How do you weigh where to make the next investment?

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Early in my operations management career, I was talking to the VP of Manufacturing at our company.  He was exasperated that the owner just ordered another edgebander, which was nice, but not his highest priority.  Our bottlenecks were coming from other issues, yet he would now devote resources to the new bander rather than working on more pressing problems.
How do you decide where to make the next investment?


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Many in our industry come from hands-on manufacturing roots.  How many websites have a “History” tab that contains something like: “it all started with a craftsman, in a garage with a table saw…”  So naturally, most owners have an affinity for technologies that directly affect manufacturing.

When technology other than machinery is under consideration, the typical first response by most managers falls on a sliding scale.  The further the investment is from machines, the less enthusiastic the response.  
To make my point, here are three hypothetical examples:

Technology Investment Under Consideration


Typical Initial Response

New CNC router

More parts/hour, Better accuracy

Yes of course!

New engineering and nesting software

More jobs/month, Better data to shop, Faster running nests


“Office software” …ERP

Improves: quotes, order processing, scheduling, purchasing, inventory, project management, job tracking/costing…

Are you sure we need it?

Going back to my opening paragraph, about the time the new edgebander arrived, we also got started implementing our first fully integrated software system (ERP).  Within less than a year, the software investment had made an enormous impact on the overall workflow in the company.  
During that time, orders increased by over 50%, partly because we cut production lead times by several weeks.  At the same time, we reduced inventory by $400K, freeing up precious working capital.
Coordination of workflow and timing of resources is just as important as the machinery and manufacturing methods.
Now to give the skeptics their due, implementation of these investments increases in difficulty, as they get more comprehensive.  Big ERP implementations are notorious for risks and cost overruns.
However, as with any significant investment, due diligence has its rewards.  Planning should always begin with a careful needs assessment that considers the entire workflow from quoting to financials.  With this benchmark, evaluation of options becomes a logical process, rather than the typical chaos of PowerPoint presentations and demos.
Once a selection is made, the next step is an implementation plan.  Here, success depends on an honest assessment of your company’s capabilities and the time available to do the work.
Finally, project management is just as important during a software implementation, as it is with the production orders your company fulfills.  Management of the many details of a project is a necessary component of the order, and trying to do without project management is a recipe for disaster.
In just a few weeks I will be speaking at a couple of the many Industry 4.0 seminars as AWFS.  There will be lots of talk about the Internet of Things and many cutting-edge concepts, but a basic integration of workflow is still the first and most impactful improvement. Take the opportunity to learn about these important concepts.
You couldn’t meet your current production goals with a table saw in a garage, nor should you use manual systems to manage your state-of-the-art production facility. 

Have something to say? Share your thoughts with us in the comments below.

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About the author
Mick Peters
Mick Peter’s career began in operations management in the manufacture of cabinets and custom architectural millwork, then to hospitality and dormitory, and next retail furniture products. The last two positions involved implementation of ERP from scratch. Both projects went live in under one year. These manufacturing management positions were followed by 12 years as president of InterPort Corporation, a consulting company and contract supplier to brands such as Century Furniture. Mick was also the developer of Trakker manufacturing planning and control software. In 1998 Mick became a founder and the first associate member of Roger Shaw & Associates (RSA).  
In 2014 Love Thy Data was published by Archway, aimed at helping business managers understand the reasons ERP is important, what to look for, and how to prepare for implementation. Mick is currently with Applied Automation Technologies LLC, specializing in ERP and manufacturing systems integration for the woodworking industry.