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Four Ways to Better Manage Small Capital Projects

IMC-2017 Learning Session 38:32
by Bill Wasilewski, Day & Zimmermann

Most manufacturing companies focus considerable planning and management attention on the largest projects in their capital portfolios. This makes logical sense since the dollars at stake and the associated risks are large and highly visible. Getting these projects funded and executed on time and within budget is often subject to both corporate and public scrutiny.

Projects under $10 million typically garner less attention, since the numbers are smaller and the stakes are lower. However, there is mounting evidence that the cumulative cost of small to mid-sized capital projects can be significant. A recent report from McKinsey found that in the chemical industry, small capital projects (those defined as less than $50 million and often less than $10 million) actually make up 80% of all capital projects by number and 50% of spending value. When cost overruns or delays occur on multiple small projects, companies see potentially serious negative impacts on their bottom line, most significantly through unplanned production interruptions and/or delays in getting new product to market. The numbers indicate a need for manufacturing plants to purposefully invest in overall capital portfolio management, with added scrutiny on the management of smaller capital projects. But doing so is not as simple as copying the processes and procedures that make larger capital projects successful. That’s neither practical nor cost effective. Instead, companies need a fit-for-purpose framework for managing smaller capital projects that considers how they are different and what makes them run smoothly. Below are four concepts for consideration.

  • Collaboration first
  • Be real about risks
  • Choose the right project partners
  • Review and recalibrate regularly