PHOTOGRAPHY: THINKSTOCK IMAGES INDUSTRIAL CAPITAL EXPENDITURE SURVEY 2017 WHAT IS THE EUROPEAN ROADMAP FOR MANAGING CAPITAL INVESTMENTS?

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1 PHOTOGRAPHY: THINKSTOCK IMAGES INDUSTRIAL CAPITAL EXPENDITURE SURVEY 207 WHAT IS THE EUROPEAN ROADMAP FOR MANAGING CAPITAL INVESTMENTS?

2 2 This is a supplementary report with the most important highlights fromout the European field of managing industrial capital investments. All results are based on the global survey INDUSTRIAL CAPITAL EXPENDITURE SURVEY 207 WHAT IS YOUR ROADMAP FOR COMPETITIVE ADVANTAGE? PHOTOGRAPHY: THINKSTOCK IMAGES If you are reading this report, you are probably looking for insights into how to manage your capital investment program or just into where to invest at this exact moment. Maybe you are wondering what others in the industry are doing to plan their programs for competitive advantage? Whereas yesterday s forecast was more or less predictable, today s forecast is not. As a capital investment manager, you are probably confronted with lots of choices and influenced by many variables when it comes to decisionmaking. But whereas yesterday s business risks, investment budgets, market conditions and growth rate were more or less predictable, the factors that influence capital investment decisions today are far more complex. We are entering a whole new industrial revolution, based on new technological innovations in internet technology. With industry.0, driven by the internet of things, your decision-making process is more complex than ever. With manufacturing needs increasing, but investment falling, a gap is being created that, if not addressed, will result in manufacturers being unable to meet demand. This gap will only widen if this trend continues, resulting in huge missed opportunities. What is your roadmap for a successful capital program? How do you deal with changing market demands and address social and environmental challenges? How do you decide and innovate in a world driven by fast-growing competitors all around us? Do you collaborate with stakeholders and suppliers, engaging them at the right time? Do you know what drives your end consumer today and will do, let s say, five years from now? Your answers to these and other questions will determine whether your processes for capital investments are fit for the future work of your organization. In the coming decade, the supply chain will change into a multi-layered value chain in which decisions are not just based on the current state of an asset. Your capital decisions will become of strategic value to the organization, as well as to suppliers and the social and natural environment. And they will largely depend on a whole network of influential parties. We believe that the seven key success factors identified by our survey will help to influence your strategic value for today and tomorrow, whether you are in the decision-making phase, from idea to investment, or already in the engineering and construction phase. We would like to inspire you by offering insights into some of our clients capex projects and into how they have applied several factors for success throughout Europe. We would also like to share the vision and challenges of forty European executives in the industrial market. We sincerely hope these best practices will stimulate your process of planning capital investment programs that will suit the demands of tomorrow. If you are seeking to establish where you stand on all seven key success factors and how to plan for competitive advantage, please feel free to contact us. With kind regards, Frank Goossensen: Client Development Director Europe, Director Water Europe John Atkins: Director Buildings Europe

3 PHOTOGRAPHY: THINKSTOCK IMAGES CURIOUS ABOUT YOUR CURRENT POSITION ON ALL 7 SUCCESS FACTORS? If you are seeking to establish where you stand on all seven key success factors and how to plan for competitive advantage, please feel free to contact us. 7 6 THE WAR FOR TALENT BETTER RETURNS AND IMPROVED SPEED TO MARKET 2 CENTRALIZATION FLEXIBILITY AND AGILITY 5 INTERNAL STAKEHOLDER SUSTAINABILITY IN CAPITAL PROGRAMS SUPPLIER INTEGRATION AND COMMUNICATION

4 PHOTOGRAPHY: THINKSTOCK IMAGES THE EUROPEAN CHALLENGES IN MANAGING CAPITAL INVESTMENT In a revolutionizing industrial landscape, it is evident that many manufacturers are looking to embed their built asset capital programs into their core value chain of delivering product to market. In addition to chapter 2 of the industrial capital expenditure survey we have outlined the European challenges in managing capital investment programs.

