Consultancy!
The usual situation while you approach a serious investment:
- You feel a high risk about unknown facts
- You doubt about the forecasted production price of the final product
- You find material cost and production cost is unusual high
- You got the feeling that manufacturing steps are missing
- You find references using not up-to-date production methods and lots of manual prototyping's
- There is a lack of suitable suppliers of the required product testing (End Of Line test)
- The equipment suppliers are internationally spread over many countries
Why shall an investor employ a consultant if he plans to start an industrial investment project?
At first glance a consultant looks like increasing the total cost for the project. But finally, the advantages shall overcompensate the cost of the consultation. It is required to use a consultant of superior quality and with lot of expertise to manage the investment moving into the successful route of ptoduction.
A word about the financial potential and risk:
Investors tend to shift the responsibility to a main contractor. The main contractor assumes all tasks and the goal to clear any interfaces among the suppliers and sub-suppliers of the trades. Main contractors know about the augmented risks of these responsibilities and treat them as black boxes. The values of the subs are increased minimum by 30% to cover the circumstances which will occur for sure. As a consequence there are at least 2 big critical points in such a behavior:
a) The prices of traded units increase substantially.
b) The main contractor has his expertise in his core business only. This means that the risks of the project do not disappear but shift to a third party probably with poor experiences about treating the crucial points. There is a high risk about a smooth start of production. The motivation of the main contractor to take more responsibility is solely the goal to realize an order for his core business. The black boxes with its poisoned contents will be ignored and pop up at a time when it has effects on the time line and impacts on the financial balance of the project. These effects are avoidable simply by addressing them by integrating measures into the project planning. The solution to organize such processes in a smooth way is by using the experience of consultant experts who have enough build-up of expertise by past experiences.
Finally we can speak about 4 variants to organize the investmentin a smarter way:
1) The traditional route:
The investor contracts a main contractor and shifts the technical and financial risks to this organization. This is the most expensive route including substantial risk against a smooth course of the investment.
The investor contracts a main contractor and shifts the technical and financial risks to this organization. This is the most expensive route including substantial risk against a smooth course of the investment.
Advantages:
Fast start
Delegation of risks
Disadvantages:
- Risks are addressed late
- Required last minute improvement impact the time line and balance
- Higher cost of the investment discriminates the competitiveness of the investors product in the market
Fast start
Delegation of risks
Disadvantages:
- Risks are addressed late
- Required last minute improvement impact the time line and balance
- Higher cost of the investment discriminates the competitiveness of the investors product in the market
2) The investor employs a team of experts:
Suggestion: No consultant required; no main contractor required.Advantages:
- Reduced risks
Disadvantages:
- Innovations in the market may be neglected by in-house experts
- Innovations in the market may be neglected by in-house experts
Typical role of a consultant here:
- Use consultants service to double check the inhouse solutions
- Use consultants service as a back-up to expand inhouse capacities when required
- Use consultants service to double check the inhouse solutions
- Use consultants service as a back-up to expand inhouse capacities when required
3) The main contractor hires a consultant:
Advantages:
- Parts of the investments can be ordered directly in a financially sound manner
- Reduction of interface risks by the consultant
Disadvantages:
- The consultant is under control of the main contractor
Typical role of the consultant:
- Monitoring the planning, decisions and timeline of the planning team
- Completion of services that cannot be covered by the internal team
- Monitoring the planning, decisions and timeline of the planning team
- Completion of services that cannot be covered by the internal team
4) The investor hires a consultant:
and manages to minimize all risks by using the expertise of the consultant.
Role of a consultant:
- Control all decisions and timing of the project in his own responsibility with investors team
- Control all decisions and timing of the project in his own responsibility with investors team
Advantages:
- There is no need of a main contractor
- No mark-ups for trading
- The investment can be kept at the lowest reasonable financial level
- Timelines are under control of the investor
- There is no need of a main contractor
- No mark-ups for trading
- The investment can be kept at the lowest reasonable financial level
- Timelines are under control of the investor
Disadvantages:
- Cost of the consultant
- Cost of the consultant
Which route to organize your investment would you like to choose?
Find your solution with a first free consultation with FW Engineering
