Dispersed Project Execution Scott J Mason Ph D

Dispersed Project Execution Scott J. Mason, Ph. D. Fluor Endowed Chair in Supply Chain Optimization and Logistics Professor of Industrial Engineering

Introduction to Dispersed Execution • “Increases in globalization and recent technological developments have launched EPCM businesses on a new trajectory that has changed where and how companies do business” (Joseph). • Dispersed execution is a strategy that simultaneously utilizes multiple offices under the overall responsibility of a lead office to execute a project – Global execution, distributed execution, work sharing – Been around for many years, but in last 10 years, largescale, multi-office execution strategies for performing engineering and procurement services evident Scott J. Mason, mason@clemson. edu 2

Introduction to Dispersed Execution India Philippines China Poland Scott J. Mason, mason@clemson. edu 3

Introduction to Dispersed Execution • What Drives the Decision to Use Dispersed Execution? – – – Project Size Sourcing Capabilities Labor Rates Schedule Increasingly competitive global economy • Provides increased responsiveness to customer demands through better supplier synchronization • Can increase a company’s global reach and provide significant competitive advantage Scott J. Mason, mason@clemson. edu 4

The Problem • Dispersed Execution is Complex and Challenging • There is Lack of Research, Standardized Processes, and Tools “While there is currently information pertaining to work share operations, there is a lack of material regarding dispersed execution. ” Scott J. Mason, mason@clemson. edu 5

Importance • If global execution can be implemented so the advantages are leveraged, risks are mitigated, and waste is reduced, then the result will ultimately be seen in the bottom line for a company and its stakeholders. Scott J. Mason, mason@clemson. edu 6

Advantages – Reduced Costs Example Labor Rates by Country $60. 00 $50. 00 $40. 00 $30. 00 $20. 00 $10. 00 $0. 00 U. S. Scott J. Mason, mason@clemson. edu China Philippines Poland India 7

Advantages – Shortened Schedules Scott J. Mason, mason@clemson. edu 8

Advantages – Enhanced Resource Allocation • Ability to Execute Larger, More Complex Projects • Utilize Employees and Expertise from around the World • Access to Broader Market of Suppliers Scott J. Mason, mason@clemson. edu 9

Challenges • • • Time Zone Communication Culture Language Alignment Scott J. Mason, mason@clemson. edu 10

Time Zone Separation • Misaligned Work Hours—who works “off” shift? • Slow Disbursement of Information • “One Team” Identity—how to facilitate cohesion? Scott J. Mason, mason@clemson. edu 11

Communication • Industry research indicates that one of the most important aspects of successful worksharing is effective communication (Davison and Varma). Scott J. Mason, mason@clemson. edu 12

Cultural Differences Attributes Asia US/Europe Saying "No" Breaking denials gradually; telling "No" in a round -about manner Getting to the point directly as a mark of respect to the person's time Dinners Lavish with a number of participants demonstrates respect Dinners are business opportunities with those who can be trusted Negative Situations Stress out a customer. It's best to solve problems internally and not pass it on Knowing the truth is more important for a customer than being denied the real situation, even if it's unpleasant Voice Mails Rude in oriental cultures. Impersonal to be asked to speak into a lifeless machine when the need is real Accepted alternative to answering calls Scott J. Mason, mason@clemson. edu 13

Language Barriers • Opportunities for errors—translators! • Communication, both verbal and written, must be thorough so that it is clear to all parties • During prime contract negotiations, language of contract documents for purchasing should be designated Scott J. Mason, mason@clemson. edu 14

Key Success Factors Clear & Frequent Communication Tools & IT Standard Work Processes Scott J. Mason, mason@clemson. edu CII Success Factors Clearly Defined Roles and Responsibilities Clearly Defined Scope 15

Key Success Factors • • • Project Set-Up Early Planning and Coordination Face-to-Face Kick-Off Meetings Strong Project Management Establishing a Sense of Team – Mutual Goals – Trust and Relationships – Act as a Single, Homogenous Unit Scott J. Mason, mason@clemson. edu 16