5 5 THE EUROPEAN CHALLENGES IN MANAGING CAPITAL INVESTMENT 6 CENTRALIZATION THE WAR FOR TALENT 7 BETTER RETURNS AND IMPROVED SPEED TO MARKET 2 FLEXIBILITY AND AGILITY 5 INTERNAL STAKEHOLDER SUSTAINABILITY IN CAPITAL PROGRAMS SUPPLIER INTEGRATION AND COMMUNICATION PHOTOGRAPHY: THINKSTOCK IMAGES - BETTER RETURNS AND IMPROVED SPEED TO MARKET Although most companies are confident that they can demonstrate the value of their capital investment projects to the wider business, only 50% of the European respondents are confident about their ROI performance and their speed to market. This is about 20% lower than the worldwide level of confidence. However, only 5% benchmarked against peers and only 50% shared lessons learned across their business. On a global scale only one quarter executed benchmarks. The biggest challenge for the industry is therefore for companies to gather insights for know-how about their current position compared to others. ON THE ROAD TOWARDS COMPETITIVE ADVANTAGE...when you strive to improve your performance and increase your speed to market we support you by taking a lead in strategy, managing the risks, and assuring the outcomes to help you achieve your business objectives and provide a strong return on investment. Business Program

6 6 THE EUROPEAN CHALLENGES IN MANAGING CAPITAL INVESTMENT 6 CENTRALIZATION THE WAR FOR TALENT 7 BETTER RETURNS AND IMPROVED SPEED TO MARKET 2 FLEXIBILITY AND AGILITY 5 INTERNAL STAKEHOLDER SUSTAINABILITY IN CAPITAL PROGRAMS SUPPLIER INTEGRATION AND COMMUNICATION PHOTOGRAPHY: THINKSTOCK IMAGES 2 - FLEXIBILITY & AGILITY Fewer than 50% of manufacturers agree that their built asset portfolio is flexible enough to support the challenges facing their business. This is exactly the same as the number reporting to have a multi-year investment plan. In Europe, asset redundancy is slightly higher than it is worldwide. Almost one quarter of companies experienced the early redundancy of an asset, whereas on a global level this is one fifth. ON THE ROAD TOWARDS COMPETITIVE ADVANTAGE when you explore ways to become flexible in manufacturing we create designs that deliver environmental and economic benefits that leave a lasting legacy for generations to come. Everything we do is created to anticipate the demands of tomorrow while optimizing the balance between the economic, environmental and social perspectives for the various stakeholders. Performance Driven Program

7 7 THE EUROPEAN CHALLENGES IN MANAGING CAPITAL INVESTMENT 6 CENTRALIZATION THE WAR FOR TALENT 7 BETTER RETURNS AND IMPROVED SPEED TO MARKET 2 FLEXIBILITY AND AGILITY 5 INTERNAL STAKEHOLDER SUSTAINABILITY IN CAPITAL PROGRAMS SUPPLIER INTEGRATION AND COMMUNICATION PHOTOGRAPHY: THINKSTOCK IMAGES - SUSTAINABILITY IN CAPITAL PROGRAMS In Europe fewer than 50% of manufacturers reported that reducing environmental impact was significant in determining how they approach major capital investment projects. On a global scale this is a higher priority. Significant drivers** in determining how companies approach major capital investment projects:. ROI 78% 2. Environmental impact 8%. Demand for customization of facilities 5% **Disruptive changes, such as the availability of global supply partners and responding to technological changes, are less important at this moment in time. ON THE ROAD TOWARDS COMPETITIVE ADVANTAGE when you reduce your environmental footprint and increase ROI we ensure that all aspects of your operations are fully environmentally compliant and sustainable. Industrial Strategic Environmental

