Insight
Introducing 'Capital Avoidance'- why CapEx decision making should begin with OpEx
How many multi-disciplinary engineering consultancies do you know that want to proactively work with their clients to reduce their CapEx plans? For a business like NIRAS, which has built an industry-leading reputation on successfully planning, designing and executing CapEx projects across process industries, it might seem a counterintuitive approach, but it’s increasingly important as we navigate an ever volatile geopolitical landscape.
August 26, 2025
What is ‘capital avoidance'?
Capital avoidance is the strategic management of assets and operations to prevent unnecessary capital expenditure.
As the global manufacturing industry faces variable market forces from ever-changing tariffs, stagnant economies, rising labour costs and shifting consumer demands, we are increasingly discussing its importance.
An indisputable rationale for CapEx projects still exists. Whether its investment in new equipment, machinery or facilities, a tailored CapEx strategy can help to increase operational efficiency, expand production and future-proof the sustainability of the business, as well as ensuring safety and engineering compliance.
While most engineering consultancies focus on capital projects, we take a different approach. We work with our clients to understand where investment truly adds value, and where it can be reduced or avoided altogether.
Often, businesses in the process industry come to us with a capital expenditure challenge. But before jumping to solutions, we take a step back to understand what’s really driving the need for investment. More often than not, it leads to a conversation about operational performance and that’s where the real opportunities often lie.
Nick Hickman, Vice President for Business Development (UK)
Often, businesses in the process industry come to us with a capital expenditure challenge. But before jumping to solutions, we take a step back to understand what’s really driving the need for investment. More often than not, it leads to a conversation about operational performance and that’s where the real opportunities often lie.
This approach is all about taking the challenge back to basics and asking some fundamental questions. For example:
- Have you optimised the facility to its full-extent?
- Are you maintaining every piece of machinery as you should?
- Is every part of your production running as efficiently and effectively as possible?
- Does your team have adequate training, experience, and qualifications?
- Are you deploying staff in the right quantities?
If a client approaches us with a discussion around upgrading a piece of equipment, rather than going straight down the route of buying a new replacement, we need to understand why. What is its role in the production process? Is it performing as it should? Have you spoken to the OEM to refurbish or repair it?
Using a capacity waterfall
One of the most useful tools we use when exploring capital avoidance is the capacity waterfall. It breaks down production performance step by step, showing exactly where capacity is being lost, from the theoretical capacity your facility could produce, to the actual output being achieved.
Often, it shows opportunities to increase capacity simply by making changes to the operating model or planning approach without the need for new investment.
You start with the theoretical (installed) capacity, the highest possible output with no bottlenecks and zero losses. From there, you factor in the impact of the products being made (product portfolio), since different products run at different speeds and can reduce output.
Next, you take into account unavailable hours, when the line is stopped for things like maintenance and cleaning, and un-resourced hours, when equipment is ready but there’s no staff to run it.
What’s left is the operating capacity. This is the output you should be able to achieve during scheduled and staffed time, assuming everything runs smoothly. From here, actual production losses are usually tracked using OEE (Overall Equipment Effectiveness), which captures things like unplanned downtime, slow running speeds, and quality defects.
Capacity waterfall modelling helps identify where the biggest efficiency gains can be made. In practice, the key levers and drivers are:
Installed capacity – increasing the speed of the slowest part of the process (bottlenecks)
Product mix – optimising the products or Stock Keeping Units (SKU) that run most efficiently
Un-resourced hours – increasing the time equipment is staffed and running
OEE improvements – reducing stoppages, speed losses and waste
Looking at these areas often helps businesses spot capacity they didn’t realise was there, and that can change how they think about what needs investing in, and when.
Capital avoidance in practice
Optimising maintenance regimes is another example of an often-overlooked method of increasing the efficiency and output of a facility. Many sites run sub-optimally simply because equipment is not being maintained correctly. If you’re able to improve the performance of multiple pieces of equipment by a few percentage points, across the whole production process, you could unlock significant increases in efficiency and energy savings.
We also encounter challenges with increasing the amount of manufacturing space. With the high cost of civil engineering projects, proving the ROI of a new development can quickly put the breaks on CapEx plans.
Exploring opportunities to reconstruct and reuse existing space for new processes often means we can make the required changes, without the need for huge CapEx investment in brand new facilities.
Exploring opportunities to reconstruct and reuse existing space for new processes often means we can make the required changes, without the need for huge CapEx investment in brand new facilities.
Nick Hickman, Vice President for Business Development (UK)
Fresh perspective matters
This shift of thinking from CapEx towards an OpEx approach is often only possible by getting fresh eyes on a challenge. We know that production managers live with the frustration of ongoing challenges with day-to-day production and running operations.
When you’re so close to the challenge, it can be difficult to be objective and self-critical. That’s where a consultant can offer a second pair of eyes to sense check your approach and challenge your way of thinking.
Our approach will also help to get a balanced view of the best plan moving forward. Anyone working in process industries will recognise that senior management will often have a different view to the team on the shop floor.
By getting full 360 degree awareness of the management of a plant, we can create a single view of operations which is absolutely essential for effective decision making.
From OpEx to CapEx
While ‘capital avoidance’ is focused on identifying opportunities to maximise efficiencies and capacity, when you’ve got your plant running at optimum levels of performance there will be opportunities to spend CapEx.
The bonus of taking this approach is that you will be able to prioritise any CapEx spend with the solid foundations of a plant which is running at its optimum level.
When you have decided that it’s right to invest in a new CapEx project, it’s vital to start with financial planning and budgeting, before moving onto forecasting and masterplanning through the different stages of the design.
At NIRAS we have decades of experience working with companies through turnkey solutions, EPC and EPCM projects, as well as civils and buildings. We can also wrap in ongoing maintenance strategies to keep the plant running efficiently and effectively.
While some CapEx projects are essential to help businesses and meet their challenges, it’s vital that any project is value-driven, minimises disruption to production and optimises energy efficiency to reduce environmental impact.
A strategic masterplan will ensure that your business is well-prepared to meet long-term business objectives. This process includes site layout optimisation, process flow engineering, future-proofing strategies and sustainability integration.
With a fully optimised site and masterplan in place, your facilities will be best-placed for any CapEx project, as well as being designed for maximum efficiency, scalability and sustainability.
Nick Hickman, Vice President for Business Development (UK)
With a fully optimised site and masterplan in place, your facilities will be best-placed for any CapEx project, as well as being designed for maximum efficiency, scalability and sustainability.
‘Capital avoidance’ is about thoroughly understanding existing operations, optimising what’s already in place and challenging assumptions to avoid unnecessary capital spend. It’s certainly not about saying “no” to investment, but instead focusing on laying the groundwork for any investment to have the maximum impact.
Get in touch
Phil Mason
Business Consulting Director
Burton upon Trent, United Kingdom
