How to Establish a Local Manufacturing Facility

Fund, Build, and Operate

You have compiled a design that you can take to your funders, compete with a compelling business case and strategy to execute the project.

You have support strategies to ensure that the facility, once built, can operate efficiently, and that your products can get to market and be sold. You can now move to secure your funding, and commence building, and ultimately operations.

Funding, Building & Operating your Facility

Unfortunately, the design is only the beginning. The real work starts now. You need to secure the funding, buy the property, get the permits, and build the facility.

Having plans and strategies is one thing, but without securing the funding required and then putting these plans and strategies into action, you will not be able to put these plans into action.

Building, Owing & Operating are the most critical steps in the local manufacturing journey, and as you may have experienced, rarely does everything go according to plan… Adjustments and improvements must be decided upon, in the context of the business plan, available funding and business objectives…

Once built, the facility must be operated to optimum performance and with improvements continuously identified and implemented…

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Project Funding

Funding is a real chicken and egg type endeavour. You need to have completed all your plans and strategies thoroughly to secure funding, but you need funding to develop and complete these plans. Hence, we talk of two funding requirements:

This section deals with Project Funding which assumes you have completed the development of your design and strategy. Most technical details have been resolved and you now need to "get your project funding" over the line. 

Purpose & Rationale

Securing adequate funding is a critical step in the establishment of a local manufacturing facility. The purpose of this section is to outline the various funding options available, the process of securing funding, and the key considerations to keep in mind. Proper funding ensures that the project can proceed without financial interruptions and that all necessary resources are available.

Considerations

  • What are the different sources of funding available (e.g., loans, grants, equity investment)?
  • What are the eligibility criteria for each funding source?
  • What is the timeline for securing funding?
  • What are the potential risks and challenges in securing funding?
  • How will the funding be managed and allocated throughout the project?

Funding Sources

There are several sources of funding that can be considered for a manufacturing facility project:

  • Bank Loans: Traditional loans from banks and financial institutions, which need to be repaid over time and at a high interest rate.
  • Government Grants: Financial assistance provided by government agencies to support local manufacturing initiatives. Whilst "cheaper", there are normally significant conditions associated with Grants, and they rarely cover the full requirement.
  • Equity Investment: Funding from investors in exchange for ownership stakes in the project. Equity funding comes with managing both the business AND your investors. Their expected return is high, and they "influence" management to ensure they get that return first and foremost.
  • Venture Capital: Investment from venture capital firms that specialize in funding high-growth potential projects, often demanding significant shareholding which limits the founder's upside later on. 
  • Private Funding: Funds from private individuals or organizations, usually as equity investment.

This table summarises the different funding types and details each's suitability for different applications:

Funding Source Description Best Applications Advantages Disadvantages
Bank Funding Traditional loans provided by banks and financial institutions. Established businesses with strong credit history and collateral.
  • Access to large amounts of capital
  • Fixed interest rates
  • Structured repayment plans
  • Requires strong credit history
  • Collateral often needed
  • Interest payments increase overall cost
Government Grants Financial assistance provided by government agencies to support specific initiatives. Innovative projects, research and development, community projects.
  • No repayment required
  • Encourages innovation
  • Support for specific sectors
  • Highly competitive
  • Lengthy application process
  • Specific eligibility criteria
Equity Funding from Development Finance Institutions Investment from institutions that support economic development in emerging markets. Large-scale infrastructure projects, sustainable development initiatives.
  • Access to substantial capital
  • Support for long-term projects
  • Expertise and advisory services
  • Equity dilution
  • Involvement in decision-making
  • Longer approval process
Equity Funding from Private Individuals Investment from private investors in exchange for ownership stakes. Startups, small businesses, high-growth potential ventures.
  • Flexible terms
  • Access to investor networks
  • Potential for mentorship
  • Equity dilution
  • Potential for conflicts
  • Variable investment amounts

Process Steps

  1. Identify potential funding sources and their eligibility criteria.
  2. Prepare a comprehensive business plan and financial projections.
  3. Determine if assistance is required in Fund Raising. Companies provide this service in exchange for a fundraising success fee as a percentage of funds raised, from about 0.4%, and sometimes to 10%.
  4. Compile a Private Placement Memorandum (PPM) which includes all the details of how your investment will be structured and what returns will be provided to investors.
  5. Summarise the PPM into a pitch-deck presentation supported by 1-Pagers, and brochures.
  6. Undertake roadshow to potential investors, updating details as progress is made.
  7. Submit applications and proposals to selected funding sources.
  8. Negotiate terms and conditions with funders; sign-term sheets and agreement contracts  Financial Close.
  9. Achieve all Conditions Precedent
  10. Ensure Paydown occurs according to Agreed Schedules.

