Capital Cost Avoidance: Think Creatively Before You Spend

ScottMasich_ photoAbout the Author  As a Senior Continuous Improvement Facilitator at the Kaizen Institute, Scott Masich has more than 15 years of experience with achievement of significant results for the deployment of Lean/Six Sigma initiatives, strategic planning, balanced scorecard, and alignment implementations.  In addition to his extensive work in facilitating and coaching teams on Lean Manufacturing principals, he has well over 20 years of budget, capital planning, and project management expertise.


Our client, a potash mine owner, was planning to expand existing maintenance shops to meet increased demand for support to the mill operation. The expansion also created an opportunity to build a new office infrastructure such that all surface support staff could be housed at a common location.  The Kaizen Institute was engaged to review the expansion for verification of fit-for-purpose layout from a Lean perspective.  There were a number of on-going issues leading our client to the belief that an expansion was necessary:

  • Existing departments within maintenance were each asking for additional shop floor space to meet demand accordingly.
  • Separating welding and fabrication from equipment disassembly, machining, rebuild and reassembly was considered important for improvement to overall equipment reliability.
  • Locating engineering and maintenance closer together would enable better technical support for both projects and maintenance functions.

A capital expansion to the existing Maintenance Facility was approved for $35 million. This capital expenditure did not provide a suitable return on investment and the Kaizen Institute was engaged to lead a local cross-functional team through the process of reducing costs and eliminating waste in the existing facility.


Shop Layout Current StateWe started by using SmartDraw to create a current layout of the facility (shown above). The SmartDraw program allowed us to create everything to scale making it very easy to analyze and find opportunities for improvement.

Employing a Lean approach, we evaluated the usage of existing shop floor space.  We started with 5S to optimize usage of existing space as well as free up additional space. The 5S process is a systematic approach to workplace organization and is widely considered the first step in implementing a Kaizen/Lean culture to reduce waste and improve productivity. Generally speaking, the steps of 5S involve going through items in a workspace, removing what’s unnecessary, organizing items, cleaning, performing maintenance, and making sure these things become habits.

5S SMG post_Nov19v2

SmartDraw Tip: To access the Lean Diagrams and Template Category simply navigate to the Left Panel.  Select Lean.  In the 5S sub-category select 5S Glossary template. The category enables you to create a number of diagrams such as as value stream maps, spaghetti diagrams, kanban boards, process maps, root cause diagrams and much more!

The 5S’s should occur in this order, and there must be a plan in place for performing the tasks associated with these steps on a regular basis. Utilizing the 5S process to achieve an organized work space also has several supplemental benefits.  In addition to the immediate visual improvement, organizations will realize:

  • Improved Quality: Having an organized work space with everything in its place will result in fewer mistakes made.
  • Improved Productivity & Efficiency: Reduced clutter and designated storage locations improves inventory management and reduces the time to locate and obtain material. It is often found that an increase in usable space is also achieved.
  • Transparency & Visibility: Abnormalities, additional wastes and problems surface much more quickly with increased visibility within the work space.
  • Boosted Morale: Employees often feel an increased sense of workplace ownership and motivation with an organized workplace; no one likes to work in an environment of disarray. Participating in the 5S Process and witnessing the dramatic before and after results also provides a sense of empowerment.
  • Improved Image: An organized workplace is a professional workplace; this is visually apparent when observing an organized workplace.
  • Improved Safety: Properly stored and organized items reduce housekeeping and ergonomic related hazards, and also make hazardous conditions more visible. The discovery of reduced accidents and injuries are typically identified after utilizing the 5S Process in the workplace.

We also employed Total Flow Management to optimize the positioning of shop equipment and flow of material through the shop. Total Flow Management (TFM) focuses on streamlining material and information flows. Diagnosis is performed through the identification the 7 wastes in the operation which result in improved Production Flow, Internal Logistics, and External Logistics.

Shop Layout Future State1Using SmartDraw, the team created a Future Layout to scale (shown above). With the ability to move items in the “virtual world” we eliminated the need to expand the existing facility.


As a result, the team eliminated the need to expand the existing facility and avoided a capital spend of $24 million. This was a significant reduction to the original spend and the client was able to apply the funds to projects that provided more value to the company.

So before you decide to spend millions of dollars on your next capital project, assemble a small team and ask them to think creatively to eliminate the need for the project altogether.