“Identify, Define and Communicate Client Needs and Expectations”
Ali Barahmani 2011
Abstract
An understanding of the internal and external risks in project management is necessary as part of the project plan. Generally speaking, internal risks are easier to identify and manage while external risks are more elusive and less controllable. Dealing with clients, who are providing the fund to define and execute the projects, can be critical and in most cases problematic. When it comes to engineering in oil and gas industry in Alberta, the same problems can affect the project in different capacities. Identifying these needs and defining the scope can be critical in receiving the approval and getting the AFE. This paper is treating this issue as an external issue to the project team since the project team has no control over the clients’ needs identification process and would suggest an approach to solve the problem in the most professional and effective manner with low cost implications. Also, industry input to the process is considered as well as academic studies to support the case.
Introduction
In today’s competitive word, “quality” may simply be defined as customer satisfaction. Failing to correctly meet customer’s requirements, expectations and needs has contributed to the United States lack of competitiveness in the global economy. This is likely also true in most of the industrialized nations. (Hartman et.al, 2001)
One of the key success factors in meeting the quality and reaching client satisfaction is to understand and identify client’s needs. In the relationship between the oil and gas companies as the “Clients” and the EPC Companies as the service providers, defining the need and identifying the success factors is an important task. In an ideal world, these needs should be defined and identified in a formal document or deliverable. In our projects and in this paper the formal document is the “Statement of Requirements” which will be called “SOR” in this paper from now on for ease of use.
Since the PM in the EPC Company has no control over the identification process and issuing the SOR, any delay or miss-identification in this process will have a negative effect in project execution in the EPC Company.
According to Nicholson and Sieli in their PMI presentation, many companies were still plagued with the following problems in the course of their projects’ execution:
- Improvements do not occur from project to project.
- Projects still function in a reactive environment.
- Roles and responsibilities are poorly defined that cut across functional or organizational boundaries.
- Successful improvements in one project do not ripple to the other projects.
This is likely to be true today as well. In most EPC environments in Alberta above problems remains to be true today and can be more specified for the projects being executed in oil and gas industry in Alberta including the “Well Tie-In projects”, “Compressor Station Construction Projects” and “Pipeline” projects.
Traditional project management tends to focus on the defined project objectives and not on defining the “unwritten set of customers’ needs and expectations which ultimately translates to project success. (Hartman, Ashrafi; 2001)
Realizing the importance of customer satisfaction, now more and more organizations are focusing on “identifying and satisfying clients’ needs and expectations”. As will be described in detail, in most projects the author is involved in, the “S.O.R.” or the “Statement of Requirements” is the official request that should be initiated from Client to the EPC Company.
In this paper, I describe “hard” issues of defining clients’ needs and the items that should be included in a complete SOR. Also, the external issues that are preventing us, as an EPC company, to address clients’ expectation and in some cases are causing delays and imposing extra costs to the project as a result of determining clients’ requirements later than it is needed.
The External Issue
According to appendix 1:”Conventional Small Project Flow Chart”, receiving the SOR is the first step in initiating the project. The SOR is very important in terms of informing the EPC Company what exactly needs to be done and the scope of the project in general. Also, it is important that scope be defined in the early stages of the project so that engineering company can design the job and allocate the man hours based on the needs of the client and prepare applications to necessary regulatory licence requirements and get the approvals in time.
The issue is that the clients are usually late or unwilling to approve the SOR in early stages. As mentioned earlier since the PM in the EPC Company has no control over the identification process and issuing the SOR, any delay or miss-identification in this process will have a negative effect in project execution in the EPC Company.
The client’s intention is to transfer the risk to the EPC Company. Also, the client wants to prevent the engineering change notes that might be issued by the EPC but by not issuing the SOR in early stages a lot of problems and costs are imposed for changes if the job is designed bases on some “assumptions” and “un-approved facts”.
• Mitigation Strategies
Project cost for a typical single well tie-in project for Wild River area is around a million dollar while this cost can easily be escalated to over millions of dollars in Ojay area. Factors like the regulatory costs, line pipe length and equipment registered in other provinces can be a big portion of this difference. Also, the client team acting in these two areas has different tastes in selecting the tools and equipments. Moreover, the clients responsiveness and communication effectiveness are very different which in some cases makes it difficult to reach an agreement.
Therefore, a standard process to define the scope and identify the needs may solve a big part of the problem. Steps below are suggested to mitigate the risk of receiving or understanding the clients’ needs later when it is not doable to save significantly.
The first step would be performing a site visit of the area and study similar projects in case they are available. In this stage we need to identify all requirements to obtain approvals from regulatory bodies. For example, using boil-off tanks are prohibited in Wild River area while there are some other areas that use of this particular equipment is permitted. ERCB and OGC, two regulatory organizations in Alberta and British Columbia may have different requirement in similar cases based on the location and other consideration.
As will be described in the work process section, the flowchart can be easily used and be treated as a live document in the entire course of the project.
There is no significant cost for implementing these processes other than holding some meetings to describe or talk about this process in the monthly and kick-off meetings.
• Use of Tools
• Studies and Site Visits
Site Visits are necessary to determine the needs and define requirements clearly. Obtaining data needed for the preparation of a capital cost estimate is another main objective of these visits. Not all the required information will be able to be obtained so discretion is necessary in deciding what is considered important or whether additional items need to be included for consideration. For a typical Class 2 or 3 estimates a one or two day visit for small jobs might be sufficient.
• AccuMap
AccuMap® provides desktop access to numerous up-to-date databases, including subsurface land, well, pressure, production, pipelines, core, reserves, seismic and logs for the Western Canadian Sedimentary Basin and Frontier areas. [5]
Use of this tool will provide useful information about pipelines in place and available tie-in locations. Also, line numbers and licence numbers will be available via this tool which will indicate the ownership of the pipeline or the company who is operating on the lease.
All these information can be critical in defining the clients’ needs.
A snapshot of the tool interface is shown in Appendix 2.
• HYSYS
Aspen HYSYS is a process modeling tool for conceptual design, optimization, business planning, asset management, and performance monitoring for oil & gas production, gas processing, petroleum refining, and air separation industries. [6]
Use of HYSYS enables us to understand the options and find out whether or not we can offer specific equipments for a specific project. It is very important to use this tool to make sound suggestions and to choose suitable equipment either from surplus or to purchase. These suggestions can then be reflected in the SOR.
• PM Database
PM Database is the single source of gathering information about project budget and final forecast in each stage of the projects. To make the client fully aware of their needs and make sound suggestions in defining the SOR we need to understand the financial situation of the project and all other projects at least in the area. Using this tool not only we can see the status of other projects but also we can enter data for our project and provide a better picture of the status of the activities.
• MS Excel
In defining clients’ needs, an accurate cost estimate can play a vital role. MS Excel is used to do a detail cost estimate. Class III Cost Estimates (±25% accuracy) are provided to clients to enable them make decisions on what is needed. It is very important to do the estimates based on the most recent and real data from recent projects to create a better basis for decisions. A sample copy of a Class III Cost Estimate is provided in Appendix 4.