Quality Indicators

  • All potential funding sources have been identified and evaluated.
  • The business plan and financial projections are thorough and convincing.
  • Investment Case and PPM terms are acceptable to potential Funders.
  • Funding is secured within the required timeline.
  • Funds are managed and allocated effectively to support project objectives.
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Site Selection, and Buying a Property

Where your site is located affects everything about your business - how far raw material travel to be processed. How far product travels to customers; where your people will live and commute. And what environment your operations will impact, laws and regulation you will need to comply with. The site selection affects your ultimate total cost is countless ways, so it must be done right.

Purpose

The purpose of this section is to guide individuals and organizations through the process of selecting and purchasing a property. This involves understanding the key factors that influence site selection, and the steps required to acquire a property successfully.

Rationale

Effective site selection and property acquisition are crucial for ensuring the success of any project. The right location can significantly impact the project's feasibility, cost, and overall success.

Key Considerations

  • Location: Proximity to raw materials, human and other resources, transportation, and target markets.
  • Accessibility: Ease of access for construction, future operations with space for expansion.
  • Environmental Impact: Ability to mitigate any potential environmental concerns and achieve compliance with regulations.
  • Cost: Purchase within budget constraints and financial feasibility.
  • Legal Issues: Zoning laws, land use regulations, and property rights.

Key Questions

  • What are the primary goals for the property?
  • What is the budget for the purchase?
  • How will you pay for the property.
  • What are the potential environmental impacts?
  • Are there any legal or zoning issues to consider?
  • What are the long-term plans for the property?

Information Required

  • Facility Design and SPACE Plan
  • Property surveys and assessments.
  • Environmental impact reports.
  • Legal documentation and zoning information.
  • Purchase Price History
  • Logistic Models to optimise location of Facility
  • Cost estimates and financial analysis.
  • Market analysis and feasibility studies.

Process Steps

  1. Define the project goals and requirements.
  2. Complete modelling to determine a range of optimally located areas for placement of the facility.
  3. Conduct a market analysis to identify potential sites.
  4. Engage a Property Broker or specialised Estate Agent to shortlist ideal locations / areas.
  5. Evaluate the shortlisted sites based on key considerations.
  6. Conduct site visits and assessments.
  7. If possible, conduct a mini-EIA on high scoring potential sites.
  8. Negotiate terms and conditions with property owners, and banks.
  9. Finalize the purchase agreement and complete the acquisition.

Quality Requirements

  • Compliance with all legal and regulatory requirements.
  • Logistics Cost Optimised.
  • Thorough evaluation of environmental impacts.
  • Accurate and comprehensive financial analysis.
  • Clear and transparent communication with all stakeholders.
  • Detailed documentation of the entire process.
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Environmental Impact Analysis and Permitting

EIAs are expensive and site specific, so can only be undertaken with a clear site in scope. Therefore, it is often necessary to procure the site before completing the EIA, although it may be possible to include a successful EIA application process as a condition for completion of the land sale.

Purpose

The purpose of this section is to provide guidance on conducting environmental impact analysis and obtaining the necessary permits for a project. This ensures that the project complies with environmental regulations and minimizes its impact on the environment.

Rationale

Environmental impact analysis and permitting are essential for identifying potential environmental risks and ensuring that projects are sustainable and compliant with legal requirements. This process helps protect natural resources and promotes responsible development.

Key Considerations

  • Regulatory Compliance: Adherence to local, state, and federal environmental regulations.
  • Environmental Impact: Assessment of potential effects on air, water, soil, and biodiversity.
  • Stakeholder Engagement: Involvement of community members and other stakeholders in the decision-making process.
  • Mitigation Measures: Strategies to minimize or offset negative environmental impacts.
  • Cost: Financial implications of compliance and mitigation efforts.

Key Questions

  • What are the potential environmental impacts of the project?
  • What permits are required for the project?
  • How will the project comply with environmental regulations?
  • What mitigation measures can be implemented to reduce environmental impacts?
  • How will stakeholders be involved in the process?

Information Required

  • Factory Design, drawings, and long-term plans.
  • factory utilities requirements, discharges, and logistics requirements.
  • Environmental impact assessments (EIAs).
  • Regulatory requirements and guidelines.
  • Stakeholder feedback and concerns.
  • Mitigation plans and strategies.
  • Cost estimates for compliance and mitigation.

