Capex Planning Cycle – Time to get started

Capex Planning Cycle – Time to get started

Capex Planning Cycle – Time to get started 

At Pioneer we provide automated systems to manufacturers.  All these purchases fall in the Capital Expense category on the balance sheet.  The purchase of these machines comes at the end of a long planning and approval cycle anywhere from 6 months to 3 years.   

We typically see the following stages in the purchase.   

Stage 1: Engineering Planning.  Engineers from a plant or corporate will identify a new automation process.  To get started Pioneer will provide a planning quote.  It will describe the operational sequence and provide a budgetary price for ROI calculations.  The project will then be added to an approval list for a Capex allocation in the next annual budget cycle.  It will compete against other projects and the customer will prioritize based on ROI or customer requirement.  If successful an allocation will be set aside for the project and we move to the next step. 

Stage 2: Detailed Engineering Specification: During this time, we work closely with the customer engineers to understand and confirm detailed requirements and select appropriate options or customized functions to arrive at a firm quote.  With the configuration defined and the price firm, the project moves to the Capex budget approval process 

Stage 3: Budget approval and PO issue:  Given the cost of the machines there are several layers of executive approval required.  Typical stakeholders represent Production, Operations, Finance, Business Unit, and Purchasing.  They will be the final arbiters of the ROI benefit and ability to meet business objectives.  Once the project is signed off the Purchasing team fully engages to negotiate payment terms and discounts.  Following negotiations, a PO is issued. 

Stage 4: Build and delivery:  At Pioneer our tire industry machines require about a 6 – month lead time to build and deliver.  In this phase, we are working very closely with the customer by holding regular meetings as the machine is being built.  This facilitates agreement on component selection and accommodates any changes the customer requests.  Once the machine is complete the customer will come to our shop for runoff testing.  Following delivery, our team engages on-site for commissioning and training. 

Estimated Timeline:  

~1 to 2 years 1-3 months 1-6 months 6 months 
Stage 1 Stage 2 Stage 3 Stage 4 

 

If you are planning to add automation in 2022 it is time to get started. Please contact us if you need a planning quote to kick of the process. 

 

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