+ All Categories
Home > Documents > MBA Project Report M00328327 (1)

MBA Project Report M00328327 (1)

Date post: 23-Aug-2014
Category:
Upload: shagun-tandon
View: 506 times
Download: 4 times
Share this document with a friend
Popular Tags:
102
A Study on increasing Operational efficiency in EPC Projects using ‘Lean’ Principles October 14 2011 A Consultancy Project Report - For Dodsal Engineering & Construction Ltd., Dubai Venkatesh Kumar Subburaj M00328327 MBA4800-Project Report Middlesex University Business School
Transcript
Page 1: MBA Project Report M00328327 (1)

A Study on increasing Operational efficiency in EPC Projects using ‘Lean’ Principles

October 14

2011 A Consultancy Project Report

- For Dodsal Engineering & Construction Ltd., Dubai

Venkatesh Kumar Subburaj M00328327 MBA4800-Project Report Middlesex University Business School

Page 2: MBA Project Report M00328327 (1)

2

ACKNOWLEDGEMENT

I owe debt of gratitude to all those people who have helped me with this study. First, I

would like to thank my professors at University of Middlesex who helped me in understanding

the concepts of management and creating a way to develop myself as a potential leader.

Special thanks to Prof. Simon Speller and Dr.Vinaya Shukla, who has significantly influenced my

thinking about consultancy in Operations Management and guided me in the successful

completion of this text. I extend my thanks to Dr. Anjali Bakhru who refined my thoughts for

choosing this study in the initial stages.

I owe a massive debt of gratitude to people in Dodsal, Dubai, UK, who were the

respondents in the interview process and helped in identifying, solidifying the concepts

required for the study. I would also like to thank my family and friends for supporting and

encouraging me throughout the course of study.

Page 3: MBA Project Report M00328327 (1)

3

Declaration of Originality

I hereby declare that this project is entirely my own work and that any additional sources

of information have been duly cited.

I hereby declare that any internet sources, published or unpublished works from which I

have quoted or drawn reference have been reference fully in the text and in the

contents list. I understand that failure to do this will result in a failure of this project due

to Plagiarism.

I understand I may be called for a viva and if so must attend. I acknowledge that is my

responsibility to check whether I am required to attend and that I will be available during

the viva period.

Signed ________________________

Date _______________

Name of Supervisor / Mentor _________________

Page 4: MBA Project Report M00328327 (1)

4

Table of Contents

1. SCHEME OF RESEARCH ................................................................................................................. 10

1.1 INTRODUCTION...................................................................................................................................... 10

1.2 OVERVIEW OF EPC INDUSTRY IN UAE ....................................................................................................... 11

1.3 ABOUT THE FIRM ‘DODSAL’ ..................................................................................................................... 12

1.4 OBJECTIVE OF THE PROJECT ..................................................................................................................... 13

1.5 STRUCTURE ........................................................................................................................................... 14

1.6 SUMMARY ............................................................................................................................................ 15

2. LITERATURE REVIEW .................................................................................................................... 16

2.1 UNDERSTANDING DODSAL’S OPERATIONS ................................................................................................. 16

2.1.1 Business Models Used by Dodsal for delivering EPC projects: ................................................... 17

2.1.2 Brief outline of Downstream EPC projects ................................................................................. 18

2.1.3 Typical Construction sequence in EPC projects .......................................................................... 24

2.1.4 Project Organization structure ................................................................................................... 25

2.2 INDUSTRY TRENDS AND PRODUCTIVITY ISSUES ............................................................................................ 27

2.2.1 Key Industry Trends .................................................................................................................... 27

2.2.2 Common Management issues in EPC Projects ........................................................................... 29

2.2.3 Consultancy Problem definition ................................................................................................. 31

2.3 LITERATURE STUDY ON IMPROVING PRODUCTIVITY ...................................................................................... 32

2.3.1 Common issues in concurrent development projects ................................................................. 32

2.3.2 Lean approach to productivity improvement ............................................................................. 33

2.3.3 Value streams - the opening pace for Lean ................................................................................ 35

2.3.4 Analyzing information flow using Design Structure Matrix (DSM) ............................................ 36

2.4 SUMMARY ............................................................................................................................................ 38

3. RESEARCH METHODOLOGY .......................................................................................................... 39

3.1 INTRODUCTION...................................................................................................................................... 39

3.2 SIMON SPELLER CRACKER MODEL ............................................................................................................. 39

3.3 PROJECT APPROACH AND DESIGN ............................................................................................................. 42

3.3.1 Field Analysis .............................................................................................................................. 43

3.3.2 Interviews/Meetings .................................................................................................................. 43

3.3.3 Desktop Analysis ........................................................................................................................ 45

3.4 LIMITATIONS ......................................................................................................................................... 45

3.5 SUMMARY ............................................................................................................................................ 45

4. DATA ANALYSIS ............................................................................................................................ 46

4.1 INTRODUCTION...................................................................................................................................... 46

4.2 IDENTIFYING VALUE STREAMS .................................................................................................................. 46

Page 5: MBA Project Report M00328327 (1)

5

4.3 DSM ANALYSIS ...................................................................................................................................... 52

4.3.1 Planned iterations ...................................................................................................................... 57

4.3.2 Unplanned iterations ................................................................................................................. 57

4.4 ANALYZING THE RESULTS AND CREATING CAUSAL MAP ................................................................................. 59

4.5 SUMMARY ............................................................................................................................................ 64

5. RECOMMENDATIONS ................................................................................................................... 65

5.1 INTRODUCTION...................................................................................................................................... 65

5.2 VALUE STREAMS BASED ORGANIZATION .................................................................................................... 66

5.2.1 Proposed Organizational structure ............................................................................................ 66

5.3 POTENTIAL IMPACT ANALYSIS .................................................................................................................. 70

5.4 JUSTIFICATION FOR NEW ORGANIZATION STRUCTURE ................................................................................... 72

5.5 BARRIERS FOR IMPLEMENTATION ............................................................................................................. 74

5.6 LEADERSHIP STRATEGIES ......................................................................................................................... 75

5.7 FUTURE PACES ...................................................................................................................................... 77

6. CONCLUSION................................................................................................................................ 79

7. APPENDICES ................................................................................................................................. 81

APPENDIX 1: OUTCOME OF INTERVIEWS/DISCUSSIONS ............................................................................ 81

APPENDIX 2: WORK BREAKDOWN STRUCTURES FOR VALUE STREAMS .................................................... 85

APPENDIX 3: IBC CODE OF CONDUCT AND PROFESSIONAL PRACTICE ....................................................... 87

APPENDIX 4: UPDATED SCHEDULE FROM PRIMAVERA USED FOR THE ANALYSIS ..................................... 88

8. REFLECTIVE SUMMARY ................................................................................................................. 96

9. REFERENCES ............................................................................................................................... 100

Page 6: MBA Project Report M00328327 (1)

6

List of Figures

FIGURE 1 : ENGINEERING & CONSTRUCTION PROJECTS .......................................................................................... 12

FIGURE 2 : CLASSIFICATION OF EPC PETROCHEMICAL PROJECTS .............................................................................. 17

FIGURE 3 : BUSINESS MODELS IN EPC BUSINESS .................................................................................................. 18

FIGURE 4 : EPC VALUE CHAIN ........................................................................................................................... 19

FIGURE 5 : BASIC BLOCKS FOR INFORMATION FLOW .............................................................................................. 19

FIGURE 6 : TYPICAL PROJECT SCHEDULE .............................................................................................................. 21

FIGURE 7 : CONSTRUCTION EXECUTION SEQUENCE ............................................................................................... 25

FIGURE 8 : PROJECT ORGANISATION STRUCTURE .................................................................................................. 26

FIGURE 9 : ISSUES LEADING TO PROJECT OVERRUNS .............................................................................................. 30

FIGURE 10 : CONSULTANCY PROBLEM DEFINITION ................................................................................................. 31

FIGURE 11 : LEAN CORE PRINCIPLES .................................................................................................................... 34

FIGURE 12 : SIMON SPELLER CRACKER MODEL ..................................................................................................... 39

FIGURE 13 : STEPS TO ORGANIZE PROJECT ALONG VALUE STREAMS .......................................................................... 46

FIGURE 14 : DIFFERENT BOUNDARIES FOR EPC PROJECTS ...................................................................................... 47

FIGURE 15 : PLANNING LEVELS IN EPC PROJECTS .................................................................................................. 48

FIGURE 16 : CHARACTERISTICS OF VALUE STREAMS ............................................................................................... 50

FIGURE 17 : STEPS IN PREPARING VALUE STREAMS FOR DSM ANALYSIS .................................................................... 53

FIGURE 18 : STEPS IN CREATING DSM BLOCKS ..................................................................................................... 55

FIGURE 19 : DSM MATRIX ............................................................................................................................... 56

FIGURE 20 : COMMON BEHAVIORAL PATTERNS LEADING TO REWORK ...................................................................... 60