Process Steps

  1. Identify the regulatory requirements and necessary permits.
  2. Conduct an environmental impact assessment (EIA).
  3. Engage with stakeholders to gather feedback and address concerns.
  4. Develop mitigation measures to minimize environmental impacts.
  5. Submit permit applications and required documentation.
  6. Implement mitigation measures and monitor compliance.

Quality Requirements

  • Compliance with all relevant environmental regulations.
  • Thorough and accurate environmental impact assessments.
  • Effective stakeholder engagement and communication.
  • Implementation of robust mitigation measures.
  • Ongoing monitoring and reporting of environmental performance.
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Package Procurement

It is possible to find Contractors who will deliver an entire Factory on a "turnkey" basis, where they hand you the keys on completion of construction. However, one tends to find that this is a more expensive route than carving the project up into around ten component packages, each delivered by a specialist organisation, and without paying a single organisation to subcontract the very same specialists, while charging a markup for this management.

This is why it is important to choose the procurement strategy carefully to define manageable procurement packages.

Purpose & Rationale

The purpose of this section is to outline the process of procuring defined procurement packages, which are essential for the successful execution of a project. Proper procurement ensures that all necessary materials and services are acquired in a timely and cost-effective manner, adhering to project specifications and quality standards.

Key Questions

  • What are the specific procurement packages required for the project?
  • What are the battery limits for each procurement package?
  • How will requests for proposals (RFPs) be structured and issued?
  • What criteria will be used for tender adjudication?
  • What are the steps involved in contract award and management?

Other Considerations

  • Compliance with legal and regulatory requirements.
  • Risk management and mitigation strategies.
  • Supplier evaluation and selection criteria.
  • Cost control and budget management.
  • Timeline and delivery schedules.

Information Required

  • Detailed specifications and scope of work for each procurement package.
  • Package Battery Limit Diagram
  • List of potential suppliers and their qualifications.
  • Budget estimates and financial projections.
  • Project timeline and milestones.
  • Risk assessment and mitigation plans.

Process Steps

  1. Define procurement packages and establish battery limits.
  2. Prepare and issue requests for proposals (RFPs).
  3. Receive and evaluate tenders based on predefined criteria.
  4. Conduct tender adjudication and select the best supplier.
  5. Negotiate and award contracts to selected suppliers.
  6. Monitor and manage contract performance throughout the project.

Quality Requirements

  • All procurement packages meet project specifications and quality standards.
  • Suppliers comply with legal and regulatory requirements.
  • Contracts are clear, comprehensive, and enforceable.
  • Timely delivery of materials and services.
  • Effective communication and collaboration with suppliers.

Performance Metrics

  • On-time delivery of procurement packages.
  • Adherence to budget and cost control measures.
  • Supplier performance and reliability.
  • Quality of materials and services received.
  • Compliance with project timeline and milestones.
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Project Execution Stage

Depending on who you speak to, the project execution stage is deemed to start anytime from project "approval" to "contract awards".

The reality is that the Project Management process of securing resources, allocation tasks and timelines to these resources is important throughout the project in keeping the project progressing after the approval phase. But it becomes especially important once multiple parties are contracted, after the procurement phase, over and above the core project team.

It is important to note that the project execution stage is where the bulk of the work is done, and where the project objectives are met or missed. The team evolves and changes as milestones are reached and contracts are awarded, but the same underlying management processes required are similar, nonetheless.

Purpose

The purpose of the Project Execution Stage is to implement the project plan, execute tasks, and achieve project deliverables. This stage transforms plans into tangible outcomes, delivering value while promoting team cohesion and clear communication.

Rationale

Project execution is critical as it is where the bulk of the work is done, commanding the most time and attention in the entire project lifecycle. It ensures that the project objectives are met and that deliverables are produced according to the defined quality standards.

Key Questions

  • Are all resources allocated and organized effectively?
  • Are team members clear on their roles and responsibilities?
  • How will progress be monitored and reported?
  • What are the procedures for managing changes and addressing issues?
  • What routine is set and to be followed by all players to ensure clear communication and coordination?
  • How is information shared, and changes communicated?

Other Considerations

Consider the impact of execution on project timelines, costs, and resource allocation. Ensure continuous stakeholder engagement and regular assessments to maintain alignment with project goals.

