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The Impact of e-Commerce on Supply Chain

Management in EPC

Gouri Kulkarni, Sanjeev Singh, Sanjay Kumar, Shiva Bhaskar and

Dr. Binay Anand

MGT 6352 – Dr. June Lu

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AgendaAgenda

• IntroductionIntroduction

• The ChallengeThe Challenge

• Industry engagementIndustry engagement

• SolutionSolution

• epc-business.comepc-business.com

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•EPC – Engineering Procurement & Construction.

•Technip – A company working on onshore & offshore EPC.

Introduction

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• A supply chain is a network of activities through which services, products, money, information etc are moved all the way across a single process.

• A single process is anything that starts with the identification of a need for the product or service, followed by planning, procurement and fabrication if required, installation or provision, operation or consumption and eventually decommissioning.

• Supply Chain Management (SCM) is the effective management of information, relationships, products and services flowing across the breadth of your supply chain.

• It is about asking yourself, your customers and suppliers:

How can we cut waste? Where can we add value?

What is a Supply Chain ?

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Supply Chain Objectives

To increase the awareness level of the industry with regards to Supply Chain Management and its strategic role in continuous business improvement

To provide a link between best business practice theory and real, pragmatic tools

To allow individual players to realise their potential to increase their profitability via reduction in waste, NOT supplier prices

To offer a duplicatable blueprint for continuous business improvement

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The value of Supply Chain Management

Effective Supply Chain Management delivers :-

• Improved customer/supplier relationships

• Alignment of objectives along the supply chain

• Reduction of waste

• Identification of value added activities

• Response to market changes and strategic repositioning A

B

C

D

E

G F

HL O I

K

J

M

0

2

4

6

8

10

12

14

16

A B C D E F G H I J K L M N O P Q R S T U V

Goods/services

Sp

end

0

10

20

30

40

50

60

No

su

pp

liers

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Core Competencies in Supply Chain Management:

• Professional procurement staff• Proactive procurement approach

• Team approach

• Use of frame and cooperative agreements

• Total Cost of Ownership analysis

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A Day inthe Life of an EPC

Project

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Head OfficeHead Office

The project is overrunning and behind schedule – the client is complaining. You guys are not in control, and you

haven’t issued a single change order.

CustomerCustomer

I want a cost report in our own work breakdown structure – one for our

partners by AFEs, and one for our accountants by

taxation category.

What is the cash-flow requirement for next month?

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SupplierSupplier

It has been sixty days since we invoiced you. Has our invoice been processed?

Can you tell me when we will receive payment?

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ConstructionConstruction

Sorry, we can’t tell you when we’ll complete fabrication

since you can’t tell us when you’re sending drawings and

material!

What’s the status of pressure control valve PVC-101?… We

are going to start the compressed air system in

five days!

How come nobody noticed this was missing? And still no

one knows where it is?

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EngineeringEngineering

Do you mind emailing the 2000 piping items bill of

material with quantity and description so we don’t have

to retype them?

Have you done the technical

evaluation yet?

Is Revision 1 of PO #700 issued? I need to add

something…

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PlanningPlanning

Do you know what was received, issued, expedited, and completed yesterday on

this project?

Item 1 of PO #Q-1001 was only partially received. How are you

going to deal with it on your schedule?

Why don’t you keep your schedule up to

date?

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Project ManagerProject Manager

How come nobody told me PCV #101 is missing? I want to

know the status of every nut and bolt on this site!

I want to know the planned and issue date of every RFQ and PO!

I want to know the delivery forecast of every

PO Item!

I want to know EVERYTHING!RIGHT NOW!

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What would make a project a success?What would make a project a success?

1. A smooth and continuous flow of products and services

2. Managed end-to-end3. A good contract4. Active Executive Sponsor / Project Sponsor5. Quality and value added at every step6. Good relationships and communication7. Improving performance8. Delivered within budget9. Delivered on time10.Satisfied customers11.Pro-active suppliers12.Shared risk and reward13.…………………………………..