FIGURE 21 : CAUSAL ROOT MAP ANALYSIS ........................................................................................................... 62

FIGURE 22 : STRATEGIC MATTERS ...................................................................................................................... 65

FIGURE 23 : CURRENT ORGANIZATION STRUCTURE ............................................................................................... 68

FIGURE 24 : VALUE STREAM BASED ORGANIZATION STRUCTURE .............................................................................. 69

FIGURE 25 : TOP BUSINESS FACTORS ................................................................................................................. 81

FIGURE 26 : STAKEHOLDER MAPPING ................................................................................................................ 84

FIGURE 27 : WORK BREAKDOWN STRUCTURES STAKEHOLDER MAPPING .................................................................. 85

FIGURE 28 : IBC COMPETENCY FRAMEWORK ....................................................................................................... 87

Page 7: MBA Project Report M00328327 (1)

7

List of Tables

TABLE 1: STAGES IN EXECUTION OF EPC PROJECTS ................................................................................................ 21

TABLE 2: VALUE STREAMS IDENTIFIED ................................................................................................................. 52

TABLE 3: POTENTIAL IMPACT ANALYSIS ............................................................................................................... 72

TABLE 4: BARRIERS TO IMPLEMENTATION ............................................................................................................ 76

List of Gantt charts

GANTT CHART 1: CONSULTANCY PROJECT PLAN ................................................................................................... 42

GANTT CHART 2: IMPLEMENTATION PLAN ........................................................................................................... 79

List of Abbreviations

EPC - Engineering, Procurement and Construction

DSM - Design Structure Matrix

LSTK - Lump Sum Turn Key projects

RFI - Request for Information

RFQ - Request for Quotation

PO - Purchase Order

WBS - Work Breakdown Structure

TQM -Total Quality Management

P&ID - Process & Instrumentation Drawings

IFA - Issued For Approval

IFC - Issued For Construction

AFDE - Approved For Detailed Engineering

Page 8: MBA Project Report M00328327 (1)

8

Abstract

Lean principles originated from Toyota production system have made revolutions in

many sectors, especially in manufacturing sectors with the achievement of high productivity.

This report sets the stage to extend this philosophy into EPC industry, which is a conservative

industry and use of those principle has not been widely accepted yet in the region. Typically

EPC projects spans for 3 -4 years and involves coordination of various engineering functions.

This industry involves tremendous flow of information due to the high overlapping of tasks

called concurrent engineering. Several factors from the external environment have been

scanned to understand the increase in pressure with the EPC contractors to adopt concurrent

engineering setup. The current formal functional organization structures that exist in this

industry is not able to cope with the industry trends and lead to many productivity issues,

which in turn end ups with project overruns in terms of both schedule and budget.

Dodsal Engineering and Construction Ltd, the flagship business of the Dodsal group is

the sponsor of this internship. They are in the business of executing large scale engineering and

construction projects for more than five decades. They are one of the major EPC contractors in

United Arab Emirates. They have been facing significant productivity issues as discussed above

in the recent years. The rationale behind this internship is to identify ways for applying Lean

Principles to address their productivity issues and recommend an environment where

continuous improvement is the fundamental nature.

Considering the crucial factor of information flow in the industry and based on the Lean

literature, value stream based organization was proposed based on the Lean concepts ‘Value

streams’ and Design Structure Matrix (DSM). The exercise of organizing a project along value

streams was done and the DSM identified the causes for rework, which is the most important

reason for project overruns.

Page 9: MBA Project Report M00328327 (1)

9

The DSM tool was used to identify the positive and negative iterations in the process.

Recommendations were made to reduce the negative iterations. Further, this report

demonstrates the need for this approach and explains how it is complementary to their growth

strategy. Currently there are several internal initiatives within Dodsal to adopt this proposal.

Page 10: MBA Project Report M00328327 (1)

10

Unit -1

1. Scheme of Research

1.1 Introduction

EPC project refers to engineering, Procurement and Construction projects. EPC

contractors are those who carry out such large scale engineering and construction projects on

behalf of clients. The client here generally refers to oil & gas companies. At a conceptual level

the most important challenge in managing an EPC project is to coordinate among the

engineering, procurement, construction groups and ensure proper & timely flow of

information/material. EPC industry over the decades had well defined systems to facilitate this.

However in recent times, there have been significant changes in the industry which disrupt the

flow. The major reasons are as follows. The first one being the dramatic increase in client power

and other one is the execution of project, which is globally distributed. This in turn has

shortened the project schedules. Meanwhile, the scope of activities has been drastically

increased in terms of safety regulations and information system that is handover to clients. As a

result, the activities in the project cycle were highly overlapped and inability to manage these

overlaps served as the basis for decline in Productivity. This methodology of parallelizing the

tasks or activities is called concurrent engineering (Backhouse, CJ and Brookes, 1996). Thus

concurrent engineering has led to problems in ensuring timely and orderly flow of information

between engineering, procurement, vendors and construction teams. This project involves in

identifying ways to address these problems and to improve operational effectiveness from a

lean perspective.

Today, traditional ways of performing and managing construction processes face

unprecedented challenges. The growing competition forces construction organizations to

rethink their construction processes for improving productivity, quality, and efficiency (Karna

and Junnonen, 2005). Especially the tremendous project complexities and uncertainties

contribute to this issue.

Dodsal Group, the sponsor company for the internship behind this project, is in the

business of executing such large-scale projects. Their EPC projects typically run for few years

Page 11: MBA Project Report M00328327 (1)

11

and involve coordination of efforts by hundreds of engineering staff. There are inherently many

productivity and information flow issues in such projects. Dodsal has been facing significant

operational efficiency difficulties, leading to cost and schedule overruns in recent years. The

main issue was identified as rework due to the fact that the existing project management

structure in Dodsal do not deal with concurrent engineering nature of the projects.

These issues being the hot topic in this industry, the Internship report is on formulating

Lean solutions for Dodsal engineering and construction, and providing them with

recommendations to make their operations more efficient.

EPC projects typically span over 2-3 years and new projects takes years to materialize.

Given the time frame of the internship, it was not able to fully observe a lifecycle

implementation of these concepts. However the report covers the phases of concept

generation, value stream definition and discusses the challenges in preparing a conservative

industry like EPC for lean implementation.

1.2 Overview of EPC industry in UAE

The prosperity of the United Arab Emirates and its rapid transformation from a

backward desert region to one with a booming economy has been made possible by revenue

from oil exports. The UAE possesses nearly 10 per cent of the world’s total reserves, and there

is no doubt that oil will continue to provide the income for both economic growth and the

expansion of social services for several more decades (Madhu Pillai et al., 2010). The Middle

East especially UAE is one of the main business hubs for EPC contractors in the world. It

possesses a number of upstream oil & gas companies in operations and grows at steady rate.

There are vast numbers of EPC contractors operating in this region. They range from

multinational companies to small sub-contractors supporting the major players. The region has

played host to some of the biggest tenders, most ambitious projects and the best prospects

anywhere in the oil & gas world. The competition is so intense here.

With the EPC industry going through a major expansion in the region, Dodsal has got

numerous projects in its pipeline for the next 7 years across the Middle East region. Taking

advantage of the industry upswing, Dodsal’s current main concern is to improve its operational

Page 12: MBA Project Report M00328327 (1)

12

performance so as to rebuild a healthy EPC business and to increase its global positioning

among the top EPC contractors.

1.3 About the firm ‘Dodsal’

Engineering and Construction is the flagship business of the Dodsal Group. As part of

Dodsal's EPC business, it undertakes Engineering, Procurement and Construction projects as

well as large scale complex Construction only projects in the Energy, Industrial and

Infrastructure sectors.

Dodsal has been successfully executing projects across the Energy, Industrial and

Infrastructure sectors in the Middle East, Asia, Africa and Europe for over five decades since

1960. The company with it two arms as an EPC and a Construction contractor has executed

wide range of projects (see figure 1) for leading international and regional Oil & Gas companies,

other reputed government organizations.

Figure 1 : Engineering & Construction Projects

Dodsal Engineering and Construction Limited have a combined team of experienced

professionals and skilled workforce who are well adept with the local laws, regulations,

procedures and client requirements in the region. Most of the project personnel have rich prior

experience of working with regional and international Energy companies and are readily

available as a part of the in-house task force for deployment.

Page 13: MBA Project Report M00328327 (1)

13

Dodsal is always committed to the integration of leading environmental practices and

sustainability principles into its core business strategy. Dodsal's Quality Management System is

certified to ISO 9001:2008 and the group's Occupational Health; Safety and Environmental

management systems are certified to OHSAS 18001:2007 and ISO 14001:2004 respectively.

The Dodsal Group routinely monitors and improves upon environmental practices, including:

Water and energy conservation

Waste mitigation, segregation, recycling and disposal

Heritage and habitat protection

These are the evidences that stand out for their interest on cleaner operations. In a whole,

Dodsal’s strategy can be defined in one line as "Optimize the whole: for the project and the

planet”.

