Decide to Plan your Capex and Plant Renewal Projects

Capital expenditure budgeting is a slow process with planning and feasibility studies preceding any decision. The low capital efficiency which follows a major Capex decision, amplifies the necessity of ensuring that a return on investment is not only plausible, but conducive to sustainable growth in market share. Hence, any such expenditure commitment brings with it a significant expectation of returns, and the promise of fewer time consuming problems. The reality is that renewal ventures seldom bring with them fewer headaches and rarely deliver to the initial perceived expectations.

The reason for misaligned expectations and poor delivery can vary from as intangible as personality traits of stakeholders and product-market life-cycles, to the physical asset life and capability of the technology. Whichever reason, all related aspects can be addressed while making the decision, prior to making the expensive mistake of applying good capital on a bad idea.

Decision making is the first link in the chain of capital commitment, but also the final point at which the direction of the new project can be determined. At this stage there are few players involved, many options still on the table, and momentum will not run away with the project. This is the ideal time to ensure the following general problem solving questions are answered:

• Where does this need originate from and what is the quantifiable problem?
• Where is the best point to address this need?
• What is the best vehicle to use?
• What is the expected solution output and how does this directly link to the current need?

The need may originate from opinion on shop floor, proven tests, loudest person in the room propagating a belief, a great salesman, benchmarking, or just pure frustration. The magnitude of the problem determines the priority as well as the size of committed capital. A root cause analysis, or six sigma approach of defining the problem will identify the cause of the problem or deviation to ensure the correct focussed measures are taken. Investigation into solving the problem will identify the best solution options and preferred vehicle to apply.

In many cases, the output of these questions leads to alignment on the problem definition, selecting plant renewal as a solution, and the on expected result. At this stage the decision making for plant renewal capital expenditure starts with the evaluation of various scenarios, the analysis of the future performance and eventually the business case and implementation roadmap.

Any such project can thus be well defined resulting from a continuous improvement drive, or just start off with the initial questions above, but should be analysed professionally with technical results to harness confidence in the solution, and also plan for successful commissioning.

Focussing on plant renewal for a manufacturing facility, we follow the LTS Plant Renewal Methodology. This methodology addressed both the technical and human aspects of the decision making process, and consists of two work packages, Scenario Evaluation, Operations Analysis, which culminate in the final phase Business Base and Roadmap.

Scenario Identification focusses on identifying feasible solutions for the areas included. It is possible that the problem definition might change during this phase, or that the focus areas might be adjusted. Whichever way, the output is documented process changes with corresponding infrastructure requirements.

During this phase the human aspects concerning change management is also addressed by focussed workshops with dependant stakeholders. It is crucial that the main company champion be involved in spearheading this process, as this gives authority to the project and project team, shows management commitment and gives the project a personal familiarity to the people attending.

During Scenario Capital Costs investigation of alternative equipment, software, processes, infrastructure and corresponding vendors are identified. The budget costs are gathered from the vendors, together with solution specifications to ascertain capabilities.

The parallel stream to this analyses the operations of the manufacturing facility. This starts with Operations Model identifying the best analysis method for the involved operations and required output. Activity Based Costing models allows unit pricing comparisons for old and new operations. This is combined with process flow redesigns based on certain scenario options, such as outsourcing, sharing of expensive resources to maximise utilisation. In the case that a detailed logistical analysis should be included, an event-based simulation is optional.

Scenario Production Profit calculates the operational savings probable per scenario based on the simulation cost model. At this point the increased throughput capacities, labour, maintenance and quality savings are included. The operational costs are used to calculate the ROI and capital efficiency over the lifecycle of the payback period. At this point is it possible to include lifecycle costs of technology and equipment.

The final hurdle in decision making is the Business Case and Roadmap. This entails evaluation of ROI results from the operational analysis combined with the capital costs positioned on an implementation timeline. As part of this phase, some final scenario changes and re-evaluations are executed and the final business cases are presented for fact based decision making.

For more information on simulations that help your decisions making: professional decision support services

"LTS Consulting was engaged by Transnet Capital Projects to carry out a capacity simulation study on the rail network between Ermelo and Richards Bay.
Transnet Capital Project is satisfied with the quality of the study and would consider using the services of LTS Consulting again if required"

Willen Kuys
Project Director
Transnet Freight Rail

Can business process re-engineering add value to my business?

In an increasingly competitive and complex global marketplace, there is a growing need for businesses to define and redefine business processes in order to improve customer service and keeping costs low by eliminating redundancies. As organizations have grown over the years, organically and through mergers, inefficiencies have risen, including the duplication of processes for the same function across lines of businesses.
Business Process Improvement has been identified as a priority for organisations to achieve efficiency through process improvements, identify problem areas and developing long-term
solutions that are flexible and scalable as businesses grow.

