I enjoyed reading what Richard Romano wrote about the optimism in the isles at IPEX. In one of his first stories he wrote, “There’s not really the sense that there is any kind of economic boom happening per se, but rather more the feeling that everyone has survived something. It’s almost like Europe after World War II: a sense that an awful time is over, and a bright future can be created through rebuilding on the ashes of the past.”
I am hearing a quiet sigh of relief from companies who have seen business stabilize and even start growing albeit at a painfully slow pace. As a result, some companies are starting to reexamine capital investment priorities that they put on the back burner a few years. The question is, when is the right time to invest and where is the best place. Considering that different companies are recovering at different rates and each company has its own unique issues, what is a good strategy for one may not be good for another. But it’s safe to say that any investment at this time will depend on how fast you are emerging, how much risk is associated with the investment and how important is this priority.
Let me share my experiences with two companies. One company is a $20M printer. They have been using an MIS system that is time-consuming and old. They have been researching MIS systems for three years because they don’t have good operational metrics that report accurate manufacturing times and costs, efficient scheduling or job floor tracking. The results of these issues are serious and not investing may be more risky than investing. Right now it is hit or miss with the profitability of the work. They have two people working on maintaining and updating the scheduling and all of the CSRs and some of the sales people run around all day long checking the status of their jobs. Without going into details, let’s just say that the $100K investment for the new MIS system will pay for itself within one year.
The other company is an $8M printer that has had stable sales for 9 months and has seen growth for the last 4 months. They have a bottleneck in the bindery that delays the delivery of 60% of the work and increases the need for overtime 10 days a month. The investment of $20K in a used piece of bindery equipment will pay for itself in 6 months.
If you have issues that have been on the back burner, it may be a good time to revisit them. The manufacturers are still hungry to deal. But of course you still have to choose the options with the greatest impact and minimize your investment risk. What’s on the top of your wish list?