1.4 Objective of the Project

This report set out the stage for adoption of Lean in EPC projects and provide

substantiation, that moving towards lean is sustainable for both the organization and the

environment it operates. After careful considerations and discussions with Dodsal, the project

was narrowed down to identify an approach for implanting lean tools and techniques that will

identify areas of improvement and mitigate issues discussed in the Unit-2, Section 2.2.

The Main objectives of this Internship project are:

To Study and analyze the productivity issues of Dodsal and identify areas where

improvements can be made specifically in align with Lean principles

Identifying from the literature the tools and techniques that can be adopted to have an

effective ‘Lean operations’ in EPC projects

To set an stage for creating an environment conducive for applying lean principles and

improving their operational effectiveness

To suggest Extensive recommendations on the research in the selected areas with the help

of the literature and case studies.

Page 14: MBA Project Report M00328327 (1)

14

1.5 Structure

This Report aims at explaining the need for the adoption of Lean principles in their

Operations and explains how it can improve their operational effectiveness with reference to

the Lean Literature. It also discusses the requirement that has to be incorporated with their

existing organization structure. Finally the recommendations are made to give an edge for the

organization to have a sustainable growth and greater chance of succeeding in a very

competitive environment. The remaining part of this report is organized as follows:

Unit-2 Literature review, describes things that are necessary to follow the rest of discussion. It

comprises of three parts as follows

-Understanding Dodsal’s Operations, details the basic background information about Dodsal’s

current operational practices in executing EPC projects. It discusses about the key phases in EPC

project, project management team and their structure.

-Trends and Productivity issues, discusses the significant problems caused by general industry

trends that has led to decline in productivity. It also describes key issues at Dodsal that formed

the basis of this internship study.

-Literature study on improving productivity in projects, briefly discusses about the past studies

that exist along the concurrent engineering contexts. It discusses the value stream as the first

step in implementing lean and the use of Design structure matrix to analyze value streams. It

also highlights issues that are involved in applying these concepts to EPC projects.

Unit-3 Research Methodology, discusses about the research method employed in the study.

Initially, the Unit discusses the purpose of the project. It also discusses the project approach

and the design. Various methods involved in data collection as On-field Analysis, Interview and

Desktop analysis are explained. The limitations of this project are explained in the end.

Unit-4 Data analysis and Discussions, describes a systematic approach to organize an EPC

project along Value streams. It demonstrates the way in which value streams were identified

and analyzed by Design structure matrix (DSM). The root causes for the issues recognized in

Page 15: MBA Project Report M00328327 (1)

15

DSM analysis, are identified by causal root map analysis tool. Then extensive process

improvement methods are suggested to mitigate the identified issues.

Unit-5 Recommendations, proposes a new organization structure along value streams which

will resolve many of their existing productivity problems. It also discusses the impact of new

organization structure and the rationale behind this proposal. Finally it describes the internal

initiatives taken by Dodsal to adopt this change. The leadership strategies that were followed to

buy-in their decision towards value stream are also explained.

Unit-6 Conclusion summarizes the discussion throughout this report.

1.6 Summary

This unit has presented a brief outline of the project. It has reviewed the UAE EPC

industry and the market for EPC contractors, the rationale and scope of the study. This Unit has

also explained the objectives of the project and has outlined the structure of the remaining

units. The next unit discusses about how EPC projects are executed within Dodsal, followed by

common management issues facing them and the review of existing literature explaining the

need for Lean operations

Page 16: MBA Project Report M00328327 (1)

16

Unit -2

2. Literature review

2.1 Understanding Dodsal’s Operations

As said earlier the term EPC industry refers general contractors who undertake large

construction and engineering projects on behalf of their clients. It is a broad industry and

consists of a wide range of facilities from large scale infrastructure projects like power stations,

metro rail systems to construction projects like roads, tunnels etc., Dodsal is into a separate

sub-sector, Oil & Gas EPC industry that focuses on industrial projects like offshore platforms,

chemical plants, petroleum refineries etc., According to Pillai et al (2010), “EPC in industrial

sector is a highly technology intensive business and is typically dominated by specialized

engineering firms that have over time, built the necessary technology and design expertise”.

Dodsal specializes and concentrates more on construction of downstream petrochemical

plants. Petrochemical plants are largely classified into upstream, midstream and downstream

projects as shown in following figure 2.

Pillai (2010) describes, facilities which are involved in exploration and production of oil

& natural gas are called upstream facilities. The midstream facilities usually deal with

processing, storage and transportation of oil and natural gas. Downstream activities include

facilities like petrochemical plants used for producing various end products from oil & natural

gas. In this internship, the scope is restricted to downstream projects. The project used here in

this report for data analysis is Ruwais sulphur plant, Abudhabi. Dodsal executed this project in

3.5 years, but supposed to be finished in 2.5 years originally.

Page 17: MBA Project Report M00328327 (1)

17

Figure 2 : Classification of EPC Petrochemical Projects

2.1.1 Business Models Used by Dodsal for delivering EPC Projects

The most predominant business models used for delivering those large scale

engineering and construction projects are lump-sum turnkey projects and reimbursable service

contracts. They are explained in the figure 3.

For the rest of our discussion, we concentrate only on lump-sum turnkey (LSTK) projects

as this is the most common model used by Dodsal.

Page 18: MBA Project Report M00328327 (1)

18

Figure 3 : Business Models in EPC Business

2.1.2 Brief outline of Downstream EPC projects

A Typical LSTK downstream project spans around 2-3 years and involves a multi- million

dollar effort. According to Bertelsen & Nielsen (1997), construction of such industrialized

facilities involves a specialized supply chain where EPC contractor acts as the channel co-

coordinator. The typical players involved in the value chain are shown in Figure 4.

It includes a swarm of players from process technology firms, equipment manufacturers to

construction sub-contractors. There are four key stages involved in the execution of EPC

project. We briefly discuss these four stages in the Table 1 below.

Page 19: MBA Project Report M00328327 (1)

19

Figure 4 : EPC Value Chain

The general flow of information between the various phases in an EPC project is as

follows (informational flow: figure 5).

Figure 5 : Basic Blocks for information flow

This is only a general direction. In reality these functions are highly dependent and

overlapped. The information flows ‘To and fro’ between these functions and are explained in

the following Units. A typical downstream project schedule at Dodsal is shown in Figure 6. It

displays the extent of overlap between different function in the form of Gantt chart.

Page 20: MBA Project Report M00328327 (1)

20

Table 1: Four Stages in execution of EPC Projects

Figure 7

Page 21: MBA Project Report M00328327 (1)

21

Figure 6: Typical Project Schedule (p21-p23)

Figure 6

: Typical Project Schedule

Page 22: MBA Project Report M00328327 (1)

22

Page 23: MBA Project Report M00328327 (1)

23

Page 24: MBA Project Report M00328327 (1)

24

This schedule was created by the planning engineers using the project management

software tool called primavera. It is the most leading tool in its kind in the industry. It is used to

develop project plans and schedules, network plans for each function, create work break down

structures, and helps in tracking the project progress both in terms of schedule and budget. It

also creates reports used to indicate the deviation of the project progress to the management.

The left Pane describes the various milestone activities across each function. The right

pane shows the time frame for each milestone and also explains the overlap between these

milestones. This is a base line schedule created at the initial stage used for tendering. Then this

is developed further with all the necessary network plans for each activity. This is shown in the

Appendix-4. This overlap occurs mainly in two ways. The first kind is the overlap of activities

within a same function and other way is the overlap between activities between different

functional disciplines. This overlap creates many issues.

2.1.3 Typical Construction sequence in EPC projects

The outcome of the first three phases provides the necessary work front for

construction. The construction involves the majority of time in an EPC project. The construction

in itself has a typical sequence which is shown below (See Figure 7). It is very important to have

a general understanding of the execution sequence in construction, as these are assumed as

the internal end customers and form the basis for identifying value streams as discussed in the

section 4.2.

Page 25: MBA Project Report M00328327 (1)

25

Figure 7 : Construction Execution Sequence

2.1.4 Project Organization structure

The formal functional organization structure that executes engineering and construction

projects is shown in figure 8. This is the most commonly used structure in the industry. In this

section we will discuss about the key roles involved in execution of those projects. Later in unit-

5, let us see how this structure is reorganized to form a value stream based organization

structure.

The project director/ manger (PM) is the top authority who executes the entire cycle of

EPC projects and wholly responsible for the profit from the project. There are number of other

managers from different functions giving support to the project manager. (See Figure 8)

Page 26: MBA Project Report M00328327 (1)

26

Figure 8 : Project Organization Structure

The engineering division consists of several engineering functional disciplines. Each of

these functional disciplines is a team, directed by a senior lead engineer. Project engineers are

those who coordinate between those functional teams and regularly assist the project manager

in resolving the issues that pops up in a project. According to Ballard & Howell (2003), “project

engineers are seasoned engineering leads and report either directly to the project manager or

to engineering managers”.