8 8 THE EUROPEAN CHALLENGES IN MANAGING CAPITAL INVESTMENT 6 CENTRALIZATION THE WAR FOR TALENT 7 BETTER RETURNS AND IMPROVED SPEED TO MARKET 2 FLEXIBILITY AND AGILITY 5 INTERNAL STAKEHOLDER SUSTAINABILITY IN CAPITAL PROGRAMS SUPPLIER INTEGRATION AND COMMUNICATION PHOTOGRAPHY: THINKSTOCK IMAGES - INTEGRATION AND COMMUNICATION WITH SUPPLIERS Whereas on a global level a majority is looking to take an integrated, enterprise-wide approach to managing supplier relationships, in Europe the approach is different. Only one third of suppliers have an integrated, enterprisewide approach to managing supplier relationships. Almost 25% of manufacturers experienced a failure in a project due to an issue with a supplier in the last three years, and one third even had a significant dispute with a supplier on a capital project in the last three years. ON THE ROAD TOWARDS COMPETITIVE ADVANTAGE...when you are looking for an integrated value chain with suppliers and end customers we work with both public and private enterprises around the world to improve your management organization, business processes and information systems. Contract Business

9 9 THE EUROPEAN CHALLENGES IN MANAGING CAPITAL INVESTMENT 6 CENTRALIZATION THE WAR FOR TALENT 7 BETTER RETURNS AND IMPROVED SPEED TO MARKET 2 FLEXIBILITY AND AGILITY 5 INTERNAL STAKEHOLDER SUSTAINABILITY IN CAPITAL PROGRAMS SUPPLIER INTEGRATION AND COMMUNICATION PHOTOGRAPHY: SHUTTERSTOCK IMAGES 5 - INTERNAL AND EXTERNAL STAKEHOLDER In Europe 6% of manufacturers think their approach to engaging stakeholders is "good". This is higher than the figure worldwide, where fewer than 50% are confident about their stakeholder engagement. Collaboration, involvement and integration were identified as the biggest factors of influence that would improve engagement. ON THE ROAD TOWARDS COMPETITIVE ADVANTAGE when you are thinking about improving collaboration and communication with internal and external stakeholders we proactively provide sustainable alternatives to projects and may decline work that does not include adequate measures to evaluate environmental issues or mitigate adverse effects Technology and Program

10 0 THE EUROPEAN CHALLENGES IN MANAGING CAPITAL INVESTMENT 6 CENTRALIZATION THE WAR FOR TALENT 7 BETTER RETURNS AND IMPROVED SPEED TO MARKET 2 FLEXIBILITY AND AGILITY 5 INTERNAL STAKEHOLDER SUSTAINABILITY IN CAPITAL PROGRAMS SUPPLIER INTEGRATION AND COMMUNICATION PHOTOGRAPHY: THINKSTOCK IMAGES 6 - CENTRALIZATION Seven out of ten manufacturers make decisions based on significant capital investment projects centrally. This means they have a central enterprise-wide investment board and a central capital investment project register. This is more than worldwide. The industry is confident of having a detailed picture centrally of costs at individual asset level. ON THE ROAD TOWARDS COMPETITIVE ADVANTAGE when you are moving towards a process in which decisions on capital investment programs are made centrally or decentrally we help you to create a competitive advantage and increase shareholder returns through improved decision-making. Investment and

11 THE EUROPEAN CHALLENGES IN MANAGING CAPITAL INVESTMENT 6 CENTRALIZATION THE WAR FOR TALENT 7 BETTER RETURNS AND IMPROVED SPEED TO MARKET 2 FLEXIBILITY AND AGILITY 5 INTERNAL STAKEHOLDER SUSTAINABILITY IN CAPITAL PROGRAMS SUPPLIER INTEGRATION AND COMMUNICATION PHOTOGRAPHY: SHUTTERSTOCK IMAGES 7 - THE WAR FOR TALENT The war for talent in search of experts in capital investment management is the second biggest challenge to capital delivery (8%). Fewer than half find it "difficult" to recruit and retain the right people to plan and deliver a capital program, and 5% said this has gotten more difficult in the last three years. Worldwide the difficulty percentage is higher, around 50%. ON THE ROAD TOWARDS COMPETITIVE ADVANTAGE when you are proactively building the right team with which you can plan and deliver capital investment programs we create workplaces with strong and compelling identities, places that advance the mission through physical surroundings, and places that form enduring and meaningful relationships with target audiences. Business