Industry Best Practices
There are two main different approaches in the oil and gas industry in Alberta to define the scope and identify technical needs in projects. Each approach has its own pros and cons which is described below:
Some big players in the industry would like to define the scope and identify the needs before they announce it to the EPC Company. In this approach the client prefers to use standard sets of drawings and process to simplify things and prevent complications. This method is usually cheaper but has some cons to it. Using this method the client won’t be able to use the latest technology every time and there is no guaranty that the tools, equipment and personnel are up to date according to the leading technology in the industry. Each change needs to be flagged and announced and reflected in the predefined standard sets of drawings. Therefore, even though this method is cheaper and the Engineering Company is less involved, the client has less flexibility towards industry changes and may not be able to change directions in company’s economical policy e.g. changing from oil to gas or visa versa. Also, last minute changes will not be accommodated easily in this approach and may cause more cost to implement a change in the scope of work.
In another approach, the client engages the Engineering Company or the EPC in the investigation process and helps the client identify the needs and define the scope. This approach is usually more expensive and needs a lot of technical expertise to accommodate changes. The parties should have a mutual understanding and a strong relationship based on trust. Changes can be accepted easier and all possible technologies and options can be explored before coming to a final decision. Designs are more optimized and modified for the specific project situation. The biggest cons for this approach are the cost and the process not being standardized.
According to the information provided above, the ideal situation would be to decrease the cost for the second approach by standardizing it to take advantage of the flexibility and being technically more confident. In order to do that I am suggesting standardizing the SOR creation process and engaging the engineering company from the early stages in all projects.
• Costs and effort in delivering the mitigation
By applying the mitigation plan and getting the help from engineering company to define the needs we are accepting to invest on the process by paying to the engineering company. This may look that we are imposing some extra cost but the intention is to save money in the long term. Creating the standardized process will make it possible to determine similar projects faster and more effectively. In this way we maybe able to prevent designing for similar jobs over and over again. By saving money in preventing the design for similar jobs we are able to provide cheaper service and at the same time be confident in the technical advantage of the services and design for each project. Also, this will ensure the identification of the needs and providing a sound SOR agreed by the client and Engineering Company at the early stages of the project. Moreover, there will be less change announced since there is a technical reason behind each and every decision and this may also save time and money for the projects.
Work Process
As it is shown in Project Flow Chart and Work Flow, the work process has many different aspects to follow and many milestones to meet. For a typical project it is highly recommended for the Project Management in the EPC Company to identify the clients’ needs and expectations as early in the projects as possible. In that, there are a number of recommendations which may ease the identification process and provide a better ground to reach an agreement.
Designing and providing a template to define the scope: A sample format for SOR is provided to the EPC Company. The complete template is not included in this paper for confidentiality reasons but a snapshot of that can be found in Appendix 3. A lot of valuable questions are asked in the template which can be answered by both companies. It is important to engage the development team and the Operations in the investigation process so that everybody is aware of the decisions being taken in the early stages. Also, a gas analysis representative, a survey and a draft of the plot plan is a part of the suggested SOR template.
By use of the different tools described earlier in this paper we may provide technical support and evidence of each and every decision made in the SOR. For example, if it is decided to drill two wells and tie in to an existing line, we can easily go to Accumap and do a research on the available pipelines and the pipeline diameter and maximum operating pressure to support the decision and address it in the SOR. A HYSYS modeling will prove the feasibility and technically sound decision. The cost estimates can be provided based on these decisions and be checked with the PM Database to get the AFE and all other approvals.
Also, according to the flow chart in Appendix 1, regulatory department can easily start the appropriate application using the data provided in the agreed SOR and IFA package designed based on the agreements. No need to mention that all changes can be accommodated via an ECN (Engineering Change Note) and managed in agreement with the client.
Industry Input to the Process to the Practices and the Academic Support
After studying the industry best practices and we need to look into the findings and recommendation from academic perspective to provide finer conclusion. In this section I describe some of the best findings in the academic side to support the case. Lewis Ireland has discussed the role of a project manager in managing the customer’s expectations and requirements and relates it to the success of the project. Identifying a number of internal and external customers and clients, Ireland emphasizes that determining the interests and expectations of each customer in the project will establish a rational basis for fostering a cooperative environment for managing those expectations. Meeting those expectations or resolving differences between customers’ expectations will facilitate the continued progress of the project’s work toward building a quality product or service.
Alan Mendelssohn considers quality as an all-encompassing concept critical to project success. He describes four principles of quality management:
- Customer Satisfaction
- Plan-Do-Check-and-Act cycle
- Management by fact
- Respect for people
According to Mendelssohn the quality revolution is now focusing on process improvement in order to achieve client satisfaction. Rather than telling the customer what product or service the client needs, it is now necessary to find out what the customer wants and then concentrate on how that can be provided.
Two key factors learned n developing quality management systems are:
- Know your clients and their requirements or expectations
- Know your products and/or services
(Hartman et.al 2001)
According to the above findings, we can now go back to the case study and dig a little more to see the areas applicable to the client’s needs in oil and gas projects in IMPROVE business unit. Creating a check list that is reflecting above requirements and also provides accurate input to the process provided in appendix 1 can help in this regard. A sample format as tried and suggested for tie-in projects can be found in appendix 2.
This spread sheet can be filled in early enough so the client can have enough time to provide the input and then make all changes that may occur afterwards. The biggest advantage of providing this format and asking the client to fill out (or in some cases fill for the client and send to them and ask for feedback) is to make the team, including the client and the engineering group, to think ahead of time and come up with all the needs and possible inventions.
Please see attachment 5 for Worley Parson’s feedback and input to the process.
Summary and Conclusions
In today’s competitive environment no organization can survive without systematically satisfying the needs and expectations of clients. That is why there is a shift in management policy of the more forward-looking and progressive organizations from a product to a customer focus. I have presented a simple approach designed to identify and communicate effectively clients’ requirements at the early definition phase of the projects. Examples of how to apply this process to real life oil and gas projects has also been presented. The process has been suggested to a leading engineering company in Alberta. The initial feedback have been highly positive and is promising a more clear understanding of clients’ needs and expectations by the EPC Company. I hope the application of the proposed methodology will greatly enhance the effectiveness of the project team both internally and externally during the implementation phase of the projects.
Acknowledgments
I would like to thank all the key personnel from WorleyParsons’ Talisman PRIME alliance who helped me gather relevant and valuable information in my study and gave their precious time to answer my questions and provided their expert opinion on the process. My special thanks go to the Project Delivery Manager, Mr. Greg Coady (PMP), who made it possible to get in touch with several project managers and use projects’ information when possible. Also, I would like to thank WorleyParsons’ Project Managers Ms. Shannon Graham (PENG) and Ms. Pamela Danyluk (PENG) for their unfailing attention to details and their kind attention during the whole process.
References
1. Hartman, F.T., Herrero, J.C., Ashrafi R.A. (2001); “How to Identify and Communicate Customer Needs and Expectations”; PMI’s 26th Annual Symposium, New Orleans.