Procurement manager handles a team, who are specialized in handling all supply chain

related activities like vendor identification, purchasing, coordination with vendors and material

handling etc.

The construction manager is solely responsible for the on-site construction progress and

reports directly to the project manager. It involves managing various skills (from labors to

engineers), which is very different from engineering and procurement phases. In Dodsal, most

of the construction work is outsourced to sub-contractors.

Page 27: MBA Project Report M00328327 (1)

27

The Projects managers are the most powerful in a project, but when it comes to reality

they will have to cooperate with a matrix of other organization managers in order to ensure

smooth project execution. In addition to these functional departments, Project control and

planning group plays a significant role in executing the projects smoothly. They are responsible

to track the project progress in terms of schedule and the budget, and report to the

management if there are any deviations. Then accordingly measures are taken to put the

project back in track. They develop the project plans, schedules and prepare the work break

down structures for each engineering functions. Later in section 4.2, planning and creation of

WBS along value streams is discussed in detail. There are also few other departments involved

in the front-end project bidding and project grant phase. Those groups are estimation,

budgeting and contracts management. Other supporting functions include material

management, Project IT, Quality group/ TQM.

In Dodsal, there is a practice of creating task force in order to accelerate the works in

larger projects. It is a cross functional team that comprises of engineers from different

functions. It is formed on the basis of the task that has to be accelerated. During this phase,

members are literally brought out of their functional discipline and located separately. This

team mainly focuses on the project progress rather than working for their corresponding

functional departments. This is the most preferred method for project managers in critical

situations and is hated by the functional heads as it disturbs their regular working.

2.2 Industry Trends and Productivity issues

This section gives a brief overview of common management issues and their root causes

from the industry. This will facilitate the process of finding lean literatures on productivity tools.

At the end of this section, the most common productivity issues faced by Dodsal was drawn out

and hence the problem definition for the report was defined.

2.2.1 Key Industry Trends

For the last few decades, there has been no change in the organization and structure of

EPC projects. But there is a drastic change and trends in the external environment factors that

have made the current organization structure unable to cope with them. This has led to many

Page 28: MBA Project Report M00328327 (1)

28

common management and productivity issues. The key trends that led to such issues are

discussed in detail as follows:

Increase in Client Power: As the prospects of industry grew, there was a huge increase

in low cost contractors. This has led the clients to choose from many, based on their

expediency. This in turn has affected the EPC contractors, by increase in client pressure to

reduce the project cycle time and compress on their profit margins; in spite of increase in

project complexity. According to Repenning and Sterman (2001), the major factor behind this

trend is the lack of significant process or technology innovation in the industry over the last few

decades. Thus this imbalance between the client and the contractors has led to less motivation

for the contractors to invest in productivity improvements.

Increase in Global Execution: The distributed pattern of petrochemical investment has

led to execution of projects globally across the world. Also, the increase in pressure of reducing

cost has moved the contractors for outsourcing in low cost countries. Result is the

fragmentation of projects, where most of the engineering and procurement activities are

spread out to reduce the cost (Backhouse and Brookes, 1996). This has led to various complex

coordination issues adding up to their regular work.

Increase in project complexity: The intensification of petrochemical plants in both

scope (Client handover requirements and Safety) and scale have led to new challenges in

coordination (Ballard, 2008), which the current structures might not deal effectively.

Increasing IT complexity: Information flow is critical in such complex projects. The range

of IT tools from auto-simulators to 3D designs has fundamentally changed the work process in

this business by declining project performance rather than increasing their efficiency. The

reasons claimed for this are:

- Reduction in computational cost of change has an impact on 'behavioral change' where both

engineers and clients can make frequent design modifications.

- IT has changed the meaning of 'Project deliverable', while project procedures remain the same

(George Reichard et al; 2007). For instance, the process departments delivers P&ID as physical

Page 29: MBA Project Report M00328327 (1)

29

document, for which input information are obtained from multiple engineering groups. IT has

changed this into mere report with no critical value added. Progress monitoring and control

have also become complicated due to this IT impact.

- The software tools for these IT applications undergo a frequent change, which means that a

project with 2-3 years duration has to adjust to this IT changes every 1-2 projects. These tools

have still not yet grown to deliver full productivity promises (Ballard, 2008).

2.2.2 Common Management issues in EPC Projects

Concurrent engineering: As discussed in the previous section, the increase in pressure

to reduce the cost, project cycle time in spite of increase in scale and scope of the project has

led the EPC contractors to parallelize the tasks heavily. To compress the project cycle time, the

activities are overlapped in spite of being sequential (Ballard, 2001). This setup is called

concurrent engineering. It has resulted in complex coordination issues and serious impacts on

information flow as discussed in Section 4.3 DSM Analysis.

Insufficient Traditional coordination mechanisms: Given rise to serious coordination

issues as discussed above, the traditional way of doing it is no longer sufficient (Ballard &

Howell, 2003). Earlier the execution was mostly sequential and it worked well with the teams

that located closely. However this cannot help in the current situation, where concurrent

engineering, globally distributed sites and outsourcing has become very common. This again

adds up to serious coordination issues, that only pops up in the last minute and give rise to

costly rework cycles.

Wrong incentives encouraged in the industry: As said earlier in Table 1, around 80% of

the project cost is represented by procurement and construction and while engineering

represents only 20%. But the engineering cost has direct influence over the procurement and

construction cost. The importance of this is not preached in reality during project contract

negotiations. During this process, both the contractor and client are ready to compensate for

the engineering cost incurred. This way of emphasizing on controlling the project cost at

expense of engineering costs, place the project at risk. It also put the engineering leads in

Page 30: MBA Project Report M00328327 (1)

30

pressure to minimize the cost incurred and will lead to issue like sub-optimizations that will

have serious impacts on the construction phase.

Unworkable budgets: Due to decline in pricing power as a result of poor performance

and industry changes, most of the EPC contractors tend to start a project with schedule and

cost budgets that are not attainable (Patty& Denton, 2010). This sort of environment causes

serious behavioral patterns into the teams; make them lethargic about the targets as they know

that it is not possible to achieve the targets. The managers knowing this can even set tighter

targets to the team and thus create a negative spiral.

Functional focus amplifies problems created by man-hour focus: The problem of

excessive focus on man hours is further amplified by with functional focus. Since this business is

characterized by low profit margin and evaluated based on the manpower utilization

(Costa,2009), the functional departmental heads are in a continuous pressure to make their

staffs fully engaged and get the job done in the minimum period. This in turn doesn’t provide

enough time for the different functional engineers in the review cycles, which can lead to

finding of an issue at later stage. This can lead to rework and can have serious impacts in the

downstream activities. Thus this hides the problem and creates a wrong sense of progress.

Figure 9 : Issues Leading to Project Overruns

Page 31: MBA Project Report M00328327 (1)

31

2.2.3 Consultancy Problem definition

Many of the issues discussed above have been encountered with Dodsal and develops

into two major problems: Project Overruns in terms of schedule and budget, ending up in

depletion of profit margins (Refer figure 9 above). The scope of this internship program was to

find ways to improve their operational efficiency and avoid overruns in the project using lean

principles. This report finds ways to address those issues by using the following approach as

shown (Refer figure 10).

Figure 10 : Consultancy problem definition

In the following Units, the relationships between these concepts and ways to adopt are

discussed.

1. Using lean and value streams to take system level approach to productivity improvement

2. Using DSM approach to analyze information flow in concurrent engineering setup

Page 32: MBA Project Report M00328327 (1)

32

2.3 Literature Study on improving productivity

In this section, concepts related to Lean productivity tools used in the environment of

concurrent engineering setups are discussed. Initially value streams are defined as the first step

in implementing the lean and then we explore the concept of DSM (Design structure Matrix),

which is powerful tool to analyze flow of information in an information centric environment.

Along this discussion, few past studies along this theme have been highlighted. Lastly, the ways

to adopt these concepts in EPC project is discussed.

2.3.1 Common issues in concurrent development projects

Many problems that are associated with EPC project management in a concurrent

engineering setup has been explored deeply. According to Backhouse and Brookes (1996), the

execution of concurrent engineering setup doesn’t succeed most of the time because of

misalignment with resources, metric, process, tools and also the focus of the organization in the

need of efficiency. He also adds that inappropriate organizational structures, policies and

decisions take place due to the mismatch between the technical organization, dynamic

complexity of the projects and also mental models used by the managers.

DSM is a powerful technique that can be used by the managers to look at those

complexities in new perspective and can help them manage the projects efficiently. Sterman

(2000) describes about how to overcome the behavioral patterns that is been developed from

the sequential working, by analyzing an EPC paper mill project using DSM. Ford and Sterman

(2003) discuss the short sighted management policies as the reason for project failure. The

project appears to be on schedule until 90% progress and freezes. It is then completed after

consuming about the two times the duration of planned schedule.

Repenning et al (2001) explains about the models that help understand how fire

fighting, recognition of unplanned allocation of resources are discovered last in the project

cycle and these are very familiar in concurrent development projects. They explain about how

the manager’s attempt to push the resources to do a bit more in a short time, forms the basis

for their decrease in concentration to the upfront task and finally ending up with issues in

downstream activities.

