Investment Feasibility Study for Factory Planning Projects

Abstract

Companies and their factories are in a state of permanent change. Factory planning is interested in anticipating the changes that will occur and thinking ahead structural adjustments by dimensioning the operating resources, personnel and space. Often incremental adjustments over the space are no longer sufficient, so that further investments become necessary. Large factory planning projects, such as a greenfield or expansion planning, usually require extensive capital, which has a huge impact on a company's liquidity. The correct evaluation of the economic efficiency of a factory planning project, i.e. the comparison of costs and revenues, is therefore essential. Investment feasibility studies can help companies choosing a proper project. In such an early phase, investments have to be planned and initiated under increasing uncertainty. However, with common methods and tools, a precise evaluation of the investments costs in an early planning phase is only possible to a limited extent. Consequently, the risk of misinvestment increases. Factory planning experts are therefore dependent on tools and methods that minimise this risk through a precise calculation of investment costs under uncertainties. This article addresses the related challenges, shows the need for an improved decision support, and give a first framework to face these challenges.