Logistics News - Sorting It Out

Cliff Holste is Supply Chain Digest's Material Handling Editor. With more than 30 years experience in designing and implementing material handling and order picking systems in distribution, Holste has worked with dozens of large and smaller companies to improve distribution performance.

January 10, 2018

Sorting It Out: The Chances for Project Approval Just got Better

When Seeking Project Approval – Be prepared With Facts & Figures

As we kickoff 2018 there is a good deal of optimism that the economy will continue to improve. This optimism will no doubt encourage business managers to reconsider improvement projects, large and small, that are on-hold pending funding approval. This is of critical importance given that many shippers have been delaying investments in projects that require capital funding. Of course, another important consideration has to do with understanding the impact of the just passed Tax Cuts Jobs Act of 2018. As a result, CEO’s/CFO’s are now thinking about how best to invest the company’s cash reserves to maintain a secure, prosperous and growing business in an expanding marketplace.

This means that capital projects must be presented so that top management can clearly understand the risk/reward benefits.

To put your project in the best light - highlight benefits upper management can buy into. Being prepared and knowing how to quantify and effectively communicate the expected results for your project will increase your chances of obtaining approval.

Holste Says...

Being prepared and knowing how to quantify and effectively communicate the expected results for your project will increase your chances of obtaining approval.

What do you say?
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The following are ten tough questions you can expect the financial officer of your company to ask:

We couldn’t justify this project in the past. How come we think we can do it now?
What happens if we continue to wait and do nothing?
Is the schedule realistic? What is the impact to the project justification if problems delay the startup?
What unique risks (business, operational, internal technical resource) does this project pose?
What other strategies did you look at and why is this project the best alternative?
What is the impact to the project justification of changing cost of capital, errors in forecasting, or other unforeseen conditions?
What do you mean a (36) month payback is unrealistic for this project?
What is the impact of this project on the company’s long & short term strategic goals?
Why did you quantify intangible benefits such as higher employee morale, improved safety, or greater customer satisfaction? Shouldn’t we just assign them a value of zero?
Why should we invest in this project instead of increasing shareholders dividends?

Note: The above questions may be asked of you in a formal pre-scheduled business meeting, or informally in a more casually setting. Therefore, be prepared with answers.

Another approach that sometimes can get a project started is to propose doing the project in steps or phases. The first phase could include consulting and risk analysis, operations impact planning. The second phase could be system engineering and bid specification development, budget pricing, environmental impact statements along with building permit requirements. Both phases can take a considerable amount of time to complete, but are a relatively small portion of the total project cost. By getting this initial analysis and design work completed, you will be ready with a good set of specifications and system layouts to request firm price bids from preapproved vendors.

Final Thoughts

Modex 2018 will kick-off in Atlanta GA. April 9 thru 12. You can quickly check it out and pre-register at www.Modexshow.com . In addition to vendors eager to do business, there will be many new innovative order fulfillment ideas, especially those related to automation. Being prepared with preliminary plans and supportive data will enrich your show experience.

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