Information Required

  • Project execution plan
  • Project Routine and Calendar
  • Resource allocation and management plans
  • Communication and reporting protocols
  • Risk management and mitigation strategies

Process Steps

  1. Develop a detailed project execution plan.
  2. Allocate and organize resources.
  3. Assign tasks to team members.
  4. Execute tasks according to the project plan.
  5. Establish Project Routine and Calendar
  6. Monitor progress and report on performance.
  7. Manage changes and address issues promptly.
  8. Engage stakeholders and obtain feedback.

Quality Requirements

Ensure that all project activities meet the defined quality standards and criteria. This includes adherence to specifications, compliance with regulations, and meeting stakeholder expectations.

Key Performance Indicator

Measure the success of the execution stage through key performance indicators (KPIs) such as task completion rates, resource utilization, and the number of issues identified and resolved.

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Quality Assurance in Project Execution

It is too risky to simply contract a vendor to complete a scope of work without checking in frequently to ensure progress is being made, and that the work is being done to the correct standard and quality requirements. "Bad news" needs to be fetched as vendors are very slow in letting on that they are facing problems. This prevents mitigation staps being taken, and normally results in more expensive consequences. Hence the needs for Quality Assurance.

Purpose

The purpose of Quality Assurance (QA) in project execution is to ensure that the project deliverables meet the defined quality standards and satisfy stakeholder expectations.

Rationale

Implementing QA processes helps in identifying and mitigating risks early, reducing rework, and ensuring the project is completed on time and within budget while maintaining high-quality standards.

Key Questions

  • What are the quality standards and criteria for the project?
  • How will quality be measured and monitored throughout the project?
  • What are the roles and responsibilities for quality management?
  • How will quality issues be identified and addressed?
  • What Quality reporting is demanded, and how often are physical inspections by third parties scheduled?

Other Considerations

Consider the impact of quality assurance on project timelines, costs, and resources. Ensure that all team members are trained in QA processes and understand their importance.

Information Required

  • Project quality standards and criteria
  • Quality management plan
  • Roles and responsibilities for QA
  • Quality control checklists and templates

Process Steps

  1. Define quality standards and criteria.
  2. Develop a quality management plan.
  3. Assign roles and responsibilities for QA.
  4. Implement quality control measures.
  5. Monitor and report on quality performance.
  6. Conduct quality audits and reviews.
  7. Implement corrective actions as needed.

Quality Requirements

Ensure that all project deliverables meet the defined quality standards and criteria. This includes adherence to specifications, compliance with regulations, and meeting stakeholder expectations.

Key Performance Indicator

Measure the success of QA processes through key performance indicators (KPIs) such as defect rates, customer satisfaction scores, and the number of quality issues identified and resolved.

Useful Resources

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Operational Readiness in Project Execution

Buildings and Machinery are one thing, challenging enough to design, and choose. In a factory environment, one also needs people to perform work and operate machinery. Finding the right people, and then training them on the machinery purchased is even more important than the machinery itself, yet oft forgotten. Operations Readiness ensure you avoid this oversight.

Purpose

The purpose of Operational Readiness (OR) in project execution is to ensure that all aspects of the project are fully prepared for seamless transition to operational status, minimizing disruptions and ensuring smooth operations. It is the Human Dimension to starting up a manufacturing facility - The Who, How and When planned before the factory starts.

Rationale

Operational Readiness is crucial for the successful implementation of projects as it ensures that all systems, processes, and personnel are ready to perform their required functions without issues. This proactive approach helps in mitigating risks and enhancing efficiency.

Key Questions

  • Are all systems and processes fully integrated and tested?
  • Is the project team adequately trained and prepared for operational roles?
  • Have the right people and number of them been recruited and trained to be able to run the factory from day 1?
  • Have then vendors provided the right training and maintenance information so the company can run and maintain its machinery efficiently the day that it is handed over.
  • Are the operators and technicians equipped with the right tools and instruments?
  • have teams been correctly structured, and the right leaders appointed?
  • Do you have sufficient cover for when key individuals are sick or incapacitated?
  • Have all potential risks been identified and mitigated?
  • Are there clear procedures for transitioning from project completion to operations?

Other Considerations

Consider the impact of operational readiness on project timelines, costs, and resource allocation. Ensure continuous stakeholder engagement and regular assessments to maintain readiness throughout the project lifecycle.

