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Creating Efficiency & Effectiveness in the EPC and Construction Industries in 2019

January 21, 2019

Often, in the oil, gas and construction industries, for various reasons that include mergers and acquisitions, organic growth into larger companies, cost cutting measures, rise in the cost of commodities and changes in technology over the last few decades, many organizations find themselves in a situation where multiple systems are employed and deployed to track data across the company, including suppliers and subcontractors. In this discussion, I am only addressing information technology systems and how they relate to one another.

 

Last week, I blogged about the challenge of adopting Agile Methodologies, but those challenges should not dissuade organizations from putting together an Innovation Strategy as part of their larger three (3) and five (5) year Executable Strategic Plan. Just a quick note. It’s important to emphasis that the Strategic Architecture of the 3-5 year goals that are part of the Executable Strategic Plan will still have shorter term yearly goals and quarterly objectives. In the case of system integration and application enhancements or deployments, there are tremendous opportunities in these industries that would enhance efficiencies and effectiveness across the organization - the right actions to produce the intended result at a high rate, at the right time using the best possible tools to reduce wasted effort thereby enhancing ROI.

 

In review of the observations below, it is obvious that there are many opportunities to enhance the effectiveness of execution by enhancing the integration or applications of the current Enterprise Resource Planning (ERP) System. Most organizations have some interconnectivity / integration between systems, though it is often connected by a combination of manual transfer of data and middleware produced by one or two company, rather than an interlacing of all systems through a single software solution. Software solutions do exist that can bring all the pieces together to interact seamlessly, but there are many reasons to plan carefully, prioritize, think long-term, and execute in short bursts once the organization is ready to adopt the Agile Methodology.  

 

Long-term as part of the organization’s Innovation Strategy, a seamless system will enable IT to synergize and eliminate the cost of focusing on multiple disparate systems that were never intended for integration. A unified integrated system also ensures the smooth transition of information from one business segment to another. The current state of system integration in many is akin to piping liquid (whatever liquid you like) to a transfer point and then manually using a bucket or a hand pump to move it to the new interconnect / lateral. An organization that can make the move to a fully integrated system will be more efficient, with greater real-time operational and project reporting, giving organizations quicker, more effective, higher impact performance and client relationship optimization, not to mention greater security. Less junctures means reduced likelihood of and fewer leaks.

 

  1. The Accounting team will have one system like Timberline or JD Edwards.

  2. Labor hours worked may get entered into a legacy system in the office - something that was built internally  outside of Accounting, perhaps as an HR solution.

  3. HR will have a totally different system for recruiting, interviewing, onboarding, and tracking employees.  

  4. Business Development’s system was probably adopted strictly for sales, marketing, and Business Development, or in some cases, just for Business Development and Sales or some combination thereof. Business Development will use the CRM (Customer Relationship Management) tool to track the client from the moment they have been engaged to the moment the contract has been established. this may not be the same system that is used by the project execution or operations team depending on which business unit receives client responsibility.

  5. Out in the field, laborers and contractors may also use a completely different software application system to track labor hours, equipment, materials and expenses. This could be one system or many - one for each expense type. When the data is all collected this may be sent electronically to accounting and project management (or operations) separately, or it may be manually sent to these departments. In the case of a turnaround or maintenance project, operations and project management may both be involved/

  6. invoicing payables and receivables may also be done through a completely different department not integrated with accounting, operations or project management software applications, but nonetheless receiving information from and feeding information back to those same business units.

  7. Project controls, although part of project management, may also operate on their own systems. Scheduling personnel, for instance, will receive information from design, engineering, procurement, construction, etc and enter that information into a scheduling system only to report back the impact of that data. Scheduling may use an software application such as Primavera 6 to track and forecast work effort, labor hours, budget and related items.

  8. Cost controllers in the project controls department may use other software application tools such as Excel, JD Edwards, SAP, etc to control, track and report budget progress and forecasts. and maybe equipment or materials.

  9. Subcontractors and suppliers may use some form of Excel and legacy system software or just different applications than the ones used by the owner organization. In general subcontractors will not enter their data directly into the same system that the owner company is using, and their schedule of values may not align with the established Work Breakdown Structure used for tracking, controlling and forecasting work efforts.  For owner companies, this means a delay in progress reporting and budget analysis. Field “emergencies” may cost projects and operations tens of thousands of dollars by the time management hears of the scope change.

  10. Other areas that are often similarly disjointed include estimating, procurement, quality, testing, inspection, and delivery of systems, material and equipment whether delivery means release from a factory or physical delivery and field acceptance of goods at a site or warehouse.  

 

These are only an example of a handful of areas that could be addressed as part of an Innovation Strategy that embraces an Agile Methodology to enhance the speed of positive impact through business case analysis and prioritization. If you haven’t had a chance to read my previous post, please check it out here: https://www.criticalpathrescue.com/single-post/2015/11/28/Time-is-Money

 

It is vital to go through each of the bullet points of that blog to determine what type and depth of preparation each business segment requires including the cultural impacts.

 

If you have any further questions, or would like to set up a time discuss options more in depth, I am available at kevinlangley@criticalpathrescue.com

 

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