Page 33: MBA Project Report M00328327 (1)

33

Though the literature gives enough insights that can identify and resolve the problems

that occur in the engineering and construction projects, it is not easy for the organization to

utilize these recommendations to put them in action. Repenning and Sterman (2001) calls this

space between the accessibility to proven solutions and the lack of ability to implement them

as "improvement paradox". They propose that this inability is not because of the specific

improvement tool, but because of the influence by the physical and psychological factors and

situations, in which the new development programs are introduced. The need for this stability

was very significant and the leadership strategy that was used to attain this stability in the

internship program is discussed in section 5.6.

2.3.2 Lean approach to productivity improvement

With reference to the interview and discussions made with the Dodsal (Appendix -1),

they stated Lean as the preferred methodology to improve their productivity and thus defined

the internship scope. So this context explains about the key concepts of lean and how this could

be applied within their EPC projects.

According to Womack and Jones (2003),” Lean Principles concentrates on five core

principles” as shown below (figure 11).It was derived from the highly successful practices of

Toyota production system. Being motivated by its achievement in the manufacturing domain,

this concept is being extended into the EPC projects (Lean engineering) and an organization

providing the environment for Lean engineering is developed (Lean enterprise). This involves a

huge impact on the organization and the implementation can be achieved through a fundament

shift in management attitude.

Page 34: MBA Project Report M00328327 (1)

34

Figure 11 : Lean core principles

Lean requires system wide thinking and decentralized action. Hence renovating the

current traditional approach with lean is very difficult and demands for process preparations

called stability conditions.

Marchini (2004) explains the importance of expanding lean thinking into the

associations between the different firms involved in the entire construction value chain. Also

there are several initiatives to adopt lean philosophy in engineering & construction industry,

from industry key players. Lean Construction Institute (LCI) plays a significant role in defining

new lean tools and techniques for the industry. Most of them has been adopted and in practice

across the globe.

Page 35: MBA Project Report M00328327 (1)

35

2.3.3 Value streams - the opening pace for Lean

Lean lay emphasis on system wide thinking. Most of the Lean experts and practitioner’s

insist to look at a system as a whole, before getting down to optimize any individual process or

process group in it. It can be accomplished by the use of value stream mapping. It creates an

end to end process map of material and information flow in a system. Thus by creating a high

level conceptual view of a system, it promotes to identify areas where improvements can be

made to increase the efficiency. Without doing this, any improvement done in the sub process

doesn’t work efficiently to bring end value for customers. This can even lead to sub

optimization that affects the other part of the system (Howell and Ballard, 1998) as discussed in

the section 2.2.2.

As a result, most of the lean practitioner’s and experts use value streams as the opening

step in implementing lean. According to Rother and Shook, (1999), Value stream is defined as

the set of activity involved in producing a finished good from raw materials or bringing concepts

to reality. The value stream analysis involves elimination of non value added activities in the

system process flow and makes the system capable of reacting rapidly to the end customer. The

first step in conducting a value stream mapping is to create the current state of process map

that capture the flow of material and information in the system. It also captures other key

information that creates value and non value in the process. This information serves as the

basis for applying lean principles and enables creating a future state map with the proposed

process improvements. The most important thing in creating the future map is to classify the

activities into value added and non value added activities. The non value added activities can

give rise to waste and supporting activities. These concepts are very predominant in

manufacturing sector and several initiatives are being taken to extend these concepts into

other areas. Morgan (2004) and McManus (2002) argue about the implementation of value

streams in product development in automotive and aerospace industries. In large engineering

and construction projects, these value streams can’t be applied directly as explained in the

section 4.2.

Page 36: MBA Project Report M00328327 (1)

36

This report sets the stage for Dodsal, for a value stream based organization and

proposes an environment, favorable to such lean concepts and provides a way for continuous

improvement. The various initiatives taken by Dodsal in implementing the value stream

approach are being discussed in the section 5.7.

2.3.4 Analyzing information flow using Design Structure Matrix (DSM)

DSM- Design Structure Matrix is a compact and also powerful method for analyzing the

information flow and dependencies between the components in a system. DSM is otherwise

called as Dependency system matrix. It normally represents the components in a system as

rows and columns in an n-square matrix. Rows and columns represent information exchange

and dependency relationships between these elements and their corresponding intersection

shows the interaction between them. The off-diagonal cells in the matrix indicate system

interactions. It captures interaction between the system elements in such a way that, it brings

out feedback iterations in the system design. Petrakis and Pultar (2005) illustrate that, DSM also

involves mathematical analysis and many algorithmic tools which are used to improve the

system design. Eppinger (2001) provides an excellent overview of DSM. DSM representation is

also used to analyze various other factors such as project activities, process parameters, system

components or team organization. Many types of DSM can been seen based on the system

elements.

In this report, Time based DSM was used to analyze the information with respect to time.

Eppinger et al (1994) classify task relationships based on informational dependencies as

follows:

Parallel (no information flow),

Sequential (A feeds information to B),

Coupled (A and B mutually dependent on each other for information).

Page 37: MBA Project Report M00328327 (1)

37

Coupled tasks are the most common feature in a concurrent engineering setup and the

resultant feedback loops that occur between the coupled tasks are called as iterations.

Iterations can be planned or unplanned. Unplanned ones cause delay in the projects.

Traditional planning process ignores such feedback loops which leads to rework and hence

causes delay in the project. Ford and Sterman (2003) uses systems dynamics models in

concurrent engineering setup to identify that, delay in discovery of rework leads to unplanned

Iterations.

The most important value of DSM is to see a complex system as a whole and understand

it. Traditionally, managers were not able to figure out complex systems, but now using DSM,

they can capture a complex system in a single view. By DSM analysis of a single value stream,

the root cause for rework in Engineering & Construction projects has been identified for Dodsal

management (Refer Unit 4). Eppinger (2001) explains that DSM allows not only identifying the

issues but also helps mangers to fix them. McManus and Millard (2002) suggest, DSM is a useful

tool for mapping and analyzing value streams in product development and project

management where information flow is large compared to material.

Page 38: MBA Project Report M00328327 (1)

38

2.4 Summary

Thus this unit gives a brief outline on Dodsal’s current operational Practices, the internal

issues facing them, productivity problems as result of industry trends and the lean literature

showing the Lean tools and techniques that can be used in this industry. Unit-4 explains about

how the Lean tools and techniques discussed in the literature part can be applied in large scale

Engineering and Construction projects, which served as the basis for formulating the

recommendations for Dodsal.

Page 39: MBA Project Report M00328327 (1)

39

Unit -3

3. Research methodology

3.1 Introduction

This Unit deals with the overall research design adopted in this project to explore the

operations of Dodsal in order to identify new areas of improvement by Lean principles. The

objectives formulated in the Unit 1 have been recognized and discussed further. Also, the

literature discusses the choices of research methodology and how they are used to gather the

required information for the study.

3.2 Simon speller cracker Model

The Simon’s speller cracker model was used as the frame work to do this consultancy

piece of work. This frame work served as basis to define the role and responsibilities as a

consultant, scope of this internship and plan the process required for an effective action

learning approach to this piece of consultancy work. It consists of three phases as shown in the

Figure 12. They are as follows

Figure 12 : Simon speller cracker Model

Pre Consultancy

Market Suspect Prospect Sale

Client Review

Company Review

Team Review

Personal Review

Beginning Middle End

Review

Consultancy Project

“Speller Cracker Model” – Framework for Managing Consultancy

TIME

PID

Post Consultancy

Review

Reflection-in-Action

Reflection-on-Action

Page 40: MBA Project Report M00328327 (1)

40

Pre-Consultancy: It involved understanding the need of this internship from Dodsal. Two

different strategic matters that involved strategic decision were identified. These were

identified with the series of discussions and meeting with company personnel representing Top

management. This phase identified the necessity of Lean principles for Dodsal in order to avoid

the problem of project overruns and to increase their position in the list of top EPC contractors

globally.

Consultancy: Once the direction for the project is set, this phase involved the design,

development and implementation of the project by the use of a project plan. It defines the

roles, responsibilities, timescale and illustrates the actions required to complete the task. The

Project plan for this internship is shown in the Gantt chart 1.

Post –Consultancy: This phase is about the outcome or the key learning from this piece of work

undertaken. It is the time taken to reflect on this internship effort and establish key learning

points about your working practice, working relationships, knowledge management and

personal development. The reflective summary outlining the above is listed in the Unit -8.

Also, this internship gave an opportunity for me to work as a business consultant for

Dodsal, and I had worked with utmost honesty and integrity in my own actions as well as with

interactions with the employees in Dodsal, and the organization as a whole. This approach of

consultancy was conducted as per IPC code of conduct for consultants, attached in the

Appendix-3.

