Supply Chain - A Competitive Advantage for EPC Businesses

In the era of globalization and harsh competition, a Projectized Organization like any other business entity, needs to be adaptive, dynamic and always aiming for continuous improvement. This is vital, otherwise, its survival will be tough. In this context, small details prevail; for example, building a strong and optimal Supply Chain System is a main objective for successful companies and today's Business Leaders. And when we say Projectized Organization, one of its core competencies lies in preparing and maintaining a well-established Planning throughout the Project Phases.

An effective planning can be seized by optimizing the supply chain design and collaborating demand and supply. From there, companies will need to execute their plan by properly managing materials supply; in short, to deliver the right product, to the right place, at the right time and in the right quantities. As it is known, the highest cost impact would arise from the corrective actions that we are forced to take at the end of a project. During this stage, time is restricted, resources are limited, budget is narrowed and customer satisfaction need to stay intact. For that, the execution and operation of EPC projects require close and direct collaboration between the Supply Chain Department and all other internal functional Departments (Engineering, Project Management, Quality, Sales, Finance) as well as the external stakeholders (Suppliers, Clients, Financial Institutions, Freight Forwarders, Customs Brokers).

Among those who manage EPC Projects, many believe that the E normally is the most important element, as usually the procurement or supply of material depends on decisions made by Engineering. The common setup states that engineering outlines the project specifications crucial to the successful procurement progress. In other words, if engineering is not properly achieved, then procurement fails. However, this does not entail that the Supply Chain has a secondary role in the effective completion of projects.

During the Project Commissioning Phase, just before the handover of the deliverables, procurement managers have to ensure that equipment and materials are purchased at the best offered cost, meet the required delivery dates, and lie within the project specifications and quality requirements. Especially when it comes to somehow big and complex projects, materials management becomes an increasingly challenging process. The management of sourcing and delivering materials is critical as any surplus or shortage would delay the project and put it at risk. This in turn affects the maintenance of a consistent flow of materials for production, thus affecting the overall project. Incorrect materials information, such as improper bills of materials, delivery errors, receiving mistakes and so on, would also affect the overall project life cycle and rise project costs. In addition, dealing with subcontractors outside of the materials management process impacts the overall project supply chain as there is an increased risk of data inconsistencies.

An effective materials management system has the capacity to integrate the entire material and supply chain work process. Project teams must have online access to up-to-date information during all project phases - from engineering through the complete supply chain to onsite management. The business paybacks of effective materials management include significant cost savings, increased procurement efficiency and well established SRM (Supplier Relationship Management) and CRM (Customer Relationship Management) systems.

The effective Supply Chain Management governs the material and quantity-related activities by providing:

• Effective commercial and project requirement management

• Accurate description of material

• Procurement and Material Traceability and Tracking throughout the Project

• Forecasting and Scheduling

• Engineering Direct coordination with clients and subcontractors

Last of all, whenever there is complication in engineering execution, Supply Chain faces burden stress. The pressure today is not different from that of yesterday, but the ability to anticipate needs, forecast conditions, analyze risks, set goals and standards, plan and schedule work is required more quickly nowadays. We can sort the pressures by their roots. Many derive from engineering; others are financial or related to supplier or materials management. Without coordinating EPC functions and activities, P struggle against E and C.

Rami (B.E in Industrial Engineering '05, MBA '11, PMP '11) has been in Transportation and Supply Chain Management for 10 years and is currently heading the Procurement and Logistics Department at Solution Power Partner in Lebanon. His areas of expertise include Logistics and Transportation, Negotiation, Sourcing and Procurement, Operations Management, Inventory and Warehouse Management, and Project Management.