More than half of my career in the Material Handling Industry has been spent in system sales and consulting. One of the most frustrating situations is when you’ve submitted a properly designed and authorized proposal for final approval, only to have it placed on hold. No doubt this is equally true for the Project Sponsor and/or Champion. Because the likelihood that this will happen always increases in uncertain times, it is important to rediscover a skill that may not have been needed during the boom days of the recent past, i.e., rejuvenating a stalled project.

Having survived several down business cycles, I have gained considerable experience in working through these situations and offer the following suggestions:

Get the Facts Straight

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. Or, it may be a case of the FUD Factor – Fear, Uncertainty, and Doubt - see Top Management Involvement is Essential in Fostering and Sponsoring Distribution Automation Improvement Projects.

Next, be a little introspective 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.

Be Prepared

While the benefits of a project may seem obvious to you, don’t assume that they are to everyone. Cost justifying a project may well be the most challenging aspect of the job. However, being prepared and knowing how to quantify and effectively communicate the expected results of a project can help make the job easier.

The following are 10 questions you can expect the financial manager of your company to ask:

• We couldn’t justify this project in the past. How come we think we can do it now?
• What happens if we wait and do nothing?
• Is the schedule realistic? What is the impact to the project justification if problems delay the startup?
• What unique risks does this project pose?
• What other strategies did you look at and why is this project the best alternative?
• What is the impact to the project justification of changing cost of capital, errors in forecasting, or other unforeseen conditions?
• What do you mean a payback of two years is unrealistic for this project?
• What is the impact of this project on the company’s strategic goals?
• Why did you quantify intangible benefits such as higher employee morale, improved safety, or greater customer satisfaction? Shouldn’t we just assign them a value of zero?
• Why should we invest in this project instead of giving the cash to the shareholders?

Don’t expect your material handling project to be an easy sell. More competition for fewer dollars means companies are looking more carefully at the impact a particular project has on the bottom line. By doing your homework prior to meeting with the financial manager, you will increase the odds for getting your project approved this time around.

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 expenditures available at this time, 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.

Consider All of the Alternatives

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 "inside space'" with the cost of expanding the building – see Rack up Savings by Putting the Squeeze on DC Storage Space. 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.

Final Thoughts

Warehousing and distribution problems haven't changed much over the years. There have always been tight-fisted 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. Then there’s the other one I like “If it was easy, anyone could do it!” - see Looking for a Materials Handling Project Champion

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