12 2 NIKE S SUPPLY CHAIN OF THE FUTURE NIKE built a progressive sustainable distribution center on the NIKE European Logistics Campus (ELC) in Ham. Thanks to this latest investment in a state-of-the-art centralized distribution network at the heart of Europe, NIKE can now serve a large network of retailers and consumers faster, through a more responsive, agile supply chain across 8 countries. More than,000 employees work for Nike on the Belgian campus. Huge green facade: The distribution center s facade is covered in greenery over a total length of. kilometers. This repels the sun, contains emergency routes should the need arise, and improves the building s appearance. Biodiversity in the area was increased after the construction. Sheep graze and maintain the landscape, while beehives contribute to biodiversity by pollinating flowers both on the site and in the local area. The design team won the international MIPIM property exhibition award Best Industrial and Logistics Development for their work on the NIKE distribution center in Ham, which was officially opened in 206. PHOTOGRAPHY: NIKE, INC. The three key themes to the design: non-fossil energy consumption, making the use of energy and resources circular, and creating an environment centered around health and biodiversity underscored NIKE s commitment towards building the supply chain of the future. SOME FACTS AND FIGURES 0% reduction of CO2 emissions per year by transporting 95% of containers via the Albert Canal, saving,000 trips by trucks over the road network. The building uses 00% renewable energy obtained from wind, solar, geothermal, hydroelectric, and biomass sources. Electricity consumption and environmental impact have been drastically reduced by incorporating lots of glass and automated LED lighting. As an added benefit, this has resulted in a pleasant workplace. OUR DESIGN TEAM Jaspers-Eyers Architects: architecture Arcadis: structural engineering, MEP (including fire safety) engineering, hard and soft landscaping engineering, biodiversity consultancy, environmental permitting, green building consultancy and LEED certification Pauwels: ecological infrastructure, landscaping. Read More about your colleagues and their challenges in returns on investment and improved speed to market, Flexibility & agility, sustainability in capital programs, Integration and communication with suppliers, Internal and external stakeholder engagement, centralization and the war for talent. contact us

13 BLUE PRINT FOR THE LEAN FACTORY OF THE FUTURE PHOTOGRAPHY: SHUTTERSTOCK IMAGES A major undisclosed multinational company within food industry with the need to create a unique blue print for a lean factory of the THINKSTOCK future. Optimize production is a key factor for capex growth in new or merged plants. The blue print lean factory is designed to meet the required production at the lowest operational costs no matter the location of the new factories or merges. Arcadis uses digital technology in combination with the lean factory approach to develop a digital performance instrument to be used as a strategic investment tool when it comes to investment decision making, also in terms of sustainability. This blue print allows the client to define his capex program in a faster and more accurate way. By adopting a smarter and digital approach based on BIM s technology our client can input more accurate information starting from the design stage bringing a more accurate predictive maintenance plan, rather than only time and cost topics. The design of every plant expansion or construction will be based on the measured volume (point cloud) of the factory as well as the possibility of a smarter and faster time to market. Less technician trips will be required from the early stage of the design development. BIM platform will allow the Client to capitalize and centralize his know-how as well as count on a remote accessible design environment. Lean and BIM approach is orienting industrials towards new kind of professional skills. New talented engineers, from all over the world will be more and more attracted by smart industries. Read More about your colleagues and their challenges in returns on investment and improved speed to market, Flexibility & agility, sustainability in capital programs, Integration and communication with suppliers, Internal and external stakeholder engagement, centralization and the war for talent. contact us

