Major capital projects - the highs and lows and some lessons learned

The three key objectives of the acquisition of KR Castlemaine in April 2008 were to:

• acquire a good base manufacturing asset from which to expand;
• increase our critical mass in key channels and key geographies; and
• use the manufacturing assets and increased scale to be cost competitive.

The non-capital related integration phase, which included closure of the WA facility and integration of the non-factory teams (i.e. sales, marketing, finance etc) and re-engineering the supply chain footprint, took approximately 12 months and in that time our integration teams delivered on the expected business case synergy benefits.

The key to our success was having dedicated teams across the various functions working full time on the integration project, but we did face the risk that this team might become alienated from the 'business as usual' (BAU) teams.

In parallel with the integration activity, a growing team of engineers was working on the design of the new factory.

The factory design had several objectives, including to:

• eliminate safety and manual handling issues through clever design, technology and automation;
• create an environment that would promote "employer of choice" - important given the regional location of the factory;
• incorporate sustainability into the design - water, energy and waste;
• allow for future expansion and anticipate growth for the 50 year design life;
• streamline all the current processes to remove waste - a key lean principle; and
• introduce new technology to ensure we ended up with a lean and agile plant that would be cost competitive.

Given this was such a large project, there was always going to be some challenges, including such things as how to match our processes to the significant changes in technology which were being introduced, how to rationalise our processes, given that we had three processes across three plants making the same products, and how to rationalise hundreds of formulations and ingredients and stock-keeping units (SKUs) across multiple brands.

We had also factored in a government tax break initiative that required we order equipment prior June 30 2009, which put significant pressure on the design process.

Other challenges were the fact that we had a new team of engineers who in most cases knew nothing about smallgoods. We also had two cultures and multiple sub cultures that needed to work together, and many of the BAU personnel had to run the business, be part of the integration activity AND contribute to the capital project.

Once the final factory configuration and scope had been approved, we embarked on the incredibly detailed work of designing how the factory would function, including what technology and processes would be used. This took over 12 months to complete. We made the decision to fast track the project by doing the design phase in close proximity to the construction phase, which put even more pressure on what was already an ambitious timeline.

So how did we go?

Overall we delivered a good result. The construction phase had best in class key performance indicators (KPIs) related to industrial relations and site safety. The factory has the capability to meet almost all of the design objectives but will take several months before the throughput and cost objectives start to be met.

The Altona factory was only shut in August 2011, so many parts of the new plant are still in commissioning and ramp up. Salami, which was the first product group to be commissioned, is exceeding our expectations of throughput and maturation times.

What did we learn?

There are literally hundreds of lessons but no silver bullets when it comes to delivering major capital projects.

The key lessons for me were:

• Be conservative with cost and time forecasting. Ensure you allow the appropriate contingency (time and money) based on factors such as complexity, design status, organisational capability, resources and project uniqueness.
• Ensure change management is well resourced to avoid issues such as engagement, transparency of scope and alignment of goals. Good communication is easy to neglect when you are up to your armpits in issues during the design and construct phase but it is the key to success.
• Spend time thinking about the "stage gates" that you will not pass through without the criteria you have established for the stage gate being met. We pushed on with the project on at least two occasions when we should have stopped and sorted out some fundamental issues.
• Ensure you get a critical mass of people with strong project management and engineering disciplines - don't reinvent the wheel, the standard practices of project management will hold you in good stead.

Overall assessment

This project was tough from almost every angle. It ran over time and over budget. We struggled to keep the design phase ahead of the construction phase, mainly because we were starting from such a low base with respect to agreed processes, existing technology and core engineering expertise.

Despite the challenges we faced, there were few errors in the construction and everything fit together when assembled. A factory has been built that will allow the business to compete in the market place, be a leader in sustainability, significantly reduce workplace injuries and make consistent quality smallgoods across two great brands.

Robert Niggl is project director at Don KRC - a wholly owned subsidiary of George Weston Foods. GWF is one of Australia and New Zealand's largest food manufacturers, employing around 8,000 employees in close to 60 sites. Please send any comments or questions you have in relation to this article to: robert.niggl@gwf.com.au