Project-Capex in Machine and Plant Construction
INVERTO Managing Director Thibault Pucken on untapped potential in mid-sized companies
How important is CAPEX in industry?
CAPEX projects are only important in a few industrial sectors, such as energy and construction. Large and, in particular, recurring CAPEX investments play an important role in industry. However, the maturity of CAPEX procurement in companies can be very different.
You would think that dealing with CAPEX projects would be routine in industry.
That is unreservedly true for the big players. However, there is a significant difference between big corporations and mid-sized companies. While corporations are very mature and professional when it comes to CAPEX, and in some cases have their own organizations for it, mid-sized companies have major shortcomings.
What is the main difference between the big players and mid-sized companies?
In industry, it is usually about investing in replacement machinery. This is quite normal for major players such as the automotive industry because, in a factory, machine parts have to be constantly replaced with new ones. To avoid downtime as much as possible, these companies have well-established structures for CAPEX procurement. Although new plants are being built much less frequently, this is still more common in large companies than in mid-sized companies. Since these requirements are rarely relevant in mid-sized companies, strategically-aligned CAPEX procurement just does not happen.
How do mid-sized companies get around this problem?
Often, not at all! Our experience shows that CAPEX has neither a culture of controversy nor an open discussion around it. Mid-sized industries do not realize how much money they are wasting through their current shortcomings in CAPEX procurement.
Who takes care of the resulting CAPEX requirements?
Planning and decisions are simply left to the departments and planners, so functionally-driven commercial expertise is ignored.
And what is the intention behind this?
None, to be perfectly clear. It is more the result – whether consciously or unconsciously – of a lack of imagination, and sometimes there is just no desire to leave their comfort zone. Establishing or optimizing viable procurement structures is a complex process that requires cross-functional teamwork, and many mid-sized companies shy away from making this effort.
How would you advise mid-sized companies?
The first step is to create transparency about CAPEX expenditure and reveal the potential. Then, that can serve as a basis to plan the next process. Since many companies only rarely have CAPEX projects, it does not always make sense to create a separate organization for this, which is what big corporations are able to do. But there should be a defined process for CAPEX procurement in every company, where the individual process steps, roles, and responsibilities are clearly defined for all parties involved. Only then can the identified potential be achieved.