A project management team was tasked with speeding up the installation of a large number of high-return opportunities by altering their current work process. This was accomplished by meticulously mapping out the existing project development and execution work processes, identifying where steps could be eliminated or significantly overlapped, and fully understanding and accepting the business risks that resulted. More importantly, clear criteria were established against which the opportunities were evaluated to see if they could be accelerated. Finally, dedicated personnel were assigned to oversee the new facilities’ development and construction. After one year of use, a number of high-return projects were successfully installed.
Those in a capital-intensive commodity business are usually faced with low profit margins for their products. Sustainable profitability is typically only achievable by maintaining high production volumes.
These businesses are constantly confronted with findings opportunities to maintain or improve these tight margins in the face of growing competition and other challenges.
Finding Simple, Low or No-Cost-High-Return Opportunities
A handful of dedicated cross-functional teams were tasked with coming up with a series of simple, low- or no-cost margin improvement opportunities at one such location. Representatives from the following groups typically made up the teams:
- Technical personnel
- Plant operations
- Business economists
- Representatives from the supply chain
The enhancements would allow for the production of higher-value products, the removal of production constraints, the reduction of manufacturing costs, or a combination of the three.
The teams were also asked to screen these opportunities and rank them in order of financial return from highest to lowest. A few of these required no investment, but the majority required facility changes.
The end result was a sizable portfolio of straightforward facility projects. The next challenge was figuring out how to put these in place quickly so that the financial benefits could be realized as soon as possible. This was critical as a subset of these opportunities had a limited time window to secure the high return value-add.
Project Management Processes Geared to Manage Risks
This manufacturing plant’s project management (PM) work processes were largely consistent with industry standards, such as those described by the Project Management Institute – Figure 1.
Figure 1: Project Management Work Process
The existing project development and execution procedures were designed for larger, more complex facility modifications or upgrades, so to speak. Several steps and built-in checks, documentations and reviews are included to ensure:
- A high degree of predictability of project outcomes: cost and schedule
- The safe execution of project work
- The safe start-up and operation of new or modified facilities
This work process, on the other hand, was resource intensive and required long cycle times.
The manufacturing facility had built up a portfolio of small investments with high returns. They needed a risk-adjusted strategy to get these installed as soon as possible.
Developing the Rapid Project Implementation Process
To shorten the overall work process, the PM team first mapped out and analyzed the existing work process to identify steps that could be eliminated or overlapped.
The revised work process was evaluated against the following “boundary conditions”:
- There will be no compromises in the safe completion of project work or the operation of new facilities.
- There were no deviations from the facility’s engineering standards.
The group then established criteria for projects that would use the accelerated work process, including:
- Investments with a high financial return; typically, with an internal rate of return of more than 50%.
- Simple changes to the manufacturing process
- There will be no major equipment installation.
- There should be no more than three engineering disciplines involved (civil, mechanical, electrical, instrumentation and controls, and so on).
- Each project has a budget of less than a nominal amount, at that time, $1 million dollars.
Opportunities that did not meet these criteria were simply relegated to the standard project management procedures.
The next step was to conduct a risk assessment of the revised procedure and to put in place cost-effective countermeasures.
The following are some of the business risks that were identified:
- Facilities that aren’t optimized
- Technical risk, i.e., if the facilities do not perform as expected, resulting in the expected financial benefits being lost.
- Facilities are more expensive than ideal, lowering the return on investment.
Again, no deviations were accepted when it comes to operations or construction safety.
Figure 2 gives an example of the risk assessment.
|Technical||Rework / write-off investment||All opportunities screened by site’s technical staff
Consult central engineering specialists as required
Follow Technical Quality Assurance checklist for small projects
Figure 2: Extract from the risk assessment completed for the
rapid project implementation work process
It cannot be overstated how important it is to select PM personnel to develop and execute the accelerated projects in order for this modified work process to succeed. The PM team assigned one dedicated Project Planner to complete the definition of the modified facilities and one dedicated Project Manager to oversee engineering, procurement, and construction in this case. Both were chosen for their demonstrated ability to complete projects on time and on budget.
Finally, the team agreed on the most important metrics for measuring the effectiveness of the new work process. Indicators like actual project cycle time vs. predicted, percentage or cost of projects abandoned during development or installation, and average portfolio return are among them.
The accelerated work process, if implemented as planned, would result in facilities being operational up to 40% faster than current methods at this location. This is calculated from the moment the opportunity is screened and confirmed to meet the previously stated criteria.
For small projects, the average time from concept to mechanical completion is 18 months.
This becomes 10 to 11 months with the revised work process
Financial returns will be captured up to 6 months earlier in the business.
This represents up to 1 ½M$ in additional net benefits to the business for every ½M$ invested (present value).
The Revised Project Work Process
To compare the typical and accelerated project implementation:
|Preliminary facility definition, cost and schedule||Gate review||Preliminary facility definition, cost and schedule
Preliminary funding – up to ¼ of total investment
|Development facility definition, cost & schedule||Gate review||1-page process conditions & constructability input|
|Preliminary funding if required||Detailed engineering||Issued-for-Review drawings and specifications|
|Preliminary facility risk assessment||Facility risk assessment|
|Final facility definition, cost & schedule – full funding||Gate review||Issued-for-construction drawings and specifications|
|Detailed engineering||Issued-for-Review drawings and specifications||Final facility definition, cost & schedule – full funding||Gate review|
|Constructability input / final facility risk assessment||Procurement
|Issued-for-construction drawings and specifications|
The following are the main characteristics of the accelerated work process:
- Essentially no Front-End Loading (FEL) is required, as well as a limited Front-End Engineering Design (FEED)
- Significant advance funding to proceed directly to detailed engineering once process conditions are documented and constructability input is provided, following the preliminary facility definition.
- There are only two formal management reviews (gates). After detailed engineering is completed, the project is given its final approval. It’s worth noting that this does result in a more precise final cost and schedule budget.
Results & Conclusions
For this version of a project management work process to capture the increased paybacks, there are several key success factors to consider:
- Establish criteria for determining which facility projects can benefit from the accelerated method. They must be simple, low-cost, and have few interactions with existing plant operations.
- Assign key personnel to the development and execution of the project. They need to be dedicated to this effort and carefully chosen based on their abilities
- A thorough risk analysis of the revised work process. All stakeholders must fully comprehend and agree on what is being sacrificed by not using a more rigorous project management methodology. In the worst-case scenario, a new project could be completely written off after installation.
- Last but not least, the plant’s leadership’s continued support.
After a year, a significant number of high-return projects were either in the planning stages or had been completed. Typically, these were minor facility changes such as replacing existing process instrumentation with upgraded equipment, adding new instruments to improve operations monitoring, or adding additional process interconnections to increase manufacturing flexibility. All provided significant financial benefits to the plant, with the majority requiring less than a year to pay off.
One of the operations team member provided the best testimonial to this accomplishment:
“Projects which would typically take 1-2 years to execute are now being progressed in 6-7 months”