2. Barkely, Bruce T. And Saylor, James H. (1994); “Customer Driven Project Management”, McGraw-Hill Inc., New York.
3. Cod, Kent A. (1998) “Project Work Plan Development”, PMI Seminar 1 Webinar, pp. 7-12.
4. WorleyParsons work processes and “Knowledge Base” web site.
5. HIS Website: http://energy.ihs.com/Products/Accumap/
6. Aspen website: http://www.aspentech.com/core/aspen-hysys.aspx
7. WorleyParosns “Share Point”: not accessible to public.
Wednesday, February 8, 2012
ERCB requirements
Planning from vision/concept to approvals requires clear understanding and stewardship of the risks and the mitigation plan. Not all risks occur or mitigation strategies are effective and often risks and/ or strategies arise in a dynamic and changing environment throughout the project. Provide a plan to ensure that risk management is integrated into the project delivery process from the earliest stages of development through to completion and is a key element of our assurance process. Risk Management should be an active and ongoing process throughout all project phases. Effective early assessment and proactive management of uncertainty (both upside opportunities and downside threats) is essential in ensuring a successful project outcome.
Risk management is an essential and integral part of the project delivery process.
The Risk Management Plan (RMP) details the risk management activities that will be undertaken by the Project including the purpose, scope, process, responsibilities and extent of technical risk studies (quantitative studies). A key activity in the RMP is the project risk assessment. The assessment results in a Project Risk Register and Action Plan that identifies and ranks risks, mitigation actions and responsibilities for their implementation. The RMP is either referred to or included in the Project Execution Plan (PEP) as required. There are two types of formal Project Risk Assessments:
- Type 1 is a qualitative risk workshop with only Company attendees. The workshop should include consideration of particular risk factors directly impacting on Company interests and client interface/interaction.
- Type 2 is a qualitative risk workshop that includes Company and external stakeholders (including Clients). This workshop should address total project risks, but would not address issues that are particular to the Company.
References:
1. https://portal.talisman-energy.com/dana/home/index.cgi
2. http://cal.ems.worleyparsons.com/documents/EMS;documentNumber=002-002-CQP-053.doc
Risk management is an essential and integral part of the project delivery process.
The Risk Management Plan (RMP) details the risk management activities that will be undertaken by the Project including the purpose, scope, process, responsibilities and extent of technical risk studies (quantitative studies). A key activity in the RMP is the project risk assessment. The assessment results in a Project Risk Register and Action Plan that identifies and ranks risks, mitigation actions and responsibilities for their implementation. The RMP is either referred to or included in the Project Execution Plan (PEP) as required. There are two types of formal Project Risk Assessments:
- Type 1 is a qualitative risk workshop with only Company attendees. The workshop should include consideration of particular risk factors directly impacting on Company interests and client interface/interaction.
- Type 2 is a qualitative risk workshop that includes Company and external stakeholders (including Clients). This workshop should address total project risks, but would not address issues that are particular to the Company.
References:
1. https://portal.talisman-energy.com/dana/home/index.cgi
2. http://cal.ems.worleyparsons.com/documents/EMS;documentNumber=002-002-CQP-053.doc
EAUB / ERCB requirements and Project Management
Energy Resources Conservation Board regulates the energy sector as authorized by various acts of the province of Alberta and the regulations under those acts. These acts and regulations, as well as directives, interim directives, and informational letters, contain the requirements that govern the energy industry under the jurisdiction of the ERCB. [1]
Regulation is a pretty important word to know when it comes to the management of any particular project and or project related activity, as the regulations are absolutely imperative to the project team leader’s acquiescence to predetermined methods that have been imposed. Specifically, requirements refer to any set and specific series of rules and requirements that have been designated and imposed by a particular governmental body. These particular rules and or regulations can serve to provide the establishment of a particular and unique product, a process, and or a series of service characteristics. [2]
These products, processes, and or service characteristics can include any series of applicable administrative designations and or provisions. Typically, any and all particular rules and requirements known as regulations are required to be complied with as per the government set dictation. Most project regulations are laid out at the start of the project. This term is defined in the 3rd and the 4th edition of the PMBOK. Knowing these regulations has significant effect on designing the methods, defining scope and providing accurate estimates. [3]
References:
1. http://www.ercb.ca/portal/server.pt?open=512&objID=253&PageID=0&cached=true&mode=22. Brighthub.com
2. http://project-management-knowledge.com/definitions/r/regulation/
3. PMBOK 3rd and 4th edition
Regulation is a pretty important word to know when it comes to the management of any particular project and or project related activity, as the regulations are absolutely imperative to the project team leader’s acquiescence to predetermined methods that have been imposed. Specifically, requirements refer to any set and specific series of rules and requirements that have been designated and imposed by a particular governmental body. These particular rules and or regulations can serve to provide the establishment of a particular and unique product, a process, and or a series of service characteristics. [2]
These products, processes, and or service characteristics can include any series of applicable administrative designations and or provisions. Typically, any and all particular rules and requirements known as regulations are required to be complied with as per the government set dictation. Most project regulations are laid out at the start of the project. This term is defined in the 3rd and the 4th edition of the PMBOK. Knowing these regulations has significant effect on designing the methods, defining scope and providing accurate estimates. [3]
References:
1. http://www.ercb.ca/portal/server.pt?open=512&objID=253&PageID=0&cached=true&mode=22. Brighthub.com
2. http://project-management-knowledge.com/definitions/r/regulation/
3. PMBOK 3rd and 4th edition
A note on Risk Management 2
For a top PM it is necessary to balance the risks with the project deliverables. One of the tools being used widely is the risk assessment tools. Multiple conservative factors are built into risk assessment for reasons including, but not limited to: calculation of worst-case estimates of risk; derivation of exposure limits (safe dose); protection of the most sensitive receptor; accommodation of unknowns/data gaps; and, regulatory requirements. In this manner, a risk assessor can be confident that results below the acceptable level of risk indicate no adverse health effects. [1] However, it also means that results exceeding the acceptable level of risk may either indicate potential adverse health effects, or may be an artefact of the multiple conservative assumptions built into the risk assessment methodology. [2] How does one then interpret and communicate risk results close to the acceptable risk thresholds and effectively communicate conclusions of no potential risk with various stakeholders when results exceed acceptable thresholds? Multiple stakeholders’ needs must be assessed and analysed and additional incremental risk analysis to be conducted. And if some of the risk results were higher than the acceptable threshold of risk a proper action must be taken. In order to communicate the level of potential risk associated with these scenarios, each should be thoroughly investigated; each input value and conservative assumption be examined. [1]
Methods, results, conservative assumptions and recommendations of the complete risk assessment should distribute in a detailed written report and presented at interactive public meetings if the public is one of the stakeholders. Effective, communication, transparent methodology and attention to all stakeholder issues critical to obtaining project success and make opportunities out of challenges. [1]
References:
1. WorleyParsons.com:
http://canada.worleyparsons.com/komex/riskgroup/Abstracts%20and%20Papers/SRA%20Conference%20Baltimore%20Dec%202009%20Abstract.doc
2. Brighthub.com
http://www.brighthub.com/office/project-management/articles/33399.aspx
Methods, results, conservative assumptions and recommendations of the complete risk assessment should distribute in a detailed written report and presented at interactive public meetings if the public is one of the stakeholders. Effective, communication, transparent methodology and attention to all stakeholder issues critical to obtaining project success and make opportunities out of challenges. [1]
References:
1. WorleyParsons.com:
http://canada.worleyparsons.com/komex/riskgroup/Abstracts%20and%20Papers/SRA%20Conference%20Baltimore%20Dec%202009%20Abstract.doc
2. Brighthub.com
http://www.brighthub.com/office/project-management/articles/33399.aspx
A note on Risk Management 1
In recent years, managers and project managers have become increasingly aware of how their organizations or projects can be buffeted by risks beyond their control. In many cases, fluctuations in economic and financial variables such as oil price, exchange rates, interest rates, and commodity prices have had destabilizing effects on corporate strategies and performance. Consider the following examples: In the first half of 1986, world oil prices plummeted by 50%; overall, energy prices fell by 24%. While this was a boon to the economy as a whole, it was disastrous for oil producers as well as for companies like Dresser Industries, which supplies machinery and equipment to energy producers. As domestic oil production collapsed, so did demand for Dresser’s equipment. The company’s operating profits dropped from $292 million in 1985 to $149 million in 1986; its stock price fell from $24 to $14; and its capital spending decreased from $122 million to $71 million. During the first half of the 1980s, the U.S. dollar
appreciated by 50% in real terms, only to fall back to its starting point by 1988. The stronger dollar forced many U.S. exporters to cut prices drastically to remain competitive in global markets, reducing short-term profits and long-term competitiveness. Caterpillar, the world’s largest manufacturer of earthmoving equipment, saw its real-dollar sales decline by 45% between 1981 and 1985 before increasing by 35% as the dollar weakened. Meanwhile, the company’s capital expenditures fell from $713 million to $229 million before jumping to $793 million in 1988. But by that time, Caterpillar had lost ground to foreign competitors such as Japan’s Komatsu. [1]
Based on the fats described above, there are few things that project managers and project members can consider in order to minimize the risk carried to the projects and control the impact of drastic price changes or other external factors on the projects:
1) The economy and the anticipations: The economy that the project is being executed in can play a vital role in future decision making. The stronger the economy the less impact can occur for the project and the team.
