Improving the Capex Project
Selection Process for Leaders
in Operations and Engineering
When it comes to capital project selection, operations and engineering teams are focused on getting their well-vetted proposals approved and funded quickly so work can get started. Yet a number of obstacles—including winding approval chains, departmental silos, and inconsistent data—often obstruct collaboration between these groups and the finance team, leading to cost overruns and supply chain issues.
Fortunately, the advent of modern platforms offers a promising solution to streamline the process. Here are some of the Capex project selection benefits we’ve seen operations and engineering teams realize with the help of purpose-built solutions:
Aligning with organizational goals
Effective project selection hinges on moving away from an ad-hoc approach to one that’s based on broader company goals. Doing so both ensures strategic alignment within the capital portfolio and helps management keep track of organizational risk.
Growth and maintenance projects should be considered differently in this context. For maintenance projects, the risk is usually clear-cut: the cost of inaction is immediate and significant. These projects typically demand swift action to prevent operational disruptions—if production is halted because a machine broke down, funding for repairs should be fast-tracked through the approval chain. Similarly, it’s in everyone’s best interest to fund regulatory compliance projects as quickly as possible.
Growth projects, though, deserve more scrutiny. They need to have an ROI rationale and clear business case that aligns with the overall strategic direction. Considerations such as payback period, net present value (NPV), and competitive positioning are the domain of the finance department, but operations and engineering can improve their chances of getting growth projects approved if they submit them with relevant data, historical comparisons, and due diligence.
Modern, purpose-built solutions can help these teams package project requests optimally so that finance can give their stamp of approval as quickly as possible. For instance, Finario’s Capex management software empowers operations and engineering teams with sophisticated modeling, historical comparisons, and “what if” scenarios for informed decision-making. By facilitating a comprehensive view of investment performance, risk assessment, and strategic fit, Finario enables teams to present well-substantiated project proposals and continuously improve with thorough post-completion reviews.
This streamlined approach ensures that growth projects are scrutinized for ROI and risks, while maintenance projects can be fast-tracked, aligning capital allocation with the company’s overarching objectives.
Underpinning this data-driven approach is a single source of truth across the enterprise.
Establishing a single source of truth
It’s common for departmental data silos to put sand in the gears of the project approval process. If finance has one set of assumptions, and engineering has another, interruptions are bound to happen. By establishing a single source of truth across the organization with the help of cutting-edge platforms, the often siloed domains of operations, engineering, and finance have a solid foundation for a collaborative approach towards capital project selection.
For example, Kerry Miller, Business Engineering Manager at LP Building Products, was struggling with these silos, and looking for “a single database that could be updated frequently for making Capex decisions ‘on the go’ with an evergreen portfolio of projects spanning multiple years.” Finario’s platform was able to “establish a single source of truth, automate Capex approvals, track and forecast in real-time and easily generate periodic reporting.”
Without centralized capital planning, operations and engineering groups are forced to choose projects without seeing the forest for the trees. Companies like LP have realized that a unified source of truth helps them pick projects based on organizational strategy, rather than an ad-hoc basis.
But just as important as consistent data is giving the right people the right access, at the right time. We saw a real example of this when working with Innophos, a global leader in specialty chemicals. Bob Petrella, a Senior Engineering Manager at the firm, highlighted that Finario “gives the right people the right visibility. We’ve got it set up so that, depending on where you are, all the people in the engineering group can see all the projects at the other site. So there’s going to be synergy: they can reach out and see who’s doing what, at a level that only the directors and above can see.”
While a single source of truth is imperative, to turn your Capex approval process into a well-oiled machine, you also need that data to be on-demand.
Streamlining project selection
Real-time data prevents discrepancies between financial projections and the reality on the ground. It ensures various project evaluation techniques are based on the latest inputs, fostering a unified approach across departments. This synchronization not only accelerates decision-making but also underpins a collaborative, Agile, and Six Sigma-informed process, enhancing efficiency and strategic coherence.
One of our customers, Wayne Farms, found the streamlined project selection process has changed the mindset of their plant engineers, finance staff, and others in the organization. Their FP&A director said “we’re able to react quicker and people are a lot more positive about the process as a whole.”
Operations and engineering: Improve project selection with Finario
The concerns of operations and engineering around capital project selection tend to get short shrift compared to finance. Purpose-built solutions like Finario arm these teams with the tools they need to submit projects that get through the approval chain faster, drastically reducing the likelihood of cost overruns and supply chain snags.
When operations, engineering, and finance are all rowing in the same direction, organizations can turn capital planning into a competitive advantage. This ensures that each project, whether for growth or maintenance, furthers their strategic vision.