Is this your current situation?

• High manual intervention leading to increased costs;
• Complex processes lacking consistency across groups;
• Low productivity;
• Complex and disparate systems;
• Integrating systems for seamless information flow;
• Spiralling cost  Frequently changing compliance regime forcing you to change processes and rules.

But you actually like to

• Process automation with minimal manual intervention for higher productivity
• Flexibility for changing process flows
• Ability for business users to change business rules
• Rule change on the fly with immediate percolation
• Ability to cope with ever-changing compliance regime
• Reduced process variability

Then it is time to consider business process re-engineering. These are the 6 steps to successfully optimise your business processes.

Step 1 - Which processes need optimisation?

Core processes are those that are key to organizational effectiveness, provide value to clients and establish a competitive advantage. The client must care that the process works well and by doing it well, the provider will be able to better position itself .

To know what core business processes require optimization it is important to understand the critical business processes in organisations as well as the process and operational bottlenecks. The first step is to understand the business landscape, identifying key business drivers and the critical business domains. The business do
mains that are best candidates for process initiatives & improvements are being identified through tools such as the Process Prioritization Balanced scorecards.

Step 2 - Define the current state?

Once the core business processes have been identified, the current way of working needs to be captured into a process map. This is called the “as-is” process. The purpose of as-is process map is to gain an understanding of the quality and efficiency of current operations and the existing performance. The benefits of this assessment are to:  

1. Develop a common understanding of the current processes; 
2. Describe the inputs, sequence (work flow) of steps, hand-offs/transfers, approvals, people, technology, and business rules involved in producing outputs;
3. Identify opportunities for improvement;
4. Potentially create a “baseline” of measures (e.g., process time, costs, resources, etc.) that describe current process performance;
5. Identify the gap between client business needs and current performance;
6. Identify parts of the current process that are non-value added from the client perspective.

At the core of the process improvement lies the definition of process boundaries and the construction of the high- and low-level As-Is process flows and process maps that illustrate the business processes, the process
activities and their inter-relationships.

Step 3 - Process analysis

With the current process mapped, the focus now is on determining the baseline and possible improvement opportunities. One can determine the baseline of the as-is process through:

1. Process time analysis – determining how much time each step in the process will take and including time in between steps due to e.g. system requirements;
2. Approvals and handoffs – assess the number and purpose of the approvals and hand-offs;
3. Value-added analysis – assessing the process from the client’s perspective i.e. what are the value added activities for which the client is willing to pay and which directly affect the completion of the product or service provided;
4. Benchmarking – comparing current performance with “peers” e.g. other agency offices, other UN agencies or those organizations considered “best-in-class”. Benchmarking should not be limited to UN and / or development partners but may include private sector organizations

Step 4 - What will the future hold for us? 

The future state is defined by the To-Be Business Processes. Process optimization is achieved through process re-engineering that aligns the business processes with the business drivers and helps achieve improved service levels as well as time, error and cost reductions.

The 7 themes of process innovation (7Rs) can help to trigger out of the box thinking.

Step 5 - Test and communicate 

With the newly designed process comes the most important element of re-engineering i.e. the challenge of implementing the proposed changes. Communicating changes and determining the impact of the changes to the way we work (i.e. managing change) is an integral part of this toolkit. Therefore, one should ensure that for example the process changes are carried forward into the job design and into the overall change implementation.

Step 6 - ROI Measurement

ROI Calculation based on cost, benefits and business value analysis.

Based on LTS experiences with Business Process Re-engineering in a significant number of private- and public sector enterprises we have the following sets of success and fail factors:

Success factors for BPR

• Clear Vision. Develop a clear vision of the goals and objectives of the organization and of its success;
• Senior Management Commitment.  Gain strong commitment from senior management from initial planning through implementation, including identifying an executive sponsor;
• Project Planning.  Conduct sufficient project planning and preparation with defined scope, roles, and tools for each phase;
• Change Management.  Utilize an effective and structured change management process, including developing a strong communication plan;
• Staff Support.  Build staff support and buy-in for the proposed solution;
• Team Commitment.  Gain team member commitment to the project and build a team with the right mix of skills;
• Understand Business Issues.  Develop a clear understanding of business issues (client needs, performance, standardization) and the BPR Solution. 
• “Quickly” Review As-Is.  Document and review high-level “as is” business process with a caution against spending too much time on “exceptions to the rule” and specific cases. 
• Always Have a Goal.  Show progress and demonstrate results by having short, medium and long-term targets;
• Follow-up, follow-up, follow-up …. To make sure that things get done! 