2) 2) The project: How much a project can be impacted from these changes and how can be mitigated is another important issue.
3) Flexibility of Investments; How flexible are the investors or the project in case they want to invest on something else.
4) The adjusted break even price; Sometimes even drastic oil price changes does not change the profitability of the project in a way the project is not feasible any more [2]
References:
1) A Framework for Risk Management, Kenneth A. Froot et.al, Journal of Applied Corporate Finance, Vol. 7.3, P. 22 – 32.
2) Managing Investment Opportunities Under Price Uncertainty: From “Last Chance” to “Wait and See” Strategies, P. Bjerksund and S. Ekern, Financial Management, Vol. 19 – No. 3, P. 65 – 69.
appreciated by 50% in real terms, only to fall back to its starting point by 1988. The stronger dollar forced many U.S. exporters to cut prices drastically to remain competitive in global markets, reducing short-term profits and long-term competitiveness. Caterpillar, the world’s largest manufacturer of earthmoving equipment, saw its real-dollar sales decline by 45% between 1981 and 1985 before increasing by 35% as the dollar weakened. Meanwhile, the company’s capital expenditures fell from $713 million to $229 million before jumping to $793 million in 1988. But by that time, Caterpillar had lost ground to foreign competitors such as Japan’s Komatsu. [1]
Based on the fats described above, there are few things that project managers and project members can consider in order to minimize the risk carried to the projects and control the impact of drastic price changes or other external factors on the projects:
1) The economy and the anticipations: The economy that the project is being executed in can play a vital role in future decision making. The stronger the economy the less impact can occur for the project and the team.
2) 2) The project: How much a project can be impacted from these changes and how can be mitigated is another important issue.
3) Flexibility of Investments; How flexible are the investors or the project in case they want to invest on something else.
4) The adjusted break even price; Sometimes even drastic oil price changes does not change the profitability of the project in a way the project is not feasible any more [2]
References:
1) A Framework for Risk Management, Kenneth A. Froot et.al, Journal of Applied Corporate Finance, Vol. 7.3, P. 22 – 32.
2) Managing Investment Opportunities Under Price Uncertainty: From “Last Chance” to “Wait and See” Strategies, P. Bjerksund and S. Ekern, Financial Management, Vol. 19 – No. 3, P. 65 – 69.
Expediting
EXECUTIVE SUMMARY
This case study is intended to present processes of the Expediting Activities, generally in oil and gas industry in Alberta and more specifically in a large size EPC (Or EPCM) company in Calgary. In this report a brief investigation and survey with respect to literature and limited available academic resources, companies’ practices and current market conditions has been conducted at WorleyParsons Calgary.
“Expediting activities would be minimal if all other procurement and engineering activities are done perfectly (3)”. However, defining the best practices for “Expediting Processes” can also be helpful considering the fact that there is no perfect procurement process. A comparison between selected company, WorleyParsons’ practices and best practices has been performed to determine the gaps and conclude recommendations.
It is observed and concluded that EPC companies approach to “Expediting Processes” are relatively similar with some differences due to adaption of some processes by companies based on their client’s requests or their discretion (See appendix 2 for more details). Therefore, it is important for EPC companies to identify and define clients’ needs as clearly as possible and in the earliest stages of any project. “Failing to correctly meet customer’s requirements, expectations and needs has contributed to the United States lack of competitiveness in the global economy. This is likely also true in most of the industrialized nations (2)”. In relationship between the oil and gas companies as the “Clients” and the EPC Companies as the service providers, defining the need and identifying the success factors is an important task which will affect the expediting requirements as well. Therefore, a form is designed and suggested to be used by project team in order to define the expediting activities based on that and prevent possible dilemmas. (See Appendix 4)
Moreover, it is realized that due to limited number of suppliers and past contractual relationship amongst Clients, EPC companies and Suppliers a flexibility regarding implementation of expediting process particularly in Alberta’s booming economy conditions and consequently clients and EPC companies and suppliers is in place. Vendors or contractors may not follow exactly the best practices or the company’s policies or in other words they may have some deviations from the processes because of their close relationship with the expeditors etc.
INTRODUCTION
The Expediting Process is defined for ensuring that all expediting activities are carried out in accordance with defined obligations, procedures and customer requirements, including the timely delivery of all Material and Equipment (M&E) and documentation defined within the Purchase Orders (PO). Expeditors assigned to a project report to the Project Procurement Manager (PPM), on larger projects possibly via an Expediting Manager or Supervisor.
There are different positions defined in expediting process. Desk Expeditors are responsible for establishing and maintaining regular contact with all Suppliers either by telephone, fax, email or letter to obtain reliable information on the status of Suppliers’ drawings and documentation, sub-Supplier materials, production and delivery of M&E. Desk Expeditors highlight any potential delays and initiate corrective action.
Desk Expeditors’ responsibilities are not complete until all M&E are delivered and accepted at the designated delivery point, damage and discrepancy reports resolved and documentation provided.
Field Expeditors complement the Desk Expeditors by making personal visits to Suppliers’ works and physically checking the status of Suppliers’ progress through the engineering, raw materials accumulation and production phases of a PO. Field expediting services may be supplied via approved third party inspection and expediting agents.
Field Expeditors are responsible for:
- Identifying need for corrective action and assuring corrective actions are being implemented at the Suppliers’ works in accordance with project requirements.