In CONTROL

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                           Aligned

Supply Chain

Head OfficeCustomer

Expediting

Inspection

Subcontractors/

Suppliers

Fabrication Shops

Const. Site(s)

Engineering

Procurement

Project Management

Accounting

Estimating

Planning / Scheduling

Cost Control

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Functional organisation

Guessed or assumed

Secrecy and / or adversarial based

Individual task by function

Activity based (CPA)

Test, analyse & fix

TodayEmpowered

process owner

Rigorously deployed

Collaborative relationships

Cross functionalteam tasks

Goal driven (consensus)

Simulation & design of experiments

Tomorrow

Managementframe work

Customer requirements

Customer/ supplier relationships

Resource management

Planning

Development

Projects need help to make a Projects need help to make a MindsetMindset shift… shift…

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A Solution……A Solution……

Project Supply ChainProject Supply Chain

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• Project Supply Chain is the global network used to deliver a project from raw materials to the final project customer through an engineered flow of information and physical distribution.

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IntegratedIntegratedCollaborativeCollaborativeSupply ChainSupply Chain

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                          A collaborative approach to A collaborative approach to unfreeze unfreeze the traditional mindsetthe traditional mindset

Value Proposition

Simulation

Whole LifeCycle Costing Cultural

Profiling

Team Based Working

Customer Supplier Relationship Improvement

Project Management

Root Cause AnalysisPerformance Management

KnowledgeManagement

Standard Contracts

Supply ChainMapping

Relationship Management

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Our goal is to unfreeze mindsets, develop Our goal is to unfreeze mindsets, develop teams, educate the team members and teams, educate the team members and identify improvement opportunitiesidentify improvement opportunities

• We want to overcome the We want to overcome the syndrome of “but we have syndrome of “but we have always done it that way!”always done it that way!”

• We must teach the effectiveness We must teach the effectiveness of ‘process’ versus functional of ‘process’ versus functional thinkingthinking

• How to reduce product lead timeHow to reduce product lead time• Involve suppliers to real benefitInvolve suppliers to real benefit• Use goal based project planning Use goal based project planning

to get resultsto get results

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BenefitsBenefits

• Reduction in Lead Time Reduction in Lead Time • Whole Life Cycle Whole Life Cycle • QualityQuality• Right first timeRight first time• Cost Reduction Cost Reduction • TeamworkTeamwork

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Procurement Improvement Processes

Project 1 Project 2 Project 3

Procurement Plans

Recommendations by Project Procurement Manager

Approval byProject Execution Team

ImprovedProcurement

Plans

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The Role of e-Commerce

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How much

farth

er is

it?

Who’s got the map?

When can I drive?

I’m feeling sick, can you pull over?

ARE WE THERE YET?

The Business Intelligence “Road Trip”

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Business Processes

Technical Architecture

How do we get there?

NetworkedNetworkedEnergyEnergy

EnterpriseEnterprise

Data Management

Applications

BusinessBusinessTodayToday

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BusinessBusinessTodayToday

NetworkedNetworkedEnergyEnergy

EnterpriseEnterprise

Forces Affecting the Transformation

Mergers / Acquisitions

Standards / Interoperability

BI / Data Warehousing

Internet / ebusiness

Reduced IT Investments

Focus on Competencies

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BusinessBusinessTodayToday

NetworkedNetworkedEnergyEnergy

EnterpriseEnterpriseL

ost

Da

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ost

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ata

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ata

Org

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Inte

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Kn

ow

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Ma

na

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ent

TimeTime

The Road to Change

Data ManagementData Management

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OrganizationOrganization

PeoplePeople

Core ValuesCore Values

Business IntelligenceBusiness Intelligence

Knowledge ManagementKnowledge Management

TimeTime

The Road to Change

BusinessBusinessTodayToday

NetworkedNetworkedEnergyEnergy

EnterpriseEnterprise

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Questions?

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                          Thank You