Fail factors for BPR

• Lack of Alignment.  BPR effort is not tied to organization goals, objectives and/or client expectations;
• Lack of Commitment.  Teams cannot ensure success if they lose senior management support or if team members do BPR “on the side” while they are performing day-to-day tasks;
• Lack of Communication.  Not everyone is informed early and the staff concerned by the changes are not engaged throughout the process.  Not everyone is on the same page;
• Improper/Insufficient Planning.  Changing scope or focus will damage integrity and commitment;
• Lack of Understanding of Business Challenges. Business case is not clear or is weak, and thus the changes will not address the real needs of the business;
• Ignore the End Users.  If the solution designed does not take the needs of the end user into account, change will not be successful. End users will resist and cannot or will not implement the new process;
• Team Member Selection.  Without dedicated, strategic thinkers that can champion change, the improvement process will not succeed;
• Lack Enabling Technology.  If decisions are made on the basis of the existing technologies (e.g. the bank cannot provide electronic interface), one will not be able to design the optimal process;
• Easily Overcome by Challenges.  If the team gets bogged down by a specific step in the process and does not keep the bigger picture in mind, the team will loose motivation and may get stuck in a particular phase. 
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"We have been working with LTS Consulting, a professional industrial  engineering provider for the past 2 years on a number of projects. During the course of their engagements they provided us with amongst others, Business Process Re-engineering and Modelling services. They have executed their work with professionalism , demonstrating integrity and skill, delivering quality outcomes."

Jonathan Cawood

Director PWC

LTS Consulting offers superior solutions for critical business needs, to learn how LTS can help your business contact us

Are your manufacturing processes operating as efficiently as they should?

Often when we visit manufacturing plants and we ask the operation manager how their production is doing we more often than not receive a positive answer- no major problems....

When we re-phrase the question and ask if their plant is running optimally it turns out that this question is a lot more difficult to answer.

In the current economical climate there is a continuous need to increase production efficiency and maximize economic benefits for any
given process plant.


Process control optimisation will provide the answer in terms of process control performance, where are you currently, where should you be and what needs to be done to get there and close the performance gap.

If we have a closer look at the statistics of the control performance of the regulatory control loops it shows that process control performance is not as good as one might think:

• 90% of the controller are PID's;
• More than 30% operates in manual;
• More than 30% of loops increases short term variability;
• About 25% of control loops use default settings;
• About 30% of control loops have equipment problems.

Depending on the type of manufacturing process typically, hundreds of these control loops are employed at the basic regulatory level for controlling the process.

There are several reason why these statistics show such a grim picture. The loop optimisation demands a combination of skills not often found in one individual: process dynamics and control theory; process engineering and understanding of loop interactions; knowing the economic driving forces and operating objectives. The most common approach to control problems is trial & error due to the general lack of understanding of the practical aspects of loop optimisation.

Control tuning is often regarded as a low level skill  and left to unqualified personnel who do not have the knowledge or skill to perform this work. Very few plants regard optimisation as a distinct discipline although advanced process control is  treated as a separate discipline and huge amounts are being invested in these systems. When the base regulatory control are not performing there is little to no chance that the advanced process control will work.

A modern control system either a DCS or PLC/Scada costs in the order of millions of ZAR. It is clear that there is great opportunity to increase the ROI on your manufacturing assets by investing a little more and make it work properly.

A successful optimisation program will have a positive effect on:

• Throughput;
• Quality and less rejects;
• Increased lifespan control equipment;
• Reduced energy consumption;
• Increased efficiency;

and does have quantifiable and measurable results.

For more information <click here>

* Statistics ISA - International Society of Automation 

What can Workforce planning do for your organisation?

Workforce planning is a clear analysis of current situations and future requirements – it should be an integrated approach and a clear part of your organisation’s overall strategies and plans.

Over the last decade workforce planning has become increasingly important for organisations mainly due to the increased complexity of change within business. In today's business it is extremely challenging to predict more than 6 months ahead but at the same time also much more important.

Getting your workforce planning right delivers significant improvements and competitive advantages:

• value improvement and cost reduction – through right sizing the workforce
• assurance that business strategy can be delivered
• better productivity – through workforce alignment to operating model
• competitive advantage through a more skilled and innovative workforce
• higher quality and timeliness of customer delivery
• greater staff engagement and retention and lower levels of stress.

The 5 steps for successful workforce planning:

Step 1: Set Strategic Direction 

The strategic direction is linking the workforce planning process with the strategic plan, annual performance/business plan, and work activities required to carry out the goals and objectives of the 

strategic plan (long term) and performance plan (short term).  

Step 2: Analyze Workforce, Identify Skill Gaps, and Conduct Workforce Analysis 

• Identify what the current workforce resources are and how they will evolve over time through turnover, etc. 
• Developing specifications for the kinds, numbers, and location of workers and managers needed to accomplish the agency’s strategic requirements 
• Identifying what gaps exist between the current and projected workforce needs. 

