When demand outstrips supply, what are the best options for small and mid-tier manufacturers? Peter Taitako of RMR Process explores the alternatives.
For our small and mid-tier food manufacturers, increasing production volumes is often not a priority until demand starts outstripping supply.
One of the big challenges they face is in achieving the right balance between scaling up the process and scaling up the facility.
So what are the options and where is the capital best spent? Should you expand or relocate, and if you choose to relocate, should you lease or buy, and if you buy, do you buy an existing site or purchase land to build a new factory?
You’ll likely have many questions, but the more defined your growth target is, the easier it will be to figure out how best to scale over a given timeframe for the lowest possible cost.
For many small to mid-tier manufacturers, scaling up over a few years may be a safer and more favourable option than immediately raising debt finance or relinquishing equity to get there quicker.
The perceived risk for lenders is far greater if the “supply contract is waiting for sign-off”, and to compound the problem, your customer wants to ensure that you have the capability to supply.
A robust scaling plan can lead to a steady increase in production volumes and less financing pressures along the way. Knowing where you want your business to be in one year, three and five years is a good starting point.
When working through the ideas and decisions, it’s important to prioritise options for how you want to scale your business. This will enable you to plan how your manufacturing processes and staffing requirements need to scale as production volumes increase.
Replicating existing processes may give you better processing flexibility, but it is likely to require more operational staff. Increasing equipment size and speed is often a better utilisation of capital to get your investment return, if the pressure is indeed supply related.
You won’t need additional staff, you’ll reduce the necessity for overtime and you’re unlikely to require additional real estate.