- Providing detailed reports to the central office on the complete status of an order.
The Expediting Manager or Supervisor is responsible for:
- Coordinating Field Expeditors’ assignments and maintaining a register for each Field Expeditor with details of the project, PO number and the required deliveries of Suppliers and sub-Suppliers,
- Issuing Field Expeditors’ reports to the PPM for distribution and updating a sequential register ensuring that there is a numbered report against every expediting visit, and
- Issuing Field Expeditors’ reports to the PPM for distribution and updating a sequential register ensuring that there is a numbered report against every expediting visit, and reviewing the Field Expeditors’ invoices and / or expense reports for correct format and accuracy.
CASE ANALYSIS
The Expediting process is a formal and cross functional process that provides this opportunity for companies to develop a framework not only for how the delivery will be acquired but also how the delivery will impact the project time, quality and schedule.
One of the main inputs to expediting strategy is supplier positioning as shown per figure 1. This is a 2x2 matrix which creates quadrants that position a supplier and define a company's strategic approach to that supplier (9).
Figure 1: Supplier Positioning
The four types of relationships are:
Acquisition: Many suppliers, buyers dominate. Focus on supply chain optimization, efficient procurement processes, and receiving bids from many suppliers
Profit: Lots of suppliers, but big impact on company if supply is disrupted; so, consider target pricing strategies and umbrella contracts with preferred suppliers.
Security: Few suppliers, but not a lot of financial risk from supplier failure; so, consider volume insurance contracts, maintaining buffer stock, and always be on look out for alternative suppliers.
Critical: The Company depends on the suppliers. Generally, the company will look for performance-based partnerships, with market and technology leaders, owning specific know-how. The balance of power between buyers and suppliers can be varying quite bit. Consider strategic alliances, building close relationships, even vertical integration (3).
To assist in synthesizing key points about the company’s practices, closer look at the expediting process is required. As it is shown in the Appendix1 an expediting process is followed all project members and expeditors are to follow the instructions and understand their roles and responsibilities. According to this procedure each member of the expediting group has a different role during each phase of the project which is described in this paper. Of course, the importance of the vendor and criticality of the items being purchased are playing a vital role in the expediting method we may take as well as other factors which will be described below.
Process Description
In this section the “expediting Process” is defined in detail and in each section the survey results (See Appendix 3) are identified and explained in order to shed more light on the whole process where necessary.
Organization
a) The Expediting group is responsible for ensuring that all expediting activities are carried out in accordance with WorleyParsons’ obligations and procedures and customer requirements, including the timely delivery of all M&E and documentation defined within the POs. Expeditors assigned to a project report to the Project Procurement Manager (PPM), on larger projects possibly via an Expediting Manager or Supervisor.
b) Field Expeditors complement the Desk Expeditors by making personal visits to Suppliers’ works and physically checking the status of Suppliers’ progress through the engineering, raw materials accumulation and production phases of a PO. Field expediting services may be supplied via approved third party inspection and expediting agents.
Field Expeditors are responsible for:
• Identifying need for corrective action and assuring corrective actions are being implemented at the Suppliers’ works in accordance with project requirements, and
c) The Expediting Manager or Supervisor is responsible for:
• Coordinating Field Expeditors’ assignments and maintaining a register for each Field Expeditor with details of the project, PO number and the required deliveries of Suppliers and sub-Suppliers,
• Reviewing the Field Expeditors’ invoices and expense reports for correct format and accuracy (5).
Project Kick-off
a) The Expediting group reviews each PO with the project procurement manager to define the level, manner and frequency of expediting activity required.
According to the survey this judgment is based on:
• criticality of the design information required,
• criticality of required delivery for M&E against required on-site dates,
• complexity of the M&E, and
• Suppliers’ past performance
b) The Expediting group may be requested to provide input to the Project Procurement Plan or its potential subsequent Project Materials Management Plan. Upon PO placement, the Expediting group assesses if Field Expediting is required and the initial frequency of visits (5).
c) An estimate of the number of visits and man-hours is established and if necessary Customer approval sought (via the PPM) before assignments are issued. The Expediting Manager or Supervisor allocates a Desk Expeditor to each P.O. The number of POs allocated to a Desk Expeditor depends upon the type of M&E being purchased, the complexity of the order and the urgency with which it is required. On projects without an Expediting Manager or Supervisor, this assignment will be done by the Project Procurement Manager (5 and the survey) – See Appendix 1.
Expediting – General Method of Operation
Following are the main expediting operational activities based on the available information at WorleyParsons share point and the survey results:
a) The Expediting group is responsible for the following tasks upon issue of the PO:
• Preparation of an ‘expediting file’ for the PO
• Issue of a standard letter, fax or email to the Supplier requesting details of the Supplier’s reference number and contacts for expediting purposes.
b) The Expediting group provides ‘expediting reports’ as required, which as a minimum include:
• Expediting input to regular project procurement and progress reports,
• Exception reports showing whether a Supplier’s latest promised delivery date is: later than the PO delivery date, and/or later than the ‘required on-site’ date.
c) The Expediting group ensures:
• That all expediting correspondence, faxes, emails and standard forms are filed in date order in hard copy files and/or electronic document control system.
• Receipt by Document Control of all final copies of documents, including test certificates and data books plus sign-off that all such documentation meets requirements (5).
Expediting of Drawing and Production Schedules
The Expediting group is also responsible for the following:
a) Expediting the Supplier to provide a document submittal schedule within the period indicated in the Supplier Document Requirement List (SDRL) issued with the PO – The Supplier Document Schedule (SDS) is passed via Document Control to Engineering for review against the SDRL. If both the lists of documentation and the submission dates are acceptable, the Supplier Document Schedule is approved and review coded by Engineering and passed via Document Control back to the Supplier.
b) Obtaining various exception reports from the document control system as required assisting in expediting the (re-)submission of documentation from Suppliers.
• Requesting the Supplier to supplement its overall production program with a detailed ‘material status report’ updated regularly, and
• Ensuring that the Supplier submits a regular report highlighting any problem areas and giving brief status of the PO which can be checked and monitored against the overall production program (5).
Field Expediting
Field Expediting visits may be carried out by Desk Expeditors, inspectors and other Procurement or Engineering personnel on certain occasions, but only after prior agreement with the Project Procurement Manager.
