What did a capex decision cost one manufacturer❓

For one rifle gun barrel manufacturer…

$ Millions, here’s why 👇

This company was only satisfying 50% of the market demand for their product.

To improve efficiencies, it was determined that they needed to replace ....

The “old” gun drills with new CNC gun drills.

They had recently invested $2M in capex spend to accomplish this.

What they did not know at the time, is that they would not be shipping any more product than they had.

Why❓

There were thousands of ‘pipe’ (post gun drilling) everywhere within the plant.

Gun drilling was not the limiting how much product shipped.

Rather it was the operation afterward (i.e. turning).

VERY basic barrel machining.
- Operation 10. Saw the bar stock to length
- Operation 20. Gun drill a hole down its length
- Operation 30. “Turn” the OD

The lower illustration highlights the current state in blue and backed up work in process (wip).

The after effect of the new gun drilling capacity is illustrated via the orange bar and orange WIP.

What were the immediate consequences❓
- A wasted $2Million investment.
- Increased $xxxK tied up in WIP.
- No additional sales despite the opportunity to ship 50% more.

Investments need to result in increased invoiced business.