Making a business case for your food facility expansion

Making a business case for your food facility expansion

From recipe development in your own kitchen through scale-up in a commercial space to large-scale production in a manufacturing facility, growth is the goal for food manufacturing companies.

You hope a day will come when consumer demands outweigh your facility’s production capabilities. At that critical inflection point, you have an extremely important decision to make regarding how you will change your operations to respond. Your best option might be to modify your existing facility or operations to increase production capacity. Alternatively, your situation might require undertaking an expansion. But expansions can be costly. Will the returns justify the investment?

Every case is different, but there are consistent criteria you can use to evaluate your unique situation and determine the best course of action for you. This is where developing a business case can help you decide. Consider all options when making a business case for your expansion, including the option to reconfigure or repurpose your existing facility. Will your current process and capacities support your short- and long-term needs? Due diligence and careful planning will result in a business case to support your goals and provide the greatest return on investment.

Gather fundamental data to build a case

Your data needs will vary based on the type of business case you are trying to build. Greenfields, retrofits, new equipment, etc. each comes with its own unique data requirements. However, when it comes to developing a business case for expansion, some of the typical information artifacts you will want to gather include:

  • Throughput: What is your current throughput? What should your throughput rate be to meet your target demands? Do you want to make this in-house or would buying be a more attractive option?
  • Headcount: How will you plan to grow over the next 5, 10, 15 years? Which department is expected to experience the largest growth over this planning horizon? Does your current facility support this growth?
  • Equipment: Is your facility equipped to handle an increase in demand? Do you have the right or best-in-class technology/platform? Where and when would automation make sense?
  • Utilities: Are the utilities in your facility able to handle additional equipment? Increased headcount?
  • Storage needs:  Do we store all material in-house? Can we use third-party logistics (3PL) for our storage and logistical needs?

Consider the spatial and financial implications of each aspect as you evaluate the business case for expansion.

See the big picture

Don’t just look at the problem in front of you, be it a bottleneck in the line or equipment that seems too small. Instead, challenge yourself to see the big picture, with a focus on the end-goal. Consider all solutions and the impact they will have on all areas of your operation. A small change in one area can create a ripple of changes in others.

Often teams focus on a problem that is specific to one area of the facility. For example, to increase capacity, a team may add a piece of equipment to the line. However, this solution may not have the desired result. Instead, it may move the bottleneck to another location. In such cases, the change does not support expected financial gains.

Also, companies tend to give a lot of attention to processing/production lines (and rightfully so), while overlooking support functions, e.g. warehouse, quality assurance/quality control, maintenance, and even office spaces. Any change in the process can have a significant impact on these support functions. Thus, a holistic analysis of changes should be evaluated.

Avoid unanticipated cost during the design phase

Work closely with your project partner to carefully manage your project and provide them with the best data possible. The data and assumptions you provide will be used to develop calculations and models that fuel your business case.

The most common issue in the design phase is a lack of good data, which hinders your ability to establish good assumptions. Calculations and models rely significantly on data and their underlying assumptions. If models are built using incorrect data or poor assumptions, the model outputs and results will not be reliable.

Good data may not always be available and trying to run all possible combinations and permutations can negatively impact project budget and schedule. In such cases, subject matter experts should start with the best set of assumptions they can make and fine-tune them by performing sensitivity analysis and other statistical methods. Modeling and simulation, especially discrete event simulations, can be an effective technique to characterize variability, uncertainty, and identify the variables that influence your metrics the most. This technique is also well suited to perform different ‘what-if’ analysis and to help visualize operations.

Engage a strategic facility planner

A strategic facility planner can help with a data-driven decision-making process

Facility planners can help you understand and document business needs. While establishing the business drivers and needs, facility planners evaluate by space types the occupancy and usage of existing spaces (baselining). Typically, space metrics will be developed for this baseline. This involves data analytics, building space models, and benchmarking. The baseline metrics will show the space ‘supply’. The business drivers, e.g. new products, additional volume for existing products, additional headcount, new technology/platform, etc. can help quantify the space ‘demand’.

This supply vs. demand analysis can help stakeholders understand the space ‘gap’, which can then be addressed by an expansion or other strategies, e.g. outsourcing, 3PL, etc.

Whether you plan to modify or expand your existing facility, don’t miss the crucial step of gathering all necessary data first. Your business case drives everything else that follows, so allow yourself the time to prepare one that will support your goals and provide the greatest return on investment.

Case in point: Our client, a global nutritional company, wanted to modify their existing facility that produces and packages liquid and power nutritional products. The goal of this project was to improve the facility, operations therein, and reduce operating and material handling and distribution (MH&D) cost. Upon completing the operations improvement study, CRB was able to help the client achieve the following outcomes:

  • Overall savings of more than $3.8 million annually
  • Cycle time reduction in MH&D procedures by more than 50%

Ready to make your case? A high-quality business case includes information backed by research and data. Our team of consultants are here to help.

Let’s talk.

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