Based on the survey results the Field expediting services may be provided by “Third Party Inspection” and expediting agency after agreement of Project Procurement Manager.
a) Field Expediting to the Supplier shop is carried out, where required, according to the expediting component of the Materials Management Plan or when one or more of the following situations develop:
• The M&E is of such importance that it requires monitoring on a regular basis,
• Delivery is so critical to the overall construction program that ‘continuous expediting’ is required to avoid any slippage,
• General Supplier poor performance.
b) Where Field Expediting is required; the Desk Expeditor raises an ‘Expediting Assignment’ which includes:
• Details of the PO or sub-order to be expedited together with a brief history of the status,
• All relevant correspondence – including inspection requirements.
d) Subsequent visits are arranged by the Expediting group in accordance with the frequency determined in the Expediting Assignment and include as a minimum the following:
• Status of submission and approvals of documentation and drawings – the Field Expeditor’s report highlights all documents overdue for return to the Supplier after review by WorleyParsons,
• Physical review of Supplier’s stock material and production progress on the shop floor, including check on actual labour loading against that planned.
e) In all cases, the Field Expeditor contacts the Desk Expeditor before leaving the Supplier’s premises with an update of the current status of the PO and may issue a ‘highlight expediting report’ or ‘Flash Report’ by fax or email from the Supplier’s premises.
f) The Field Expeditor issues a ‘full expediting report’ within a specified time of each visit to the Expediting Manager or Supervisor. Reports include as a minimum:
• The original and latest promised delivery dates
• Drawing / document submission dates
g) The Expediting Manager or Supervisor:
• Logs receipt of the expediting reports,
• Distributes expediting reports immediately to the Project Management
h) Document Control copies and distributes the expediting reports in accordance with the project document distribution matrix.
i) The Field Expeditor advises the Expediting Manager or Supervisor at the end of each month the current expediting workload status to confirm the workload registers are correct (5).
Dispatch and Shipping
a) Dispatch of M&E is controlled and tracked by the Expediting group, when required and depending on the applicable delivery conditions, in conjunction with Logistics and Transport to ensure its movement in the fastest and most economical manner, and its location is known at all times.
c) All inter-site movement of M&E is controlled by Field Material Control. When an item of M&E is being returned to the Supplier, Site Materials Control advises the Expediting group identifying the reason for return such as the applicable reports. Also, Expediting will ensure that the necessary corrective action is taken (5).
EXPEDITING BEST PRACTICES
To gather enough data on best practices of expediting in the oil and gas industry in Alberta, three different companies were studied. (See Appendix 2 for comparison) According to this study following activities is used as a guideline of expediting best practices. Although according to the project size, complexity of the project, criticality of the items etc. the process could be different or practiced in a different paste a few suggestions can be followed which will be described later in the text.
• Expediting Activities
o Review Purchase Orders (POs) and Determine Expediting required
o Establish Priorities for all Materials and Equipment (M&E)
o Develop the Expediting Component of PO Administration
o Allocate a Desk Expeditor/Package Expeditor to each PO
o Expedite and Receive Purchase Order acknowledgement
o Expedite Supplier on a regular basis
o Provide Reports
o Expedite Supplier Sub-orders
o Commence Field Expediting, as necessary
o Arrange Regular Visit to the Supplier
o Issue Field Report and Follow-up any Actions Required
o Receive 'Ready for Inspection' Notice
o Receive Inspection Release Certificate and Initiate Shipping Actions
o Check Completeness of Dispatch
o Closeout Expediting File
CONCLUSIONS AND RECOMMENDATIONS
Expediting activities are more required when there is a chance of slippage and according to the expediting component of the Materials Management Plan or when one or more of the following situations develop:
-The M&E is of such importance that it requires monitoring on a regular basis,
- Delivery is so critical to the overall construction program that ‘continuous expediting’ is required to avoid any slippage,
- Delivery of ‘Critical’ M&E has slipped and is jeopardizing the overall construction program, and
- General poor performance of the supplier.
Also, identifying the clients’ needs as early as possible can play a vital role in project delivery success. A recommendation is to use a form (an example provided in Appendix 4) and agree on the scope of work and develop the PEP and expediting plan based on that.
Based on the facts stated in this paper and according to the survey performed there are also other recommendations which is categorized into two main sections:
• General Recommendations for EPC Companies
Mutual respect between the expeditors and vendors must be continuously increased and monitored (6). The expeditors should get involved as early as possible in the course of the project execution so they can re-act proactively and help selecting the vendors (7). For all companies it is necessary to update the project expediting plan as it is a live document and make it available for all parties responsible. As observed during the survey and data collection and according to some market investigation, there are no specific qualification requirements for an expeditor to get a job in most EPC companies. As another recommendation Engineering companies need to re-assess the requirements for this position. Moreover, Expeditors’ recommendations should be considered in project scheduling since they are the most familiar with the vendors and their time management (8). It is suggested to base the companies’ communication on a more concrete system and keep track of all communications. Based on the survey results it is recommended that the PO include a requirement that the Supplier submits un-priced copies of all sub-orders for major components and it is the Expediting group’s responsibility to ensure these are received and checked to ensure the delivery dates are factual and meet the needs of the production program.
• General Recommendations for EPC Companies
Specific recommendation for Company A is to allocate Field Expeditor as a separate position. Recommendation to company C is to allocate Shop Expeditor according to clients’ needs and project condition. For company B it is also recommended to allocate a specific expeditor to each PO and to prioritize the expediting activities. Company C needs to involve more team work in project expediting including the EPC firm, Client and the suppliers.
Identifying client’s needs for projects is suggested to be used for future studies. Project phase and project type must be considered as well as the client and EPC organizational requirements.
REFERENCES
1. Huston, C, L (1996) Management of Project Procurement, New York, McGraw- Hill
2. Hartman, F.T., Herrero, J.C., Ashrafi R.A. (2001); “How to Identify and Communicate Customer Needs and Expectations”; PMI’s 26th Annual Symposium, New Orleans.
3. Varughese, Joe (2010) OPMA-719 Class Notes, winter 2008, University of Calgary
4. Jergeas, George (2009) Analysis of the Front End Loading of Alberta Mega Oil Sands Projects, Project Management Journal, Vol. 39, No. 4, 95–104
5. Expediting Procedure WorleyParosns Calgary – Talisman PRIME Alliance
6. www.suplychainmechanic.com
7. Dale R.Labittzke, “Project expediting“.www.born2process.com
8. www.met-chem.com
9. Supply Chain Digest (Feb. 2010), Kraljic later made enhancements to the model, including a 3 x 3 version, and there have been many refinements of this by others over the years
This case study is intended to present processes of the Expediting Activities, generally in oil and gas industry in Alberta and more specifically in a large size EPC (Or EPCM) company in Calgary. In this report a brief investigation and survey with respect to literature and limited available academic resources, companies’ practices and current market conditions has been conducted at WorleyParsons Calgary.
“Expediting activities would be minimal if all other procurement and engineering activities are done perfectly (3)”. However, defining the best practices for “Expediting Processes” can also be helpful considering the fact that there is no perfect procurement process. A comparison between selected company, WorleyParsons’ practices and best practices has been performed to determine the gaps and conclude recommendations.
It is observed and concluded that EPC companies approach to “Expediting Processes” are relatively similar with some differences due to adaption of some processes by companies based on their client’s requests or their discretion (See appendix 2 for more details). Therefore, it is important for EPC companies to identify and define clients’ needs as clearly as possible and in the earliest stages of any project. “Failing to correctly meet customer’s requirements, expectations and needs has contributed to the United States lack of competitiveness in the global economy. This is likely also true in most of the industrialized nations (2)”. In relationship between the oil and gas companies as the “Clients” and the EPC Companies as the service providers, defining the need and identifying the success factors is an important task which will affect the expediting requirements as well. Therefore, a form is designed and suggested to be used by project team in order to define the expediting activities based on that and prevent possible dilemmas. (See Appendix 4)
Moreover, it is realized that due to limited number of suppliers and past contractual relationship amongst Clients, EPC companies and Suppliers a flexibility regarding implementation of expediting process particularly in Alberta’s booming economy conditions and consequently clients and EPC companies and suppliers is in place. Vendors or contractors may not follow exactly the best practices or the company’s policies or in other words they may have some deviations from the processes because of their close relationship with the expeditors etc.
