Most food manufacturing facilities have more capital ideas than capital budget. A facility needs: new CIP automation, production line expansion, electrical system upgrade, preventive maintenance overhaul, and quality control improvements. But the capital budget allows only $750K of $2.5M in identified needs.
How do you choose? Which projects advance strategic objectives while delivering financial returns?
Without a scoring framework, decisions become political. The loudest advocate wins. The project gets funded that best aligns with the current CEO's priority. This approach generates inconsistent decision-making and suboptimal capital allocation.
The Multi-Criteria Scoring Framework
Assign each project scores across five dimensions:
1. Financial Return (Weight: 40%)
Calculate 3-year NPV and payback period:
- Over $500K NPV, under 2 year payback = 5 points
- $250K-$500K NPV, 2-3 year payback = 4 points
- $100K-$250K NPV, 3-4 year payback = 3 points
- $50K-$100K NPV, 4-5 year payback = 2 points
- Under $50K NPV or over 5 year payback = 1 point
2. Strategic Alignment (Weight: 25%)
Does the project advance explicit facility/company strategy?
- Directly enables growth strategy = 5 points
- Supports customer demands = 4 points
- Improves operational efficiency = 3 points
- Maintains baseline performance = 2 points
- Limited strategic connection = 1 point
3. Risk Mitigation (Weight: 15%)
Does the project reduce downtime, safety, or compliance risk?
- Eliminates critical safety or regulatory risk = 5 points
- Reduces high-probability failure mode = 4 points
- Improves reliability measurably = 3 points
- Provides incremental improvement = 2 points
- Minimal risk benefit = 1 point
4. Execution Confidence (Weight: 15%)
Can this project be delivered on-time and on-budget?
- Proven technology, internal team experienced = 5 points
- Proven technology, needs external support = 4 points
- Newer technology, clear scope = 3 points
- Emerging technology, some ambiguity = 2 points
- Novel technology, high execution risk = 1 point
5. Dependency Management (Weight: 5%)
Are there dependencies on other projects?
- Standalone, no dependencies = 5 points
- Enhances other approved projects = 4 points
- Works independently, minor connections = 3 points
- Depends on other pending projects = 2 points
- Blocks other critical initiatives if not done = 1 point
Calculating Overall Score
Project Score = (Financial Return × 0.40) + (Strategic Alignment × 0.25) + (Risk Mitigation × 0.15) + (Execution Confidence × 0.15) + (Dependencies × 0.05)
Maximum score: 5.0
Rank all projects by score and fund from top until budget exhausted.
Why This Framework Works
- Transparent: Everyone understands how projects are evaluated
- Balanced: Doesn't over-weight financial return at expense of risk mitigation
- Defensible: When capital decisions are questioned, scoring framework provides rationale
- Adaptable: Weights can be adjusted based on company priorities (safety-focused company increases risk mitigation weight to 25%)
For food manufacturing companies managing multiple competing capital priorities, using a scoring framework ensures capital allocation advances strategic objectives while delivering financial returns. This approach also demonstrates clear decision-making to PE investors during due diligence.
