Light Industrial Projects: Limiting Risk and Maintaining Flexibility in a Fast Growth Environment
As the world emerges from the global pandemic, we are witnessing growing customer demand for products and services across a variety of sectors, leading to increasing capital expenditure on everything from warehouses and distribution networks to the manufacturing of computer chips and electrical components. Many companies in the light industries—organizations that are focused on customer fulfillment—are growing rapidly to meet this increased demand. Although opportunities abound in these industries, the question is how can such companies keep up with their ever-growing portfolio of light industrial projects? How can they remain fast and nimble to respond to customer needs, while implementing the right work processes and governance to serve what are now multi-billion dollar project portfolios?
Drawing on IPA’s recent experience supporting various light industrial projects, we offer a high-level roadmap to effective growth.
The first step is to have people with the right experience in the organization plan and execute the work. Organizations that have traditionally only completed a few small maintenance and optimization projects per year typically do not have the experience in-house to plan and execute multiple large projects without bringing extensive risk into the organization.
As companies expand, human resource groups and senior management face the challenge of increasing their teams to meet the staffing needs of their growing portfolios—without making the mistake of staffing for the “peak” in CAPEX. One way to understand these needs is to benchmark the company’s structure and manpower against other similar size organizations to gain an understanding of what the right-sized teams should look like: number of people, key positions, areas that can be delegated to contractors, and functions that must be kept in-house at the owner.
One trend we are currently witnessing is that light industry companies are bringing in experienced project management people from diverse processing industries such as oil, gas, chemicals, and mining. These diverse team members provide the needed experience, but also present some challenges because of their varied experiences and different perspectives on what “Best-in-Class” looks like. This leads us to the second consideration, work process. IPA has worked with a few light industry organizations that have already staffed up, but do not have an existing stage-gated process to follow as projects are approved for scoping. The lack of a standardized stage-gated process adds significant risk to the organization. Without a standard process, the organization’s ability to collect information and data on projects—and, thus, leverage learnings and develop projects that are faster to market—is lacking.
Therefore, in addition to hiring people for the company, senior management needs to develop a fit-for-purpose stage-gated system that guides all projects through key milestones: business opportunity and objectives finalization, scope closure, and final cost and schedule authorization. When the process is standardized, adequately detailed, and used on all projects, it significantly reduces the variability within the project implementation system that naturally occurs when drawing in new employees from diverse backgrounds as they bring different ways of doing things from their previous organizations.
Once organizations have a standard “way of doing projects” in place that has stop-check points along the planning phases up to authorization, they need gatekeepers to review the deliverables at each gate. These gatekeepers have the authority to decide whether the project moves forward, is recycled for more clarity and risk reduction, or is even canceled due to unacceptable risk to the organization.
Finally, the objective for organizations is not simply to have a repeatable and standardized process that is staffed by experienced project teams who use the system, but also to improve over time to develop competitive advantages. This requires a standardized data collection built from the projects in the system to be able to develop analytical tools for improvement. What are the organization’s strengths? Speed? Quality? Price? A combination of the three? Without standardized data, the organization’s ability to analyze planning, estimating, and scheduling versus operational performance, cost, and the actual durations of activities across the project life cycle is limited.
IPA recently worked with an organization that saw a 10-fold project CAPEX increase over each of the past 2 years. This organization provided service equipment to a major retailer and was known for fast and reliable delivery. However, the rapid project expansion exceeded the organization’s capabilities, and it started to see some projects go off the rails with large cost growth and schedule slip. IPA’s Organization and Teams group completed a detailed evaluation to establish the ideal owner organization and recommended where it should staff up rapidly and where it could make more effective use of third-party service providers. To complement the staffing analysis, IPA Capital Solutions completed a desktop review of the very minimal existing project authorization process and worked with the client, from the sales organization to HR, to develop a stage-gated work process with clear, fit-for-purpose deliverables at each gate. IPA then worked with the client to establish key data and formats to be collected at each gate, including at project closeout, to feed back into the system for measuring performance, developing tools, and enabling continuous improvement plans. The client has reported back to IPA that the use of the new project system has enabled it to increase predictability, reduce individual project risk, and vastly improve the management of its overall portfolio of projects.
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