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Restarting a stalled project in uncertain times

David Luton President David Luton & Associates -- Modern Materials Handling, 3/1/2002

One of the most frustrating situations you may face as a warehouse manager is when you've submitted a properly designed and authorized project for final approval, only to have it placed on hold. Because the likelihood that this will happen always increases in uncertain times, it is important to rediscover a skill that was often overlooked during the heady days of the late 1990's: restarting a stalled project.

The first step is to determine why your project has been placed on hold. At first you may get a quick brush-off from your boss – some vague excuse about a lack of money. It's important to clarify exactly what he or she means, however. It may be that there is an insufficient financial payback, which is very different from having no money at all.

Next, be critical and ask yourself a tough question. Could you or your staff have inadvertently done something that caused the project to be placed on hold? You may have submitted an insufficient economic justification for the project. Or you may have believed that the need to handle increased volume was sufficient reason to justify a capital project. As a result, you did not fully outline other benefits such as increased productivity, lower costs and improved service levels in your original submission.

It helps to emphasize cost savings, too. Even in the toughest of economic times, corporate management usually is reluctant to pass up a project that promises attractive savings. To put your project in its best light, use financial language they will understand. Help advance your project by preparing a proper payback or rate-of-return analysis.

Sometimes, though, even an attractive economic return is not enough to sway management in your favor. If so, find out the real reason behind their decision and develop a solution for it. If, for example, management says there is no funding for capital acquisitions available, then you could propose leasing all or part of the project. Or, if there is insufficient financial return, you might look at the feasibility of doing the project in phases. Be sure to propose completing phases that offer the best economic returns first.

Yet another way to approach this kind of situation is to do a comparative analysis that shows you have properly considered the alternatives. You might compare better use of what I call "inside space'" with the cost of expanding the building. Or you could compare the benefits of higher rates of depreciation for equipment with the cost of investing in buildings.

If all else fails, consider the possibility of funding an accelerated project start when business returns to normal. For most projects, design engineering and permit approvals take a long time, but they are only a small portion of the total project cost. You could fund the design work now and be ready to expedite your project's startup when business conditions are more favorable.

Warehousing problems haven't changed much over the years. There have always been tightfisted bosses, even in boom times. But in today's economic climate, more of us have to deal with them. Just remember the old saw, "When the going gets tough, the tough get going." That's why you were hired – to deal with tough times like these.

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