find the most inexpensive route to their ideal outcome. Over time, the capital you saved by avoiding poor investments and choosing only advantageous purchases will grow exponentially.
Be Better Prepared for Potential Risks
All investments will inherently carry some form of risk. However, with advanced planning, you can be as prepared for the risks as possible and prepare for them appropriately. With a precise and accurate rendering of your plant’s schedule after the new investment, the organization can devise solutions to address issues or inefficiencies as they occur.
For example, say your plant is planning to purchase a new piece of equipment that may help speed up production, but is reliant on a certain raw material that is expensive or frequently in low supply. Once you know how those risks may affect the equipment’s capabilities, you can make plans to stock up on materials when the price is lower or have multiple suppliers on hand in the event of a product delay. Armed with this information, you can be better equipped to manage the risks and make the investment worthwhile.
Stay on the Cutting Edge
As you plan for the future, making strategic and systematic investments will ensure that you company stays on the cutting edge of innovation in the industry. This approach allows you to save capital for emerging enhancements, while avoiding trendy ventures that may not benefit your unique organization. Having the ability to make these crucial decisions will only become more important in the coming years as supply chains get restructured, raw material prices rise, and the manufacturing industry continues to change.
An advanced planning and scheduling tool is the key to identifying strategic manufacturing investments and allocating capital wisely. Our tool, VirtECS, has been perfected since 1993 to create virtual plant models that can accurately display a variety of different scenarios and corresponding production results. We frequently hear from our clients that they would never have been able to make as many beneficial changes to their plants without VirtECS. For more information on how VirtECS may help your organization, download our guide here.
