Manufacturing Success Story - West Malaysia rising labour costs and production inefficiencies vs automation case.

A mid-sized food manufacturing company operating in West Malaysia was experiencing rising labour costs and production inefficiencies. The operations team had proposed a RM3 million automation upgrade to replace several manual processes across two production lines. However, the finance team was unsure whether the investment would deliver strong enough returns to justify the cost.‍ The company engaged CapX Solutions to perform a strategic capital investment evaluation and provide decision clarity. The Challenge • Labour shortages were creating bottlenecks in production. • The proposed automation solution would reduce headcount by 20% but required significant upfront investment. • Management needed a clear view of cost savings, productivity gains, and returns on investments. • No internal model existed to evaluate long-term financial and operational impacts. What CapX Solutions Did‍ 1. Built a Custom DCF Model to Evaluate IRR of Automation We developed a tailored discounted cash flow model to evaluate the Internal Rate of Return (IRR) of the proposed automation investment. The model factored in: • Upfront equipment and installation costs • Labour cost reductions over 10 years • Increases in production capacity and sales potential • Maintenance, depreciation, and residual value assumptions • Sensitivity to output volume and cost changes ‍2. Delivered IRR-Focused Insights for Stakeholder Alignment CapX Solutions collaborated with operations and finance to translate technical benefits into financial outcomes. We presented the IRR in context—showing how it compared to the company’s hurdle rate, and how value was created over time through improved efficiency and cost savings. This approach enabled both technical and financial leaders to align on the decision. ‍3. Conducted Risk and Scenario Analysis We tested multiple scenarios including: • Underperformance in production gains • Delayed implementation • Higher-than-expected maintenance costs This provided a clear view of downside risks and reinforced confidence in the IRR-driven decision. The Result‍ ✅ The investment was approved with full support from finance and operations. ✅ The model built by CapX was used to secure internal funding and treasury support. ✅ Within 9 months, the client reported improved production efficiency and a 10% reduction in unit cost. ✅ CapX Solutions was re-engaged to evaluate automation at other facilities. Services Provided • 🛠 DCF Modeling for Automation • 🔍 Scenario & Sensitivity Analysis • 💰 ROI & Payback Evaluation • 📄 Strategic Investment Case Support