How FEL Can Help SMEs Get the 'Biggest Bang for the Buck'

How FEL Can Help SMEs Get the 'Biggest Bang for the Buck'

Alex Kent | 2014-02-05 10:10:00

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What's FEL I hear you ask? – It stands for Front End Loading, also called early project planning. It is an important stage in the development of major projects in capital intensive industries, for example the refining and petrochemicals. 

The chart below illustrates that, in the early stages of a project, the ability to make changes is high whereas the cost of making those changes is relatively low. However, in the latter stages of a project, significant changes are much more difficult to make and therefore the cost to make changes is high.

FEL_images


My own business experience spans both larger and smaller businesses. From what I have seen and heard, FEL is well known and used in the capital intensive industries described above - but hardly known and/or poorly used in SMEs.

One reason for this is that larger business projects carry significant financial and other risks which FEL can help minimise. FEL in the larger projects is often associated with the construction of major new equipment, a situation which is much less common in SMEs.

However smaller businesses are missing out on important opportunities to make sure they get the best out of their investments (‘bang for the buck’) if they are not aware of - or ignore - the importance of early project planning. Therefore let's briefly look at FEL in a more typical smaller business situation.

Consider your business is launching a new product into an existing or a new market. Unless you are in the fortunate position of having customers with contracts in hand ready to buy the new product, the business is faced with a number of key issues. These include a) how much can we sell based on a particular price and b) how much stock do I need? Getting either of these plans and forecasts wrong could easily mean the difference between making a profit and making a loss.

With new products it’s very easy for businesses to get caught up in the enthusiasm and optimism of the situation and they are often ill-prepared if things go quicker or slower than planned. That’s one of the reasons that early stage planning or FEL is so important.

FEL for SMEs does not need to use very complicated or lengthy processes. It could be as simple as getting together a diverse group of people early in the project to challenge key assumptions and plans. If you are a Vistage member then I would recommend using your advisory group to help you stress test your plans at an early stage.

So my question to SMEs is 'how robust is your FEL or early project planning, to ensure that you always get the 'best bang for the buck'?


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