Page 41: MBA Project Report M00328327 (1)

41

Page 42: MBA Project Report M00328327 (1)

42

3.3 Project Approach and Design

Initiation of the contact with the client company was through the support from Mr.

Dinesh, The Senior Project Manager of Dodsal. The initial briefing by Dinesh and Santhosh

(Senior Project Engineer, Dodsal) led me to understand that the company is in full swing to

identify areas of improvement which would maximize efficiency of their operations, with

minimal impact on the environment. With the ideas obtained from the initial meeting, a

proposal was prepared based on the discussion and submitted to Mr.Dinesh and Mr. Santhosh,

who was the contact person in the company. The proposal presented, highlighted the objective;

approach and timeline of the project which at a later stage was acknowledged by the company.

The next stage after the proposal approval was to collect data and discuss with the

concerned employees. Data collection process involved collection of both primary and

secondary types. When the experimental data is been gathered by the researcher themselves,

then it is defined as primary data. In contrast, when the experimental data is gathered from an

already existing resource and utilized for study, then it is defined as secondary data (Eriksson

and Kovalainen, 2008).

In this project, data set has been collected directly from the field work and hence

primary data is the prime source of information for this study. Secondary data has also been

used at few occasions in the analysis Unit to support certain key discoveries from the field work

and strengthen the validity of arguments. With respect to the data, qualitative and quantitative

data are the two extensively used terminologies in management research where the former

constitutes all the numerical form of data and later comprises of non-numerical data. Both

types have its own traditional data collection and analysis techniques (Saunders, Lewis and

Thornhill, 2007). Thus this stage was focused on gathering all necessary data about Dodsal,

which would be informative to support the project. The primary and the secondary data

required were collected through three main methods.

On-Field Analysis

Interviews/Meetings

Desktop Analysis

Page 43: MBA Project Report M00328327 (1)

43

3.3.1 Field Analysis

The field analysis was started with the help of Santhosh, senior project engineer for

Dodsal. Initial visits were scheduled with meeting people in various departments of Dodsal to

learn and understand their operations. The First few visits were dedicated to have a clear idea

of what is happening. Discussions with each of the department heads gave a clear light on how

an EPC project is executed in Dodsal. Reviewing company documents also provided a base for

understanding how the company operates and is structured.

After this initial phase of understanding their entire value chain and operations, more

importance and time were spent in the Project Planning and control department. This

department plays a significant role in planning and tracking the EPC projects. They prepare the

base line schedule for projects used for tendering and once the project is being awarded the

detailed schedule is being developed from the base line schedule. Planning engineers working

in this department assisted in developing value streams, the corresponding WBS and network

plans for value streams as discussed in section 4.2.

On the field visit days with the mid- level employees gave a better knowledge regarding

the technical aspects and real time scenarios. A few visits were made accompanying the project

and site engineers to learn about the typical issues they face in a project. Necessary data’s were

collected with the help of them, which served as the basis for this project.

3.3.2 Interviews/Meetings

A traditional reason for opting for an interview as an effective data collection method is

to develop a sense of trust with the participants that would encourage them to provide

answers to the questions as transparent as possible (Saunders, Lewis and Thornhill, 2007). And

also, since the employees are the major contributors in the company operations and efficiency

score, it was critical to meet key people face to face to get their input. It was important to talk

with people starting from the upper management to front line employees to understand if the

information flow and the company strategy are uniformly spread. Hence the interviews were

scheduled with the required people as shown below:

Page 44: MBA Project Report M00328327 (1)

44

Interview with Taral kumar, Projects Director (Upper Management):

Interview and discussions with Dinesh, Senior Project Manager (Middle Management)

Meetings and discussions with Santhosh, Senior Project Engineer (Lower Management)

Meetings and discussions with Thilak, Lead Planning Engineer (Lower Management)

The Interview with Taral, the Projects Director was aimed at understanding the Company’s

Competitive strategy, contract management and their current position in the industry. In

addition, this interview provided information on Company’s goals, future plans, current

performance of the company and other aimed future Growth strategies. This was an important

interview as this decided to narrow my work on finding ways to improve their productivity

using lean principles, as this was in align with their interest. This narrowed down my research to

find ways to improve their productivity using Lean tools and techniques.

Discussions with Dinesh, Senior Project Manager were very helpful in knowing the entire

cycle of EPC projects. He helped in getting the insights of their entire value chain and to

understand the common management issues facing the industry.

And the interview with Santhosh was designed to know the issues faced in a day to day

basis at site and if there are any bottlenecks in their daily actions. This interview gave a clear

idea of how the changes or delay at engineering and procurement phases drastically affected

their work at site.

With the knowledge of how an EPC project is being executed, the discussions with Thilak,

Lead planning engineer helped to understand how the project is being planned, updated and

tracked for control. The time taken for each phases of the project was understood through him.

He played an important role in collecting data to identify value streams and to evaluate the

same as discussed in Unit 4.

This phase was the most insightful and informative to our data finding step, providing with

the ability to flexibly interact and probe on necessary points. Since a good number of people

were interviewed, it was able to highlight common themes and trends in the feedback, which

contributed to the formulation of recommendations.

Page 45: MBA Project Report M00328327 (1)

45

3.3.3 Desktop Analysis

The Desktop research helped in understanding and learning the current industry trends

and the productivity issues in EPC industry. The official web page of the Dodsal

(http://www.Dodsal.com/) is very user friendly and informative. Due to previous working

exposure in the industry, it was easy to understand the technicalities of the industry and how

the company is setup.

Desktop research was also utilized to gain an understanding of various tools and

methods used by the other big companies in their supply chain to improve performance.

Various research journals and case studies prepared by Lean construction institutes and other

major companies in the region were studied which was very helpful in designing the

recommendations.

3.4 Limitations

There were few limitations in terms of project. The typical EPC projects executed in

Dodsal was around 3-4 years. This was the major concern as the outcome of the

recommendations from this internship was not feasible to observe due to the limited internship

period of 4 months. Though it was a problem, initiatives were taken to implement the

recommendations in a low risk project as discussed in section 5.7.

3.5 Summary

This Unit discussed the various methods used for collecting the relevant data. The

research method and the methodology are dealt in detail. The data collected through the above

mentioned methods are analyzed in the next Unit.

Page 46: MBA Project Report M00328327 (1)

46

Unit - 4

4. Data Analysis

4.1 Introduction

In this Unit, we are going to look at how to organize an EPC project along value streams.

In unit-2, we have gone through the concepts of value streams and DSM and let us see how this

could be applied in a large scale engineering and construction projects. This part of the report

was really significant as this convinced to buy-in the management decision towards Lean and

was the important step in facilitating the mental shift. The following were the steps identified

to organize a project along value streams (refer figure 13).

Figure 13 : Steps to organize project along value streams

4.2 Identifying Value streams

The key difficulty in identifying the value streams was to define the start and end points.

Unlike Product development or manufacturing where value streams can be defined by using

the existing process boundaries or by using physical area of a plant, the same methodology

can’t be used to define the value streams in EPC projects, as it involves characteristics of both

design and manufacturing domain. The Engineering, Procurement and Construction feature of a

project can be considered as combination of design, supply chain and manufacturing

environment. For instance, consider the generation of engineering drawings, which starts from

basic design, then gets into production of final drawings and finally been sent for fabrication.

Thus it was too complex to decompose the project. The following figure shows the different

Page 47: MBA Project Report M00328327 (1)

47

concepts used across the globe to split an Engineering and construction project. Here we will

look at the limitations and difficulties, when we try to adopt the boundaries shown in the

figure-14.

Figure 14 : Different Boundaries for EPC projects

EPC functional boundaries:

Initially it was thought to use these broad functional boundaries as value streams, as it

had a good boundary definition. But once looking after those set of activities under these

groups, it was realized that those set of activities were highly interrelated and can’t be isolated

to define them as value streams. As we could see in Unit-2, most of the inputs for onsite

construction come from engineering and procurement functions. Also, many of the engineering

details can be finalized only with vendor information, this in turn can to lead to procurement

delays and thus these functional groups are highly interrelated, dependent on each other and

can’t be used as Value streams.

Functional Sub-divisions:

This is the most common way an EPC project can be viewed. As we saw in the Unit-2,

there is lot of information exchange between these functional Departments. The project

deliverables are measured & tracked on the basis of these departments. But none of these

Page 48: MBA Project Report M00328327 (1)

48

departments can provide a substantial end result for onsite construction by themselves. Thus it

is not suitable to define the value streams based on the functional sub divisions, as it is highly

interdisciplinary. Moreover the concept of creating value stream is to eliminate this mental

boundary and create a new cross functional frame work for executing projects enabling

superior productivity and avoid project overruns.

Project Phase Gates:

Like most of the EPC contractors, Dodsal also defines and uses project phase gates like

IFA, IFC etc to split projects into different phases. The problem here to define the value streams

based on these phase gates is that the scope of these phase gates was too broad.