14 SHELL, FLEXIBLE AND ADAPTABLE TECHNOLOGY CENTER Since 9, Royal Dutch Shell has been at the forefront of developments in fuel technology. Much of this research has been conducted at the Shell Technology Center in Amsterdam, which has pioneered important chemical processes and products, including gas-to-liquids (GTL) technology and the Shell Coal Gasification Process that turns coal into synthesis gas, a mixture of hydrogen and carbon monoxide that burns as cleanly as natural gas. LESS OPEX COSTS, SUSTAINABLE AND LOWER CO 2 In September 2009, the new Shell Technology Center Amsterdam was opened, aimed at providing a modern and energy-efficient working environment for over,00 researchers and staff. Although it is one of the city s largest buildings, all its electricity is generated by a North Sea wind farm and includes other notable features such as an underground thermal storage system that controls indoor temperature. Compared to conventional installations, it is estimated that the new building produces 60% lower CO2 emissions. By designing the Shell Technology Center, Arcadis assisted in enabling Shell to be flexible and adaptable. The design offers flexibility to adapt to new technologies, such as a new "plug and play" system that enables climate, electricity, air and gas to be controlled in individual rooms whenever required. Read More about your colleagues and their challenges in returns on investment and improved speed to market, Flexibility & agility, sustainability in capital programs and the war for talent. contact us

15 5 A NEW FACTORY INCREASED SPEED TO MARKET BE COMPLIANT PHOTOGRAPHY: SHUTTERSTOCK IMAGES A global operating research-intensive biopharmaceutical company, with the need to increase their production volumes while improving their speed to market, invested in a new factory. In a fast-track delivery program, within 2 months, the Bio Facility was successfully designed, engineered and constructed. An integrated EPCM team from Arcadis, sub-contractors, vendors & the client worked closely together as ONE team to make it happen. For this client, it was and still is important to be compliant to the stringent laws and regulations as well as to their own sustainability objectives concerning discharge of wastewater and the treatment of contaminated groundwater arising from remediation activities. The activities in this project had a huge effect on daily operation on-site and at neighboring sites from other companies. A team from Arcadis and stakeholders from all involved companies developed a plan that mitigated all risks and ensured ongoing operations. Arcadis executed the project in an EPCM project where we designed, engineered, contracted and constructed all systems, utilities and buildings. Read More about your colleagues and their challenges in returns on investment and improved speed to market, Flexibility & agility, sustainability in capital programs and internal and external stakeholder engagement. contact us

16 6 CREATING COMPETITIVE ADVANTAGE PHOTOGRAPHY: SHUTTERSTOCK IMAGES For an international healthcare client we ve helped to deliver several projects in a complex operational environment whilst maintaining facilities for core scientific services. The projects include office, amenity area and laboratory refurbishment, mechanical and electrical plant asset replacement and upgrade. The management of this high volume and diversity of projects running concurrently across several sites, requires an excellent alignment with the business strategy to ensure full realization of monetary value and maximum impact on the business needs. Arcadis supported the Program Managers to plan and deliver a diverse portfolio of simultaneously running capital programs across the Research & Development Sites, using expertise in capital delivery and operational risk management. Our client obtained a very successful rate on delivering their projects to baseline cost and time, reaching high levels of customer satisfaction and safety to materialize benefits aligned with baseline models for safe and on-time project success. Read More about your colleagues and their challenges in returns on investment and improved speed to market, Flexibility & agility, Integration and communication with suppliers, and Internal and external stakeholder engagement. contact us

17 7 CREATING COMPETITIVE ADVANTAGE TOGETHER As capital programs are key drivers in the delivery of business value, ROI is therefore expected to increase and the industrial sectors need to manage and optimize their capital expenditure with strong knowledge of market disruptors and competitors and good collaboration with suppliers. PHOTOGRAPHY: SHUTTERSTOCK IMAGES Arcadis, with years of experience in executing and delivering projects, has the required knowledge and expertise (with these experiences) to prepare, execute and deliver projects within budget and on time, at an outstanding level of quality and with the flexibility to fit changing needs. One of our success formulas is keeping all relevant stakeholders involved and engaged, from idea to delivery, monitoring the progress of projects in a transparent way based on our lessons learned, while fitting in with the organizational strategy and culture as well.