Information Required

  • Operational readiness plan
  • staffing requirement
  • Training and development plans for personnel
  • Risk assessment and mitigation strategies
  • Integration and testing reports

Process Steps

  1. Develop an operational readiness plan.
  2. Conduct thorough testing and validation of systems and processes.
  3. Provide training and development for project team members.
  4. Identify and mitigate potential risks.
  5. Engage stakeholders and conduct regular readiness assessments.
  6. Transition from project completion to operational status.
  7. Monitor and review operational performance.

Quality Requirements

Ensure that all systems and processes meet the defined quality standards and criteria. This includes compliance with regulations, adherence to specifications, and meeting stakeholder expectations.

Key Performance Indicators

Measure the success of operational readiness through key performance indicators (KPIs) such as system uptime, ramp up rates, line efficiency, defect rates, and the number of issues identified and resolved during the transition phase.

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Plant Commissioning

Commissioning new equipment is unavoidable, and mistakes can be costly. It therefore needs to be planned extremely well and resourced with specialists with deep trouble of how the equipment should work. There are always problems on startup, and these need to be effectively resolved with root causes truly understood, hence the need for the specialists.

Purpose

The purpose of Plant Commissioning is to ensure that all systems and components of a plant are designed, installed, tested, operated, and maintained according to the operational requirements of the owner or final client.

Rationale

Commissioning is critical to verify that the plant operates as intended and meets the performance criteria. It helps in identifying and rectifying issues before the plant becomes operational, thus ensuring safety, reliability, and efficiency.

Key Questions

  • Are all systems and equipment installed and tested according to specifications?
  • Have all safety and regulatory requirements been met?
  • Is the plant ready for operational handover?
  • What are the contingency plans for potential commissioning issues?

Other Considerations

Consider the impact of commissioning on project timelines and costs. Ensure that all team members are aware of their roles and responsibilities during the commissioning process. Regular communication and coordination among stakeholders are essential.

Information Required

  • Commissioning plan and schedule
  • Equipment manuals and specifications
  • Safety and regulatory compliance documents
  • Test procedures and checklists

Process Steps

  1. Develop a detailed commissioning plan.
  2. Conduct pre-commissioning activities such as system checks and equipment testing.
  3. Perform commissioning tests and validate system performance.
  4. Address any deficiencies or issues identified during testing.
  5. Conduct final inspections and obtain necessary approvals.
  6. Handover the plant to the operations team.
  7. Monitor and review plant performance during initial operations.

Quality Requirements

Ensure that all commissioning activities meet the defined quality standards and criteria. This includes adherence to specifications, compliance with safety regulations, and meeting performance benchmarks.

Key Performance Indicator

Measure the success of the commissioning process through key performance indicators (KPIs) such as system uptime, defect rates, and the number of issues identified and resolved during commissioning.

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Performance Acceptance Testing

Getting a plant working is not enough. it needs to run to the required standards and performance metrics to be able to produce cost competitive products. Performance acceptance testing ensures that the equipment efficiencies, usages and reliability are to the required levels as stated in the contract documentation. It usually requires specific test conditions and minimum runtimes so does need to be planned, scheduled and resourced.

Purpose

The purpose of Performance Acceptance Testing (PAT) is to validate that the project deliverables meet the specified performance criteria and are ready for operational use. This ensures that the system performs efficiently under expected workloads.

Rationale

Performance Acceptance Testing is crucial to identify and rectify performance issues before the system goes live. It helps in ensuring that the system can handle real-world scenarios, thus preventing potential failures and ensuring user satisfaction.

Key Questions

  • What are the performance criteria and benchmarks for the system?
  • How will performance be measured and monitored?
  • What tools and methods will be used for performance testing?
  • How will performance issues be identified and resolved?

Other Considerations

Consider the impact of performance testing on project timelines and costs. Ensure that all team members are trained in performance testing processes and understand their importance. Regular communication and coordination among stakeholders are essential.

Information Required

  • Performance criteria and benchmarks
  • Performance testing plan
  • Tools and methods for performance testing
  • Performance test scripts and scenarios

Process Steps

  1. Define performance criteria and benchmarks.
  2. Develop a performance testing plan.
  3. Prepare performance test scripts and scenarios.
  4. Execute performance tests and monitor results.
  5. Identify and resolve performance issues.
  6. Conduct final performance validation.
  7. Document and report performance test results.

Quality Requirements

Ensure that all performance testing activities meet the defined quality standards and criteria. This includes adherence to performance benchmarks, compliance with regulations, and meeting stakeholder expectations.

Key Performance Indicator

Measure the success of performance testing through key performance indicators (KPIs) such as response times, throughput, and the number of performance issues identified and resolved.