Figure 15 : Planning levels in EPC projects

Detailed Project plans and Schedules:

The Detailed project schedules prepared using Primavera, was used to define the value

streams. The updated Gantt chart, with the list of activities was used to do this. It was the

obvious choice to interpret the sequence and interrelation between the tasks and hence form

Page 49: MBA Project Report M00328327 (1)

49

the value streams. The project schedule used for this purpose was a level -4 schedule. This

industry uses level 1-5 to define the details of their planning which is illustrated in detail on the

above figure 15.

The main reason that stood behind choosing the project schedules from primavera to

identify value stream was that, it was possible to derive a CPM/PERT network out of all

activities in the project, which illustrated the critical deliverables in the project and hence

formed the basis for forming the value streams.

The Updated schedule used for this purpose is shown in the Appendix-4. It is partially

shown for few functions for the purpose of understanding it. This was the most time consuming

process in the internship and the support of the planning department helped in getting this job

done. As a result of this exercise nine value streams were identified as shown in the following

Table 2. One of the main objectives behind creating the value stream is to create a master

template for each value stream upon which project plans could be derived.

Now Let us see the methodology used to define value streams and the procedure that

was used to evaluate them. To follow the discussion further, there should be a general

understanding of the construction sequence. This was discussed in the Unit 2. Here the

methodology refers to some of the key points that were considered the most important in

defining the cross functional value streams.

Construction was identified as the internal customer and all value streams were

identified by considering the construction work front as their end customer. Construction work

front refers to the materials and information that needed to enable on-site construction.

Page 50: MBA Project Report M00328327 (1)

50

The following characteristics were used to define them:

Figure 16 : characteristics of value Streams

The value streams identified, closely resembled the construction execution sequence.

After the exercise of grouping the activities under each value stream, there were activities that

were duplicated in more than one value stream and were unavoidable. In the case where an

activity was duplicated, it was further decomposed and added with the corresponding value

streams. There are also cases where the possibility of decomposing was less. In that situation it

was added to one of the value stream and added as a constraint to other value streams. For

Instance, this could be seen in the value stream ‘procurement’ as it depends on other value

stream for the final information about the materials and equipments to be purchased.

Page 51: MBA Project Report M00328327 (1)

51

Table 2: Value Streams Identified

4

Page 52: MBA Project Report M00328327 (1)

52

The next process was to create a WBS for these values streams. According to Allen and

Hamiltion (2001), “A work breakdown structure (WBS) in project management, is a deliverable

oriented decomposition of a project into smaller components. It defines and groups a project's

discrete work elements in a way that helps organize and define the total work scope of the

project”. The WBS for each value stream can be seen in the Appendix-2. This activity helped us

to draw out a master template for each value streams and that would serve as the base for

creating Project Plans out of it. Each of these WBS defines a network plan for the corresponding

value stream. This exercise helped in convincing mangers, that it covers the entire aspects and

scope of a project.

4.3 DSM analysis

Thus once identifying the value streams, it was approved with the Planning department.

The next phase is to do a value stream analysis using Design structure matrix (DSM) as

discussed in the literature review. Due to the internship time limit, the value stream analysis

was restricted to a single value stream. The value stream chosen was based on the critical

activities of a project, and the area where the frequency of rework is high within a project. The

‘Above ground Piping/conveyor’ value stream was selected for the analysis along with the

approval of planning department. The resultant finding of this analysis was the most significant

factor in shifting the mental gap of the management towards organizing Engineering &

Construction project along value streams.

As discussed in the value stream Table-2, the ‘Above ground piping/conveyor systems’

refer to those set of activities that provides construction with sufficient work front for installing

the rack and process piping systems above ground. This activity is marked as a significant

milestone in executing petrochemical construction projects and most prone to rework. With

this value stream almost all the piping in line with plant design is laid and allows procurement

to finish up with their bulk buy.

The major reason to choose DSM as the mapping tool is that it is a proven tool for

tracing the flow of information (Millard, 2001). It works well in an environment where

information flow is crucial (Yassine, 2003). This industry involves mostly coordination of

Page 53: MBA Project Report M00328327 (1)

53

information flow, which is very important in executing such large scale Engineering &

Construction projects. The major pattern of such flow of information includes

- To and fro information interchange between functional departments to produce detailed

engineering drawings

- Informational flow between various engineering functions, vendors and buyers from

procurement department to purchase materials and equipment

- Material/Information flow to provide work front at construction sites in proper sequence

Doing a value stream analysis with Design structure Matrix involves few preparatory

steps before being analyzed. They are as follows and shown in the following figure 17.

Figure 17 : Steps in preparing value streams for DSM Analysis

With the value streams identified using the updated schedule from primavera, it was

easy to form the network plan for DSM analysis. This sets out to be the master template for

creating DSM blocks. This may vary and would change as the scope of project changes. But the

sequence of the blocks is based on actual time frame it happens in the real project but differs

from the current planning method. Figure 18 explains how the DSM blocks for the ‘above

ground piping’ was drawn out for the analysis and Figure 19 show the interactions between the

DSM blocks plotted in a matrix. Each DSM block represents a group of activities as in the

network plan and each interaction in DSM is the consolidation of information flow between the

component activities. It is very important to identify the exact flow of information between the

DSM components and mark the interactions for a better analysis.

Page 54: MBA Project Report M00328327 (1)

54

As expected, most of the interactions between the DSM blocks were below the diagonal

of the matrix. But some interactions were found plotted above the diagonal of the matrix.

Those are called as the feedback loops. These feedback loops provided the basis for a detailed

analysis.

There was few common iteration patterns found in the matrix and was marked with

different color codes as shown in figure 19. There were 2 main types of unplanned iterations

and a planned iteration. The next portion will discuss about those patterns, problems identified

through this analysis and some possible solutions are suggested.

Page 55: MBA Project Report M00328327 (1)

55

Figure 18 : Steps in creating DSM blocks

Page 56: MBA Project Report M00328327 (1)

56

Figure 19 : DSM Matrix

Page 57: MBA Project Report M00328327 (1)

57

4.3.1 Planned iterations

The method of producing the Process & Instrumentation drawings, corresponding

datasheets are highly iterative as shown in matrix (refer figure 19). This was very clear as it

involves lot of information exchange between the project team and the design engineers, to

generate the final plot plan.

It involves derivation of the process flow diagrams from the scope of the project and

generation of the corresponding Process & Instrumentation drawings. This is then made out to

be a preliminary plot plan and the necessary equipment design activities are started in parallel.

Design of equipments might propose a change in the plot plan for reasons like space, erection

feasibility etc., which can lead to an alternate process flow diagram forming a feedback

iteration loop. Thus in this stage the process is kept open for change that are unavoidable.

Those iterations are harmless as it denotes the early stage of design and iterations are also fast

between the engineers working at the same location.

4.3.2 Unplanned iterations

Vendor information not on time:

As we can see in the matrix (figure 19), there are some unplanned iterations between

the vendors and process of generating the final Process flow drawings. This is basically due to

following reasons:

In few cases, there is a delay in finalizing the vendor list which can lead to late arrival of

required engineering information for the process design. Also even in some situations,

Page 58: MBA Project Report M00328327 (1)

58

procurement people can lead to schedule and information delays, from the vendors due to

their activities which intend to keep their cost down. There are also instances, where engineers

don’t respond to the vendor enquires in time or they might not follow up thoroughly with

vendors to get the necessary information. This lack of accountability leads to vendor

information coming in late after the documents have been issued for the next stage.

On the other hand the DSM analysis also unrevealed the fact that the changes caused by

the information delay from vendors was not really necessary to complete those design

drawings. Information like paint finish, commissioning procedures might only be available at

end of delivery from the vendor. This piece of information is not really required to produce the

process flow drawings. However when this information is released it has to be updated and

provided as a single document to the field. But in some cases when the engineers reopen the

document for revision of these changes, they tend to modify few things that lead to rework.

This clearly implies that there is need to differentiate the engineering revisions from

documentation updates and a proposal was made on the same.

Delayed Client feedback:

Most of the time, client review comments doesn’t come back in time and it was very

common in the industry. The client teams have a trend of putting off their reviews and raise

issues related to design before each project phase gates like AFD, IFA etc signs off. This is

mostly due to the reason that the client team doesn’t have the operational team taking over

the facility. So the client approves the design at the initial stage but keeps on making small

changes over the time.

For instance, the client might approve the design for an area of the facility and when

reviewing a subsequent area, might find some issue and make changes in design. In order to

make the design consistent all over the facility they tend to reopen the reviewed area and make

changes. However these issues are overcome by use of change orders and negotiated at Top

level management.

Page 59: MBA Project Report M00328327 (1)

59

The worst problem is that the internal engineers know that there is going to be design

changes from client and they tend to accumulate all these changes over time. This in turn

generates rework to all other areas where the changed design is going to have the influence.

4.4 Analyzing the results and creating Causal map

Based on the results from DSM analysis and issues discussed in Unit 2, most of them

seem to be highly interrelated. To bring this out, a powerful representation tool called causal

root map analysis was made. In this causal root map analysis, issues identified from DSM

analysis and issues discussed in Unit 2 were all brought together. It was all coupled to three

common tendencies that resulted in rework as shown below (See Figure 20).