Information Technology • Advanced IT capabilities are one of the reasons that dispersed execution is even possible • Project consistency, standardization • “The five interdependent factors critical to deploying collaborate technologies include availability, reliability, capability, supportability, and an individual’s ability to use the technology” (Joseph) Scott J. Mason, mason@clemson. edu 17

Example Fluor Project Execution Sites • Polysilicon Project – Greenville, SC – Shanghai, China – Manila, Philippines • Simandou Project – – – Farmborough, UK Toronto, Canada Perth, Australia Melbourne, Australia Paris, France Polysilicon Project Scott J. Mason, mason@clemson. edu 18

Optimization Model for Dispersed Execution Scott J. Mason, mason@clemson. edu 19

Example Salary Data Scott J. Mason, mason@clemson. edu 20

Example Constraints • Travel and Lodging Costs • Checking and Rework • Expatriate Requirements Scott J. Mason, mason@clemson. edu 21

Travel • One trip required for every 10, 000 hours executed • If office is allocated less than 10, 000 hours, no trips required • If office is allocated more than 20, 000 hours, then one additional trip required for kick-off meetings. If the office is allocated less than 20, 000 hours, then kick-off meetings held via teleconference Scott J. Mason, mason@clemson. edu 22

Rework • May be required due to communication issues, language barriers, lack of expertise • We assume the following amounts of rework for each office: Scott J. Mason, mason@clemson. edu 23

Rework • Amount of checking and rework varies by office location depending on expertise, the amount of experience that the office has in work sharing, and other factors • While it is certain that an amount of checking or rework exists due to dispersed execution, there is a lack of specific, historical data – Estimates are built into the model based on assumptions • Inevitably, some amount of checking or rework is required for all execution offices • Interviews with personnel who have broad dispersed execution experience can help produce estimates • Rework figures will decrease as GEC’s gain proficiency and expertise Scott J. Mason, mason@clemson. edu 24

Expatriate Costs • One Expatriate Required (2, 500 hours) if an office is Allocated > 19, 000 Hours • Cost is Approximately 3 X Regular Salary • Model Assumes Expatriate Comes from U. S. office Scott J. Mason, mason@clemson. edu 25

Lower and Upper Bound Settings • Set to Define Min and Max Man-hour Allowances for Each Office • Adjusted Based on Project, Office Capabilities, Expertise, and Availability of Resources Scott J. Mason, mason@clemson. edu 26

Model Inputs and Constraints Scott J. Mason, mason@clemson. edu 27

Sensitivity Analysis: Salary Inputs • Results: • Philippines office should be utilized in dispersed execution until salary input increases by 175% • After the thresholds highlighted in blue are reached, distribution of hours to respective offices reduces to zero Scott J. Mason, mason@clemson. edu 28

Sensitivity Analysis: Travel Costs Scott J. Mason, mason@clemson. edu 29

Sensitivity Analysis: Travel Costs Cont’d Scott J. Mason, mason@clemson. edu 30

Sensitivity Analysis: Rework • New Delhi is the only office with hours reduced to zero when checking/rework increases by 100% Scott J. Mason, mason@clemson. edu 31

Further Confirmation? • Two real world projects from recent history were analyzed to assess the potential impact of optimally dispersing project hours subject to necessary constraints • Project labor savings – Project 1: 12% possible cost reduction – Project 2: 11% possible cost reduction Scott J. Mason, mason@clemson. edu 32

The Bottom Line • Dispersed Execution is a Significant Part of Today’s EPC Industry • Dispersed Execution is Challenging But It Can Bring Many Benefits to a Capital Project • Standardized Processes and Tools are Required and Will Make Execution More Effective and Successful Scott J. Mason, mason@clemson. edu 33

Acknowledgement • The original content for this presentation was created by M. Eng. Cohort 1 students Blaine Babb and Kristen Taylor of the Fluor Corporation with the support of their IE 859 Project Sponsor, Bob Novak. Scott J. Mason, mason@clemson. edu 34