Step 3: Develop Action Plan 

The action plan summarizes the strategies to close gaps, plans to implement the strategies, and measures for assessing strategic progress. These strategies could include such things as recruiting, training/retraining, restructuring organizations, contracting out, succession planning, technological enhancements, etc. 

Step 4: Implement Action Plan 

The action plan ensures that human and fiscal resources are in place, roles are understood, and the necessary communication, marketing, and coordination is occurring to execute the plan and achieve the strategic objectives. 

 Step 5: Monitor, Evaluate, and Revise. 

The last step involves monitoring progress against milestones, assessing for continuous improvement purposes, and adjusting the plan to make course corrections and to address new workforce issues.

Workforce planning allows your organisation to consider future pressures and plan effective solutions for people development; financial and change management. Our workforce planning services help our clients meet these challenges by addressing the processes, programs and technologies designed to develop, deploy and connect their people to business priorities.

If you would like more information about the services LTS is offering please <Click here>

"Since 2009, we have engaged with LTS at least once a year with follow-up studies related to workforce modelling. As a long-term client of LTS, we have developed a close working relationship and have always been impressed with their ability to understand our business and deliver valuable and professional results"

Frank Bravenboer

Pep Stores

Manufacturing Trends 2020 and beyond

The next 6 years......

How will the manufacturing industry evolve

The globalisation of manufacturing has been a hallmark of the past 15 years. The transfer of jobs in the manufacturing sector (especially, but not only, labour-intensive activities) from developed markets to emerging markets will continue over the next decade and beyond. However in the recent 2013 Global Manufacturing Competitiveness Index, South Africa was placed 24th on the global competitiveness ranking, and is expected to move down a further position in the next five years. 

The reality is that it is difficult to be globally competitive when your population size is 3.86% of China, and 4.3% of India, but as Africa we have the critical mass to compete. There absolutely are challenges to achieve this and LTS is continuously helping businesses to become more competitive and realize the full potential. We will high light some of the trends in the manufacturing industry that focusses in increasing efficiency and profitability.

Plant efficiency is critical to survival

Manufacturing plants around the world are feeling competitive pressure with escalating demand for higher quality products at a lower cost and with reasonable profit margins. The increased costs of raw materials, utilities and labour are putting pressure on manufacturers margins. In the current economical climate we have seen an increase in the demand for our services that are focussing on these particular area's as increasing efficiency now has become a priority and will remain so in the foreseeable future. Four strategies that add significant value in the process of increasing efficiency are:

• Process Control Optimisation
• Workforce Modelling
• Business Process re-engineering
• Decision Support

Process Control Optimisation

Process control optimisation will provide the answer in terms of process control performance, where are you currently, where should you be and what needs to be done to get there and close the performance gap.The focus is to eliminate variation from you manufacturing process that has a direct impact on productivity, quality and cost. Obtaining and optimising the dynamic performance of control systems can make a measurable difference in plant operation and profit. How efficient is you manufacturing process?

Workforce Modelling

In the past workforce related cost savings have been synonymous with broad cuts to headcount but there is an alternative. Cost savings may be gained  through the reconciliation and re-alignment of the organisations workforce rather than a reduction in personnel. Over-staffing may lead to overspending, while under staffing leads to lost opportunities. The effective application of your workforce can lead to significant cost savings and operational improvements.

Studies and experience have proven that better outcomes are achieved when organisations make cuts strategically, rather than slicing a little from everywhere. It is important to identify how to realize savings, based on strategic plans, performance measures and a clear understanding of priorities and responsibilities.

Read more about what Workforce Planning can do to your organisation

Business Process re-engineering

How important is business process re-engineering for the manufacturing industry?

• The world is becoming more competitive. both internationally and domestically there is over capacity in the world because many technological improvements have resulted in less staff being n
• eeded;
• Technology will continue to make jobs obsolete;
• It is unclear if demand from emerging markets will fill up that capacity some Asian markets are already feeling strong competition form other Asian markets;
• It is unclear whether savings rates will increase it is unclear whether consumption rates will increase it is unclear how much government spending will occur due to large debt;
• In some countries population is stagnant or decreasing spending by retires in some countries will be much lower than projected housing gains will not allow for large consumption in many countries energy prices will take a larger percentage of income water shortages may increase the price of food.

How does business process engineering add value to your business?

Decision Support

Many companies are actively investing in new machines, technologies and expanding their business activities. Uncertainty about the impact of these changes and the risks associated with wrong decisions due to sophisticated and complicated business processes can be hard.

The analysis of complex datasets along with the evaluation of complicated, interdependent systems is necessary to understand the behaviour of systems under set conditions. There are a wide range of operations research and simulation modelling techniques available to evaluate and interpret system behaviour over time. This provides invaluable information to help identifying underlying risks, trends, unexpected constraints and realistic output performance of a modelled scenario prior to process change or the allocation of capital expenditure.