Factory Expansion Decision

The Situation

A mid-sized manufacturing company was facing a critical capacity decision. Their main factory was operating at 95% capacity, and demand was projected to grow 40% over the next 18 months. The leadership team had three options:

1. Expand existing facility: Add production lines to current location
2. Build new factory: Construct a new facility in a different region
3. Outsource production: Partner with contract manufacturers

The decision involved multiple stakeholders with competing priorities:

• Operations wanted to maintain quality control
• Finance was concerned about capital expenditure
• Sales needed to ensure supply for key customers
• HR was worried about workforce implications

The Challenge

The company had been analyzing this decision for 8 months with no clear path forward. Key challenges included:

Hidden Constraints:

• Union contract negotiations were pending
• Key customer contracts had specific delivery requirements
• Board was divided on capital allocation strategy
• Regional tax incentives were expiring soon

Conflicting Priorities:

• Operations VP favored expansion for quality control
• CFO preferred outsourcing for lower capital requirements
• Sales VP needed guaranteed capacity for key accounts
• CEO was concerned about long-term strategic positioning

Organizational Trauma:

• Previous expansion project had gone over budget by 50%
• Outsourcing experiment 3 years ago had quality issues
• Board was risk-averse after recent market volatility

Our Approach

We conducted a comprehensive Cool-Headed Framework engagement over two weeks:

Week 1: Discovery

• Stakeholder interviews: One-on-one sessions with all key decision makers
• Constraint mapping: Identified all hidden deadlines, budget limits, and political factors
• Risk assessment: Evaluated each option against company's risk tolerance
• Customer impact analysis: Assessed how each option would affect key accounts

Week 2: Decision Workshop

• 90-minute decision session with entire leadership team
• Decision landscape creation showing all options with pros/cons
• Commitment charter development with explicit ownership
• 30-day proof plan with specific milestones

The Outcome

Decision: Hybrid approach - expand existing facility with strategic outsourcing for overflow capacity.

Key Results:

• $2M cost savings identified through optimized expansion strategy
• 6-month execution timeline with clear milestones
• 100% stakeholder buy-in with explicit commitments
• 30% capacity increase achieved within budget

Specific Commitments:

• Operations VP: Facility expansion design by Month 2
• CFO: Capital allocation plan by Month 1
• Sales VP: Customer communication plan by Month 1
• CEO: Board approval by Month 2

Cost Savings Breakdown:

• Optimized expansion design: $800K
• Strategic outsourcing partnerships: $600K
• Tax incentive optimization: $400K
• Reduced project timeline: $200K

Lessons Learned

1. Hybrid solutions often work best: The combination of expansion and outsourcing addressed all stakeholder concerns
2. Hidden constraints drive decisions: The union negotiations and tax incentives were more important than pure financial analysis
3. Past trauma shapes current decisions: The previous expansion failure created risk aversion that needed to be addressed
4. Speed enables better deals: The quick decision allowed them to secure favorable terms with contractors and suppliers

Long-term Impact

The company successfully executed the expansion plan, achieving:

• 30% capacity increase within 6 months
• $2M cost savings vs. original estimates
• Improved relationships with key customers
• Enhanced operational flexibility for future growth

The success of this decision led to the adoption of the Cool-Headed Framework for all major strategic decisions going forward.