Asset-intensive projects are typically long-term initiatives that can cost millions or even billions of dollars over the asset’s implementation. During these uncertain times, it is even more important to streamline efficiencies for effective project management and to eliminate waste on highly capital-intensive projects. Some examples of asset intensive projects are nationally based cellular buildouts or a utility company’s project to install smart meters throughout a city.
According to PMI Pulse of the Profession* survey, 9.9% of every dollar is wasted on poor project management, which equates to $99 million on a $1 billion project.
According to the same study, only 64% of the most mature project management teams deliver a project on time, and only 67% of projects are delivered on budget. When you compare those KPIs to low maturity project teams, only 36% of projects are delivered on time and 43% are on budget.
Unnoticed Project Wastefulness
There are many reasons for the excessive waste and poor project performance—a lack of visibility into financials for a given project, disconnected software applications, manual processes, workarounds to derive data from siloed information. Some traditional supply chain solutions provide data as sources for some of the project metrics, but they often don’t provide the detailed insight that a project manager needs to course correct quickly to prevent waste or knowing when to adjust supplies.
Phases of a project
Let’s dig a little deeper into the progression of an asset-intensive project, such as building a cellular network. Here are the typical phases of such a project:
• Quote/bid, initiate the project – This includes engineering functions, as well as negotiations, legal reviews, contracts, and project planning. Depending on the contract terms, it may include prototypes of cell towers or suppliers providing quotes for other major physical components of the cellular network that are being built out or upgraded.
• Supply Chain Planning and Materials Management – This starts the initial phase of the supply chain processes that include planning, ordering, manufacturing, managing inventory, and transporting goods for the project. It also typically involves subcontracted services for specific aspects of the project, e.g. hiring architecture or site planning company, engineering services, or welders and electricians to help construct cell towers.
• Construction – Actual work of the project is performed at project sites. The project manager carefully manages the process, inventory and contractors to try to avoid delays and mitigate risks so that the construction project is completed on time and within budget.
• Transfer of ownership and service – Here, the completed asset, in this case, a cell tower network is transferred from the project manager/contractor to the owner. Depending on the project, it may be a private company or a public entity. And then, the asset typically rolls into a maintenance phase. At this point warranties, service contracts, SLAs, and replacement parts come in to play when there’s a hardware failure, upgrade or damage to a cell tower network.
• Capitalization, billing and revenue – The finance department will account for the receivables and payables, properly attributing costs and expenses to the correct project, and capitalizing assets.
Common Challenges to Overcome
What has been described is the intersection between projects and supply chain processes. Without an integrated solution, these processes can be a muddle of disparate management software applications, manual tasks, and cumbersome work-arounds. Add in delays in the timeline because of macroeconomics events, inclement weather, resource scheduling conflicts, permit reviews, approvals from cities or component part delays, and you could quite easily have a confusing trail that requires forensic investigation to see if a project is on budget, let alone identify the nuances of project waste and detect in-flight project scope creep.
The Solution: Six Opportunities to Eliminate Waste in Supply Chain Projects
An end to end project-driven supply chain solution that integrates the six functions listed below can help project managers eliminate waste.
1. Project planning—with dashboard KPIs to streamline scheduling and budgets for individual projects to quickly gain insight and track the progress at any point in the lifecycle.
2. Procurement—designed for project-specific purchasing to ensure materials are priced, procured, and received into inventory according to the specifications of each individual project.
3. Supply chain—with automated functionality to orchestrate a complex multi-project supply chain, you can set up business rules for project requests, orders, creating documents, look-ups and attachment categories, and replenishment planning with a dashboard work area to manage the workflows.
4. Manufacturing—offering functionality to create work orders, review availability and pick materials at the project or task level, attribute work orders as well as manage inventory and costs per individual project.
5. Maintenance—with a process flow to create work orders, issue parts from a common or project-specific inventory, the solution also enables you to purchase outside services, import materials, and resource costs, with all costs, resources, and details associated with individual projects.
6. Finance—with controls to ensure that multiple projects, customers, and associated activities can be accounted for separately with visibility into costs, expenses, and payables.
Benefits of a Project Driven Supply Chain
Fully supporting supply chain processes within the context of a specific project, including procurement, inventory, ordering, manufacturing, shipping, maintenance and costing, as well as finance functions and project accounting makes it makes easier to gain oversight and take corrective action as needed. When connected to finance, the project manager can gain visibility into how each project relates to the planned budget at any point in time.