INTRODUCTION
The Expediting Process is defined for ensuring that all expediting activities are carried out in accordance with defined obligations, procedures and customer requirements, including the timely delivery of all Material and Equipment (M&E) and documentation defined within the Purchase Orders (PO). Expeditors assigned to a project report to the Project Procurement Manager (PPM), on larger projects possibly via an Expediting Manager or Supervisor.
There are different positions defined in expediting process. Desk Expeditors are responsible for establishing and maintaining regular contact with all Suppliers either by telephone, fax, email or letter to obtain reliable information on the status of Suppliers’ drawings and documentation, sub-Supplier materials, production and delivery of M&E. Desk Expeditors highlight any potential delays and initiate corrective action.
Desk Expeditors’ responsibilities are not complete until all M&E are delivered and accepted at the designated delivery point, damage and discrepancy reports resolved and documentation provided.
Field Expeditors complement the Desk Expeditors by making personal visits to Suppliers’ works and physically checking the status of Suppliers’ progress through the engineering, raw materials accumulation and production phases of a PO. Field expediting services may be supplied via approved third party inspection and expediting agents.
Field Expeditors are responsible for:
- Identifying need for corrective action and assuring corrective actions are being implemented at the Suppliers’ works in accordance with project requirements.
- Providing detailed reports to the central office on the complete status of an order.
The Expediting Manager or Supervisor is responsible for:
- Coordinating Field Expeditors’ assignments and maintaining a register for each Field Expeditor with details of the project, PO number and the required deliveries of Suppliers and sub-Suppliers,
- Issuing Field Expeditors’ reports to the PPM for distribution and updating a sequential register ensuring that there is a numbered report against every expediting visit, and
- Issuing Field Expeditors’ reports to the PPM for distribution and updating a sequential register ensuring that there is a numbered report against every expediting visit, and reviewing the Field Expeditors’ invoices and / or expense reports for correct format and accuracy.
CASE ANALYSIS
The Expediting process is a formal and cross functional process that provides this opportunity for companies to develop a framework not only for how the delivery will be acquired but also how the delivery will impact the project time, quality and schedule.
One of the main inputs to expediting strategy is supplier positioning as shown per figure 1. This is a 2x2 matrix which creates quadrants that position a supplier and define a company's strategic approach to that supplier (9).
Figure 1: Supplier Positioning
The four types of relationships are:
Acquisition: Many suppliers, buyers dominate. Focus on supply chain optimization, efficient procurement processes, and receiving bids from many suppliers
Profit: Lots of suppliers, but big impact on company if supply is disrupted; so, consider target pricing strategies and umbrella contracts with preferred suppliers.
Security: Few suppliers, but not a lot of financial risk from supplier failure; so, consider volume insurance contracts, maintaining buffer stock, and always be on look out for alternative suppliers.
Critical: The Company depends on the suppliers. Generally, the company will look for performance-based partnerships, with market and technology leaders, owning specific know-how. The balance of power between buyers and suppliers can be varying quite bit. Consider strategic alliances, building close relationships, even vertical integration (3).
To assist in synthesizing key points about the company’s practices, closer look at the expediting process is required. As it is shown in the Appendix1 an expediting process is followed all project members and expeditors are to follow the instructions and understand their roles and responsibilities. According to this procedure each member of the expediting group has a different role during each phase of the project which is described in this paper. Of course, the importance of the vendor and criticality of the items being purchased are playing a vital role in the expediting method we may take as well as other factors which will be described below.
Process Description
In this section the “expediting Process” is defined in detail and in each section the survey results (See Appendix 3) are identified and explained in order to shed more light on the whole process where necessary.
Organization
a) The Expediting group is responsible for ensuring that all expediting activities are carried out in accordance with WorleyParsons’ obligations and procedures and customer requirements, including the timely delivery of all M&E and documentation defined within the POs. Expeditors assigned to a project report to the Project Procurement Manager (PPM), on larger projects possibly via an Expediting Manager or Supervisor.
b) Field Expeditors complement the Desk Expeditors by making personal visits to Suppliers’ works and physically checking the status of Suppliers’ progress through the engineering, raw materials accumulation and production phases of a PO. Field expediting services may be supplied via approved third party inspection and expediting agents.
Field Expeditors are responsible for:
• Identifying need for corrective action and assuring corrective actions are being implemented at the Suppliers’ works in accordance with project requirements, and
c) The Expediting Manager or Supervisor is responsible for:
• Coordinating Field Expeditors’ assignments and maintaining a register for each Field Expeditor with details of the project, PO number and the required deliveries of Suppliers and sub-Suppliers,
• Reviewing the Field Expeditors’ invoices and expense reports for correct format and accuracy (5).
Project Kick-off
a) The Expediting group reviews each PO with the project procurement manager to define the level, manner and frequency of expediting activity required.
According to the survey this judgment is based on:
• criticality of the design information required,
• criticality of required delivery for M&E against required on-site dates,
• complexity of the M&E, and
• Suppliers’ past performance
b) The Expediting group may be requested to provide input to the Project Procurement Plan or its potential subsequent Project Materials Management Plan. Upon PO placement, the Expediting group assesses if Field Expediting is required and the initial frequency of visits (5).
c) An estimate of the number of visits and man-hours is established and if necessary Customer approval sought (via the PPM) before assignments are issued. The Expediting Manager or Supervisor allocates a Desk Expeditor to each P.O. The number of POs allocated to a Desk Expeditor depends upon the type of M&E being purchased, the complexity of the order and the urgency with which it is required. On projects without an Expediting Manager or Supervisor, this assignment will be done by the Project Procurement Manager (5 and the survey) – See Appendix 1.
Expediting – General Method of Operation
Following are the main expediting operational activities based on the available information at WorleyParsons share point and the survey results:
a) The Expediting group is responsible for the following tasks upon issue of the PO:
• Preparation of an ‘expediting file’ for the PO
• Issue of a standard letter, fax or email to the Supplier requesting details of the Supplier’s reference number and contacts for expediting purposes.
b) The Expediting group provides ‘expediting reports’ as required, which as a minimum include:
• Expediting input to regular project procurement and progress reports,
• Exception reports showing whether a Supplier’s latest promised delivery date is: later than the PO delivery date, and/or later than the ‘required on-site’ date.
c) The Expediting group ensures:
• That all expediting correspondence, faxes, emails and standard forms are filed in date order in hard copy files and/or electronic document control system.
• Receipt by Document Control of all final copies of documents, including test certificates and data books plus sign-off that all such documentation meets requirements (5).
Expediting of Drawing and Production Schedules
The Expediting group is also responsible for the following:
a) Expediting the Supplier to provide a document submittal schedule within the period indicated in the Supplier Document Requirement List (SDRL) issued with the PO – The Supplier Document Schedule (SDS) is passed via Document Control to Engineering for review against the SDRL. If both the lists of documentation and the submission dates are acceptable, the Supplier Document Schedule is approved and review coded by Engineering and passed via Document Control back to the Supplier.
b) Obtaining various exception reports from the document control system as required assisting in expediting the (re-)submission of documentation from Suppliers.
