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As your organization embarks upon capital expenditure (CapEx) planning, you want data-driven insights to guide your decision-making. This article from the Optilogic team explores capital expenditure planning for mergers and acquisitions and walks through various best practices to help you execute a CapEx plan that leads to long-term growth and success.
An Overview of CapEx Planning
CapEx planning empowers your organization to plan for sustainable growth, including mergers and acquisitions. Before implementing additional capabilities, you should consider the following questions:
• What manufacturing enhancements could be made to existing facilities?
• Where will the increased inventory be stored?
• How will our service levels be affected?
• How does this affect any recent mergers or acquisitions?
Organizations must evaluate the potential financial and service impacts and risks associated with capital expenditures, as these decisions regularly involve and affect larger investments. But because CapEx planning requires significant time investment before implementation, it typically affects the larger scope of your supply chain design.
Optilogic’s Cosmic Frog platform evaluates specific input data regarding facilities, transportation, and more, so that you can better assess the financial impacts, see how service to your customers will be affected, and the risks associated with any CapEx planning decisions and scenarios.
Optimization and Simulation in CapEx Planning
CapEx planning and mergers and acquisitions are classic network strategy questions. And these questions can be answered through optimization and simulation technology from Optilogic and the Cosmic Frog supply chain network design platform.
Our platform allows you to model various scenarios to explore how supply chain decisions will affect your productivity and profits. Supply chain simulation results empower you to optimize your CapEx investments and maximize efficiency and profitability. Below are a few examples of how optimization and simulation through Cosmic Frog can guide CapEx decision-making for your organization:
1. Addressing Capacity
Suppose your organization has facilities or buildings reaching capacity or facing manufacturing limitations. In that case, we can identify those roadblocks and analyze the best way to address those issues while prioritizing organizational goals.
2. Exploring Facility Expansion Options
In some cases, a business might be experiencing significant growth, but the current footprint doesn’t allow for expansion. Data analysis can evaluate existing locations to determine the best investment from an expansion standpoint. We can explore alternative options that allow you to reallocate volume across existing facilities to defer operating or expansion costs. You can also discover untapped or underutilized synergies by identifying overlap and redundancy.
If expanding an existing property isn’t an option, do you need to put new buildings, warehouses, or facilities in place to meet production demand? Greenfield analysis and optimization technologies help determine new locations or buildings for your expansion initiative.
3. Expanding Equipment and Processes
Increasing productivity doesn’t necessitate building expansions or new facility locations. Expanding equipment and optimizing processes often allows you to bolster productivity with a comparably low investment.
Are there particular processes, equipment, or lines within your manufacturing facility that you can reimagine or expand? For example, you might find a bottleneck or throughput capacity issue after analyzing your operations. From there, you can identify avenues to increase capacity within your existing building and types of capacity that need to be added, i.e., packaging, sorting, and receiving.
Simulation and optimization technology help you identify which CapEx investments relieve roadblocks to productivity and increase capacity within your facilities.
Greenfield Analysis for CapEx Planning
Mergers and acquisitions necessitate a new logistics strategy. With new products, locations, and markets at your disposal, you must reevaluate your supply chain design to ensure you’re operating at peak efficiency while maintaining a high standard for customer satisfaction.
Greenfield analysis allows you to optimize any supply chain network, helping organizations quickly identify potential site locations.
If you’re asking these questions, greenfield analysis is the ideal tool and next step for your organization:
• Where should we place our distribution centers to minimize transportation costs?
• Which locations would make our supply chain least vulnerable to potential disruptions?
• How do we achieve these new initiatives without sacrificing customer service?
Optilogic’s Intelligent Greenfield Analysis (GFA) offers capabilities above and beyond traditional greenfield analysis tools. Our GFA allows you to:
Model Facility and Transport Costs
You may specify a fixed opening cost for new facilities and a per-distance transportation cost. This allows the GFA engine to find the optimal number of distribution centers to minimize your total cost.
If transportation costs are relatively low, the GFA will open fewer distribution centers. If transportation is the main cost driver, our GFA will open more centers to reduce the average distance to your customers.
Consider Multiple Service Level Bands
You may specify a particular portion of customer demand to be served within a specific range.
Receive a Risk Rating on Every Greenfield Scenario
Cosmic Frog’s risk engine assigns an OptiRisk score for potential site locations to help you make smart decisions that bolster supply chain resilience.
Choose Brownfield Analysis
Brownfield analysis models existing facilities to help you determine where to open additional distribution centers.
Set Capacity Constraints for Both Existing and Candidate Locations
Determine caps and minimums at various locations to understand the optimal avenue for production.
Rapidly Autogenerate Many Candidate Locations
With Cosmic Frog Intelligent Greenfield, start with hundreds of potential location candidates. Then, by applying parameters, you can rapidly narrow down five to ten possibilities for detailed consideration.
Optilogic’s GFA allows you to explore unlimited logistic possibilities regarding mergers and acquisitions. And to get started, you only need customer location and demand. With these two data sets, you can begin an analysis that provides data-driven insights so you can make the best decision for your organization both at present and for future growth.
How Does CapEx Planning Work Using Cosmic Frog?
Cosmic Frog allows you to evaluate various factor input data for assessing a CapEx decision. Our platform enables you to
- Evaluate the financial impacts of CapEx decisions
- Evaluate service tied to the CapEx decisions
- Evaluate the risk associated with the CapEx decision
Cosmic Frog houses all available foundational data inputs. We analyze the factors that must be incorporated into this model and run the necessary algorithms to evaluate all potential influences and outcomes.
Cosmic Frog allows you to review financial, service, and risk-related impacts from the output when analyzing mergers and acquisitions. From the input side, we’ve implemented an input structure that will enable you to intake and aggregate data from multiple companies.
Our platform compiles your data into a unified structure to conduct analyses and identify synergy opportunities.
Creating Supply Chain Resiliency in Capital Expenditure Planning
Supply chain planning and execution are essential for lucrative CapEx planning, especially as you consider company mergers or acquisitions. A robust supply chain network design is crucial to your success in an increasingly volatile market with evolving variables and risks at every turn.
Cosmic Frog allows you to bring various supply chain designs from multiple companies into one unified data structure to quickly identify synergistic opportunities. Our team has the experience and tools that provide vital insights that drive organizational decisions, no matter what your goals.
Let us help you with your CapEx planning. Create your free account today to learn how Optilogic’s Cosmic Frog can position your company to succeed.