This is the 5th part of "9 Steps to Successful Plant Relocation". If you'd like to view other posts in the series, the links are available on the right side menu of this post (desktop) or at the end (mobile).
Once you've established your plant relocation plan’s target cost, timeline, and scope, you need to account for any unforeseen issues with a contingency plan. Like any complex operation, you will almost certainly face difficulties, cost overruns, and delays when building a new manufacturing facility.
While some can be dealt with easily, others might force major changes. The chances of hitting your project’s targets are much higher if you identify some of these potential issues in advance and plan accordingly. Having proper contingency plans ensures you remain flexible enough to tackle these issues with minimal deviation from your targets.
However, when preparing your contingency plan, you shouldn't limit yourself to only thinking about the potential logistics or operation problems with your relocation. You need to account for issues that may arise from any aspect that can impact your business, from HR to environmental regulations.
Contingency Plan Considerations
Below we break down some things you may need to consider when putting together your contingency plans:
From an HR Perspective
- How to deal with the employees who will lose their job from the changes?
- What do you do when key employees leave?
- Do you have training programs in place for new and retrained employees?
- Are you able to make changes if labor laws or conditions change?
From a Supply Perspective
- If a major supplier cannot deliver, what are your alternatives? Do you have other suppliers available or will production stop until a critical part arrives?
- How do you handle an important supplier going out of business?
- Will weather or local conditions affect your supply? For example, how are your supplies from China affected during Chinese New Year?
From an Equipment Perspective
- Do you have equipment maintenance programs ready?
- Is there a plan to train new staff to use equipment if key individuals leave?
- Do you have an adequate supply of the replacement parts based on the equipment manufacturer's projections?
- Is there a fallback plan if the equipment is late or has a technical problem?
- What level of support does the equipment manufacturer provide?
From an Environmental Perspective
- How will you adapt to changing environmental regulations?
- Has your team considered the environmental conditions of where the factory is located? Is it prepared for major storms, earthquakes, extreme heat or cold, etc.?
- How do you respond if unexpected environmental issues are discovered in the site assessment?
- Are your consumers' environmental requirements greater than the local regulations?
- What are the industry trends and is it possible to run ahead of them?
Developing Your Manufacturing Contingency Plan
Deciding which contingency plans are important to have is dependent on your product type and the state of your company. New companies may need to consider their ability to bring in external support to train new people or set up a new facility. However, they may not have institutional knowledge that could help plan for unforeseen events. Similarly, manufacturers that have products with highly specialized components need to consider their vulnerability to their supply chains more than companies with generic parts.
If the contingency can have a major impact on operations, companies should at least have a basic plan to manage it. For example, it is vital for companies operating in Southern China to have a detailed plan to deal with high water from monsoons. But for the same operation in Northern Mexico, it's not as important. The key is to be clear on the need for contingency plans – preparing for an elephant attack at a peanut factory might be overkill.
Work With Locals Authorities
You should leverage all available resources to understand the potential risks. Local governments and suppliers will know a lot about the local working conditions and have a strong vested interest in the factory’s success. Publicly available information from the national or regional government, like the Department of Commerce and NIST in the US, are especially good at providing free in-depth economic information which can be useful for understanding risks and building contingency plans.
The Bottom Line
With problems being unavoidable, the best way to ensure successful plant relocation is to pre-emptively consider the potential issues and resolutions for them. Risks come in many forms and planning for the most realistic ones can save your company millions as you plan for your move to a new location.
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