• Requesting the Supplier to supplement its overall production program with a detailed ‘material status report’ updated regularly, and
• Ensuring that the Supplier submits a regular report highlighting any problem areas and giving brief status of the PO which can be checked and monitored against the overall production program (5).
Field Expediting
Field Expediting visits may be carried out by Desk Expeditors, inspectors and other Procurement or Engineering personnel on certain occasions, but only after prior agreement with the Project Procurement Manager.
Based on the survey results the Field expediting services may be provided by “Third Party Inspection” and expediting agency after agreement of Project Procurement Manager.
a) Field Expediting to the Supplier shop is carried out, where required, according to the expediting component of the Materials Management Plan or when one or more of the following situations develop:
• The M&E is of such importance that it requires monitoring on a regular basis,
• Delivery is so critical to the overall construction program that ‘continuous expediting’ is required to avoid any slippage,
• General Supplier poor performance.
b) Where Field Expediting is required; the Desk Expeditor raises an ‘Expediting Assignment’ which includes:
• Details of the PO or sub-order to be expedited together with a brief history of the status,
• All relevant correspondence – including inspection requirements.
d) Subsequent visits are arranged by the Expediting group in accordance with the frequency determined in the Expediting Assignment and include as a minimum the following:
• Status of submission and approvals of documentation and drawings – the Field Expeditor’s report highlights all documents overdue for return to the Supplier after review by WorleyParsons,
• Physical review of Supplier’s stock material and production progress on the shop floor, including check on actual labour loading against that planned.
e) In all cases, the Field Expeditor contacts the Desk Expeditor before leaving the Supplier’s premises with an update of the current status of the PO and may issue a ‘highlight expediting report’ or ‘Flash Report’ by fax or email from the Supplier’s premises.
f) The Field Expeditor issues a ‘full expediting report’ within a specified time of each visit to the Expediting Manager or Supervisor. Reports include as a minimum:
• The original and latest promised delivery dates
• Drawing / document submission dates
g) The Expediting Manager or Supervisor:
• Logs receipt of the expediting reports,
• Distributes expediting reports immediately to the Project Management
h) Document Control copies and distributes the expediting reports in accordance with the project document distribution matrix.
i) The Field Expeditor advises the Expediting Manager or Supervisor at the end of each month the current expediting workload status to confirm the workload registers are correct (5).
Dispatch and Shipping
a) Dispatch of M&E is controlled and tracked by the Expediting group, when required and depending on the applicable delivery conditions, in conjunction with Logistics and Transport to ensure its movement in the fastest and most economical manner, and its location is known at all times.
c) All inter-site movement of M&E is controlled by Field Material Control. When an item of M&E is being returned to the Supplier, Site Materials Control advises the Expediting group identifying the reason for return such as the applicable reports. Also, Expediting will ensure that the necessary corrective action is taken (5).
EXPEDITING BEST PRACTICES
To gather enough data on best practices of expediting in the oil and gas industry in Alberta, three different companies were studied. (See Appendix 2 for comparison) According to this study following activities is used as a guideline of expediting best practices. Although according to the project size, complexity of the project, criticality of the items etc. the process could be different or practiced in a different paste a few suggestions can be followed which will be described later in the text.
• Expediting Activities
o Review Purchase Orders (POs) and Determine Expediting required
o Establish Priorities for all Materials and Equipment (M&E)
o Develop the Expediting Component of PO Administration
o Allocate a Desk Expeditor/Package Expeditor to each PO
o Expedite and Receive Purchase Order acknowledgement
o Expedite Supplier on a regular basis
o Provide Reports
o Expedite Supplier Sub-orders
o Commence Field Expediting, as necessary
o Arrange Regular Visit to the Supplier
o Issue Field Report and Follow-up any Actions Required
o Receive 'Ready for Inspection' Notice
o Receive Inspection Release Certificate and Initiate Shipping Actions
o Check Completeness of Dispatch
o Closeout Expediting File
CONCLUSIONS AND RECOMMENDATIONS
Expediting activities are more required when there is a chance of slippage and according to the expediting component of the Materials Management Plan or when one or more of the following situations develop:
-The M&E is of such importance that it requires monitoring on a regular basis,
- Delivery is so critical to the overall construction program that ‘continuous expediting’ is required to avoid any slippage,
- Delivery of ‘Critical’ M&E has slipped and is jeopardizing the overall construction program, and
- General poor performance of the supplier.
Also, identifying the clients’ needs as early as possible can play a vital role in project delivery success. A recommendation is to use a form (an example provided in Appendix 4) and agree on the scope of work and develop the PEP and expediting plan based on that.
Based on the facts stated in this paper and according to the survey performed there are also other recommendations which is categorized into two main sections:
• General Recommendations for EPC Companies
Mutual respect between the expeditors and vendors must be continuously increased and monitored (6). The expeditors should get involved as early as possible in the course of the project execution so they can re-act proactively and help selecting the vendors (7). For all companies it is necessary to update the project expediting plan as it is a live document and make it available for all parties responsible. As observed during the survey and data collection and according to some market investigation, there are no specific qualification requirements for an expeditor to get a job in most EPC companies. As another recommendation Engineering companies need to re-assess the requirements for this position. Moreover, Expeditors’ recommendations should be considered in project scheduling since they are the most familiar with the vendors and their time management (8). It is suggested to base the companies’ communication on a more concrete system and keep track of all communications. Based on the survey results it is recommended that the PO include a requirement that the Supplier submits un-priced copies of all sub-orders for major components and it is the Expediting group’s responsibility to ensure these are received and checked to ensure the delivery dates are factual and meet the needs of the production program.
• General Recommendations for EPC Companies
Specific recommendation for Company A is to allocate Field Expeditor as a separate position. Recommendation to company C is to allocate Shop Expeditor according to clients’ needs and project condition. For company B it is also recommended to allocate a specific expeditor to each PO and to prioritize the expediting activities. Company C needs to involve more team work in project expediting including the EPC firm, Client and the suppliers.
Identifying client’s needs for projects is suggested to be used for future studies. Project phase and project type must be considered as well as the client and EPC organizational requirements.
REFERENCES
1. Huston, C, L (1996) Management of Project Procurement, New York, McGraw- Hill
2. Hartman, F.T., Herrero, J.C., Ashrafi R.A. (2001); “How to Identify and Communicate Customer Needs and Expectations”; PMI’s 26th Annual Symposium, New Orleans.
3. Varughese, Joe (2010) OPMA-719 Class Notes, winter 2008, University of Calgary
4. Jergeas, George (2009) Analysis of the Front End Loading of Alberta Mega Oil Sands Projects, Project Management Journal, Vol. 39, No. 4, 95–104
5. Expediting Procedure WorleyParosns Calgary – Talisman PRIME Alliance
6. www.suplychainmechanic.com
7. Dale R.Labittzke, “Project expediting“.www.born2process.com
8. www.met-chem.com
9. Supply Chain Digest (Feb. 2010), Kraljic later made enhancements to the model, including a 3 x 3 version, and there have been many refinements of this by others over the years
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