1. Capital Projects Supply Chain Management
Looking Beyond
Construction Materials Management
Jay Jean
Jacobs

2. Team Charter
Introduce supply chain management (SCM) to the construction industry.
Facilitate more effective use of SCM in delivery of capital facilities.

3. Project Team Paul Behnke U.S. Steel J.C. Boyers Butler Manufacturing
Buddy Clark KBR
Mike DeMuro / Tom Kepper Intel
Frank Dombrowsky Parsons Energy & Chemicals
Jim Hershauer Arizona State University
Mark Hodson / Allison Leer Eli Lilly
Jay Jean Jacobs
Skip Lee M. A. Mortenson
Roger Long Anheuser-Busch Companies
Mark Palmer, Project Manager NIST
Skip Stuart Black & Veatch
Iris Tommelein University of California–Berkeley
Ken Walsh Arizona State University
Terry Zgabay ChevronTexaco

4. PT 172 Deliverables Research Report 172-11 Research Summary 172-1
Implementation Resources
Capital Projects SCM Assessment Checklist
Example Supply Chain Maps with Metrics
Implementation Guide for Capital Projects SCM

5. Supply Chain Management
Supply Chain Management (SCM) is the practice of a group of companies working collaboratively in a linked chain of interrelated processes designed to best satisfy end-customer needs while rewarding all members of the chain.
In summary Supply Chain Management is about getting organizations participating in projects or programs to work together for an optimum solution.
SCM is recognized as a leading process improvement, cost saving, and revenue- enhancing business strategy practiced in today’s business world. All disciplines (conceptual design, engineering, procurement, fabrication, logistics, and construction to name but a few) can be, and most often are, involved in SCM.
How many people in the room have supply chains in their companies? How many apply supply chain management in your corporation?

6. Why SCM?
Effective supply chain management is a business practice that delivers:
- process improvements
- cost and time savings
- revenue enhancements
- new business opportunities

7. SCM is seldom practiced effectively across the construction industry!
Research Finding
SCM is seldom practiced effectively across the construction industry!

8. Barriers to SCM Implementation
Traditional contracting practices
Functional stovepiping
Lack of SCM skills
Local project vs. global program perspective
Must be practiced at strategic, tactical, and task levels
Risk aversion
Lack of incentives
Lack of standards

9. SCM Stakeholders Owners Engineering firms Contractors Subcontractors
Equipment and material suppliers
Raw material suppliers
Lenders and insurers

10. Capital Projects Supply Chain
OWNER
CONTRACTOR
specialists
ARCHITECT/
ENGINEER
EPC FIRM
DEMAND
DEMAND
MATERIALS & SERVICES
tier 3
tier 2
SUB-
CONTRACTOR
tier 1
CAPITAL
INFORMATION
tier ...
tier 2
SUPPLIER
tier 1
RAW MATERIALS
PROVIDER

11. Research Approach Previous CII research CII Best Practices
Case studies
SCM best practices from other industries
Literature reviews
Industry survey
Periodic peer reviews

12. Case Studies Tools and techniques: Supplier-Managed Inventories
Supplier Relationship Management
Web-Based Project Management
Strategic Inventory Placement
Core Competency Leveraging
Streamlining
Lean Production

13. Construction SCM Headlines
In the case studies we observed…
Intel Cuts Fab Construction from 36 to 18 months
Conservative approach indicates $30MM inventory savings
Mapping Helps Uncover SC Inefficiencies
Mapping across organizational boundaries for pipe supports, contractor discovers 96% of elapsed time is wait time, only 4% is value add time
SMI Effort Gives Electrical Contractor Boost
Craft utilization increases 20-50% with partnership
Supply Chain Efforts Cut Lead Time 70%
Owner enters long-lead supply chain, holds inventory

14. Case Studies Lessons Learned
Define and Optimize Core Competencies
Plan across Projects
Develop Right Relationships
Share Information
Standardize
Map, Measure, and Improve
Benefits accrue to ALL

15. Map and Compress SC Lead Time for Pipe Supports
Lead Time ± 33 weeks
Value-added Time/Lead Time = 3.8% … …
Lead Time
± 1 week … …
Start
Design
Select
Supplier
Ready
to Ship
direct work time = Value-Added time
± 2 mh
(1) Select and Involve Supplier Early in Design
(2) Other SCM Techniques

16. Map and Compress SC Lead Time for Pipe Supports
Value-added Time/Lead Time = 4.6%
New Lead Time ± 25 weeks ..
± 6 weeks
Engineer and Supplier
Collaborate
Ready
to Ship
Start
Design

17. The Challenges to Applying SCM
Manufacturing SCM
Capital Projects SCM
High degree of design and part standardization
Project-unique design and materials specifications
Reliable demand forecast and planning capability
Uncertain demand forecast and inadequate tools
Rationalized supply base, set distribution network
Project-specific supply chains
Controlled environment
Unpredictable environment
Customer not involved
Client intimately involved

18. All are essential for successful SCM!
SCM Reality Check
CII Implementation Survey reveals:
< 30 percent use Mat’ls Management Best Practice
< 32 percent use Design Effectiveness Best Practice
< 50 percent use Alignment Best Practice
< 50 percent use Quality Management Best Practice
< 15 percent use Dispute Resolution Best Practice
All are essential for successful SCM!

19. Rewards Are Worth the Effort!
SCM Benefits
Compression in longest paths of the SC
Reduction in variability of lead times
Reduction of cost risks and charges for extra services
Reduction of communication errors and delays
Reduction of waste
Increased net present value due to savings in maintenance, repair and operation
Additional income to all stakeholders
Rewards Are Worth the Effort!

20. Follow-on research is needed
Conclusions
Supply chains can be complex
Include all project stakeholders
Proven techniques exist
CII Best Practices can be integrated
There are barriers to overcome
Improved SC will enhance project performance
The CII SCM journey has just begun
Follow-on research is needed

21. Implementation Session Panel
Mark Hodson, Eli Lilly (Moderator)
Buddy Clark, KBR
Frank Dombrowsky, Parsons E&C
Paul Behnke, U.S. Steel
Skip Stuart, Black & Veatch
Iris Tommelein, UC-Berkeley
Terry Zgabay, ChevronTexaco
J. C. Boyers, Butler

22. Implementation Session Agenda
1. Check your SCM Readiness
2. Identify Strategic Opportunities
3. Assess Organization and Practices
4. Map
5. Collect Data
6. Analyze and Select Alternatives
7. Implement
8. Evaluate and Iterate