By weight, a person’s central nervous system accounts for a fractional percentage of body weight. And yet, without it we couldn’t live, much less function effectively.
For industrial process manufacturing facilities, the same can be said of automation. Typically accounting for roughly 4 percent of the project cost for new construction, automation is rarely considered early enough in the project strategy. This might be why 65 percent of all projects over $1 billion and 35% of all projects under $500 million are significantly late or over budget, according to a study in Project Management Magazine.
While not all projects should be considered failures, the difference between Top Quartile project performance and other quartiles is staggering. According to the Project Management Institute, companies lose $109 million for every $1 billion spent on projects due to the decrease in recoverable budget when the project fails.
One of the greatest challenges, complexity, is an enormous obstacle and comes in many forms:
- The size and scale of today’s new oil and gas, petrochemical, refining and other process manufacturing facilities are unprecedented.
- Facilities are bigger, more technically complicated and often built in remote locations with limited infrastructure.
- The workforce in these locations often doesn’t have experience operating technical facilities of this magnitude.
- The sheer number of suppliers and contractors working on these projects—often dozens—makes a difference. While each of these suppliers and contractors has a defined work scope that is uniquely theirs, there are inherent dependencies between suppliers which can create frustration at best and schedule-busting delays at worst.
A third and endemic issue is the use of outdated methodologies in project execution, combined with missed opportunities to utilize new technologies to reduce and eliminate work. These inefficiencies and missed value-engineering opportunities add up to significant wasted expense in terms of engineering hours and materials, as well. Tens, if not hundreds, of millions of dollars could be saved on every project.
So what is a C-suite to do … stop investing? Not viable for any company wishing to remain competitive and drive growth.
“Top Quartile companies investing in new infrastructure need the certainty of projects delivered on-time, on-budget with lower cost and lower risk,” said Jim Nyquist, president of Systems and Solutions at Emerson Process Management.
Eliminating cost is simply about engineering better value from every dollar spent. It comes in several forms: Three requirements for successful projects going forward are: Cost Elimination, Complexity Reduction and the ability to Accommodate Change.
- Elimination of redundant or unnecessary work
- Automating steps in the process to reduce engineering hours
- Utilization of standardized technologies to reduce customization, excess materials and manpower
For example, for every $1 billion of capital investment in a new facility, a Top Quartile project team invests $22 million less in spare parts than its lower-quartile peers. That Top Quartile project team also follows a control-system engineering and design strategy that saves 70-80 percent on hardware space requirements, and finds ways to reduce its investment in expensive piping by 30-50 percent in segments around the plant. Once under operation, that same Top Quartile facility spends a staggering $40 million less annually on maintenance than its third-quartile counterparts.
Reducing complexity is another critical factor in Top Quartile project performance. For example, shared amongst dozens of suppliers and contractors are hundreds of thousands of documents and millions of pieces of data. The information is not simply the blueprint of the plant, but complex operating requirements and technical specifications which impact the work of many companies. Because each company maintains their own system of record for documents and data, the likelihood of version incompatibility or data entry errors can have staggering impact on project schedules.
To prevent project information getting out of sync while providing for a nimble team of suppliers, Top Quartile project teams utilize a single source of truth on documents and data. Emerson’s Project Data Ring, by example, manages all project documentation in one place, interfaced among all suppliers—regardless of their independent document and data management sources. It also stores all technical specifications in one database, providing each supplier with just the information they need to complete their respective scope of work.
Accommodating change, especially in late stages of a project, addresses one of the most vexing problems project teams and their investors have: startup delays. A project that has been on paper for five years or more and in construction for 2-3 years is scheduled to go into full production on a specific date. Contracts with suppliers and customers of that site are developed based on that projected “go live.” When the date is missed—often by months—the consequences can be staggering. Lost revenue, delayed return-on-investment, customer goodwill are all sacrificed. But why?
The root cause is technical, yet simple at the same time. Early in a project cycle, engineering and technology decisions are required in order for suppliers to schedule their deliverables. However, the actual manufacturing process design isn’t yet finalized. Fast-forward two years to construction and routinely, those early automation design decisions prove restrictive to late design modifications. As a consequence, costly and time-consuming change orders wreak havoc on the schedule. What if the project could simply absorb those late-state change orders without affecting the schedule?
One game-changing technology Emerson introduced recently, called “Electronic Marshalling with CHARMs,” does precisely that. This unprecedented system interface platform helps project teams eliminate miles of wiring and thousands of hours of engineering traditionally required for connecting tens of thousands of instruments and valves. It gives them the flexibility to accommodate late design changes nimbly and adjust the deployment of automation technologies with little-to-no impact. Most importantly, it helps ensure on-time startup, which leads to faster return on investment.
Top Quartile project teams utilizing Electronic Marshalling with CHARMs technology have saved months on their project schedule. This has also translated into cost savings measured in millions of dollars.
As capital markets have tightened in reaction to uncertain business conditions, the demand for greater project certainty will increase to ensure better investment performance.
“To reach these demands, project teams and their sponsors will need greater capital efficiency, information integrity and schedule agility,” Nyquist said. “With better performance in these areas, you will be on the path to Top Quartile project performance.”
For additional articles related to Project Certainty, visit the Emerson Process Experts blog.