THE DEVELOPMENT OF A METHODOLOGY FOR THE COST JUSTIFICATION OF NEW MANUFACTURING INVESTMENTS

Abstract

This work addresses the problems faced by small and medium manufacturing enterprises (SME's) in cost justifying new investments in tools, techniques and technologies, and presents a methodology which significantly improves on current cost justification techniques. The methodology provides a structured approach which leads a company through a series of workshops, which assist a company in establishing the full company wide benefits and costs associated with new manufacturing investment. A model, in the form of a workbook and the specification for a prototype computer based tool, of the tasks necessary in cost justification is presented. The model is used to structure the decisions relating to possible investments. The research work described involved two distinct stages. The first stage included a fifteen month involvement in the Finjust project - a financial justification project sponsored by the DTI, in collaboration with Quintec Applied Systems, Mundy Johnson, Entrepreneurial Technologies and the University of Plymouth, where the author's individual contribution was for the identification of the links between business needs and technologies and specifying the benefits of the investments. The author's involvement in the project allowed the strategy to be tested in the collaborating companies. In the second stage, the major contribution of the research lies in the development of a new methodology, which whilst based on some of the principles of the Finjust project, incorporates many new ideas which significantly improve its value to SME's. Through the use of this work SME's are encouraged to improve ownership and commitment to the manufacturing solutions identified by fully involving relevant company personnel in the identification of business needs, the generation of solutions and the financial justification of proposed investments. This work also provides a mechanism to facilitate management development and training in financial justification by providing rationales for each activity, forms for the collection of data and tool kits to assist in the completion of specific tasks. The results of this work have provided the data necessary for the specification and building of an improved methodology in the form of a workbook.