Page 60: MBA Project Report M00328327 (1)

60

Figure 20 : Common behavioral Patterns leading to rework

The following section discusses about the root causes of these behaviors as shown in

the figure 21 and provides measures to avoid this.

Breakdown of schedule discipline:

With increase in overlap of tasks, the information handoffs between the different

groups are becoming highly uncertain leading to an increase in the frequency of rework on the

released documents. The impact of such frequent changes creates a behavioral pattern that

tends internal engineers to become careless in information they handover, as they know it will

change later anyway. And whenever an engineer reopens a document they tend to make few

other modifications when they really work on it. For instance making a change in one area may

come up with a calculation flaw and that can lead to changes in other areas due to the

consistency of design. Such addition of desired but not mandatory changes leads to schedule

and cost overruns.

The other underlying reason behind this issue is that information transfer happens in

multiple stages and the documents are released with multiple release states.

Page 61: MBA Project Report M00328327 (1)

61

Figure 21: Causal root map Analysis

Page 62: MBA Project Report M00328327 (1)

62

Such use of information on a probabilistic basis generates rework. The possible way of

avoiding this could be done by splitting the deliverables based on the content of information

and release can happen with a subset of data that is fully matured.

Lack of system view of internal workflow:

The extreme focus on the functional groups can lead to lack of system wide approach.

This affects system wide decision making process, by leading to decisions based on local

functional priorities that affect other functions adversely. For Instance, a Design engineer might

accept a change from the client which is going to be small work for him, but can have major

rework for the downstream activities.

This lack of system view also manifest schedule problems in the other way. In order to

show progress, a Lead mechanical design engineer might make his division to work on the

deliverables that can be finished easily and that can be of no use in the early stage. This can

lead to additional cost and effort.

Figure 21 : Causal root map Analysis

Page 63: MBA Project Report M00328327 (1)

63

Vendor finalization takes time:

Most of the procurement activities are done by public contracts. This is done to achieve

low cost purchases. It is a time consuming process and the vendors will not commit to prices

until all the design specification are ready. This in turn delays the vendor information coming in

late and can cause rework by changing the engineering documents that has been issued

already.

This could be avoided by allowing vendors to be involved in the initial design process.

This allows to exchange and share information/knowledge between the vendors and internal

engineers. This could avoid deviation in design and could reduce the overall cost. This is the

kind of change that is expected out of this transformation to Lean enterprise.

Misleading Metrics:

The metrics based on engineering man-hours doesn’t work well at all the situations.

These metrics are basically tied up with the external commercial reporting as clients often pay

according to the progress based on milestones. These metrics used to measure the internal

performance doesn’t handle the rework issue properly. For instance the monthly productivity

figures were calculated on incremental progress achieved and the effort spent on that month. If

rework occurs in a project, ideally the progress of the project should decline, but it is not done

so, as this reflects negative progress to the clients and their payments get affected. The effect

being the metrics measuring the productivity becomes inaccurate when there is rework. Such

wrong feedback can mislead the team and also makes them attached to the same way of

working. Thus it is very critical to realign these metrics to change these behavioral patterns.

Page 64: MBA Project Report M00328327 (1)

64

4.5 Summary

Thus the use of Value streams, DSM and causal map analysis brought together all the

internal problems that lead to rework at the expense of schedule and cost overrun in the

project. The DSM was the powerful tool to persuade the attention of top management towards

the existing issues that reinforced the rework cycle. It proposed a system wide approach to

mitigate them. It also identified specific process improvement methods like tracking the

progress based on the content of information rather than on probabilistic basis, separate

engineering changes from the documentation updates and use of progress metrics that are

devised to consider rework. However the report didn’t look at the improvement options fully,

but to devise a system for project control team to identify such areas for improvement and

work on it in continuous improvement basis.

Page 65: MBA Project Report M00328327 (1)

65

Unit -5

5. Recommendations

5.1 Introduction

In this internship, two different types of strategic matters: a series of organizational

problems as well as an organizational objective desired by the top management were dealt.

Based on the above discussions, recommendation was made in line with those strategic

matters as shown below in figure 22.

Figure 22 : Strategic Matters

It is quite evident from our findings that main challenge in such projects is the

management of information flow. The DSM analysis and other subjective evidence, repeatedly

strengthen the need for the full system view of operations. The following organizational

structure was proposed based on the literature and internal discussions. By adopting this

approach, there would be an extensive impact on the Dodsal’s project management structure.

The following section would outline the organization proposal based on the value stream, its

rationale and its impact on the organization as a whole and the preliminary steps needed to aid

the implementation.

Page 66: MBA Project Report M00328327 (1)

66

5.2 Value streams based Organization

The value stream approach required re-drawing the mental map of engineering and

construction projects; hence project organizations structure had to be re-oriented. Also,

Metrics and supporting process had to be realigned and changed respectively.

The fundamental approach is to break an Engineering & Construction project in to mini

projects and it should be along the lines of the value streams. The aim of this exercise is to

facilitate decentralized operational decision-making, foster cross-functional working, and create

a system flow and line up incentives to the needs of the final customer. This Segregation of

projects is a common method used in upstream oil & gas business where the projects

themselves are composed of standardized units. This is also common on most of the onsite

construction as projects are divided into independent sectors. This is usually considered very

useful and it tends to give clarity on the operations and also aims at achieving high productivity.

Thus, Value stream organization helps us to advance this approach further by moving it

to design, Engineering and procurement phases.

5.2.1 Proposed Organizational structure

Project is managed as a sequence of mini projects, each with its own hours related to

manpower and budgets related to procurement. So, the final output of each value stream

would provide us with necessary work front for construction like materials and drawings at the

appropriate time.

Cross functional team with engineers and senior buyers will have unswerving control

from each value stream. Home office construction personnel will be scattered line reporting

back into one or more value streams. Managers purposely skilled to supervise cross-functional

teams will run each value stream. The responsibility of the manager will be to supervise

multiple value streams, as these value streams are spread out in various time phases.

There is a need to create a separate strategic team within the supply chain to manage

over procurement and logistics of engineering materials needed for the entire project. This

team will encompass technical personnel like expeditors, quality inspectors, materials

Page 67: MBA Project Report M00328327 (1)

67

coordinators, requirement planners etc. The senior buyers from the procurement team will be

aligned into this group. A value stream champion for each stream of the work in the

organization will be nominated from the outer side of the projects.

The following Figures 23 and 24 compare the current organization structure with

proposed organization structure.

Page 68: MBA Project Report M00328327 (1)

68

Figure 23 : Current Organization Structure

Page 69: MBA Project Report M00328327 (1)

69

Figure 24 : Value Stream based organization

Structure

Page 70: MBA Project Report M00328327 (1)

70

The Following are the key changes:

Currently functional departments have straight line control while project engineer’s role

which is usually a coordinating role is a staff role. The proposal aims to change these roles. The

underlying principle behind this change is that a team can be efficiently managed in a staff

function, but in order to achieve coordination within cross functional teams in a concurrent

engineering project, line roles are required in the project.

Due to this change, the functional roles will become staff roles. For instance,

Engineering leads will be responsible for maintaining technical quality and have to ensure

standard procedures are always adhered to. Subsequently, the existing responsibilities of the

functional leads like maintaining budgets and monitoring deliveries would be moved to the new

Value stream Managers.

As part of the project executive team, the managers from engineering and procurement

division will allot operational responsibility to the value streams. They will focus on managing

interfaces with clients and external contractors and provide needed supervision. The home

office organization, exterior to the projects, is unaffected and will continue to be along with

functional lines.

5.3 Potential Impact Analysis

The Impact of these changes are carefully analyzed as there are many other supporting

function for executing such large scale complex projects, being affected by this proposal. This

has been discussed in detail as shown in the Table 3 below.

Page 71: MBA Project Report M00328327 (1)

71

Table 3: Potential Impact Analysis

Page 72: MBA Project Report M00328327 (1)

72

5.4 Justification for new Organization structure

The first step in implementing as well as enabling lean & productivity improvements

have to begin with an effective team organization. We all know that teams are natural units for

information flow. In order to achieve this there needs to be right management structure which

would give additional responsibility and full control to teams in order to create value to the

final customer. This structure would also aid us to create incentives and measures. These would

in turn, help us to achieve project goals. These are not achieved in the current organizational

structure. The value stream approach thus solves many of the issues by creating a suitable

organizational structure. This structure aligns the actual workflow in projects. The positive

implications of value stream are as follows:

Allow faster informational exchange with Vendors:

By collating manpower and procurement budget under a single manager, a better cross

functional trade-offs is achieved. For Example, procurement decisions can be made more

holistic by including logistic schedules and overall landed cost in the purchasing decisions. There

is also significant impact on behavioral patterns by creating cross functional teams. For

example, the metrics used for engineers will measure final delivery to construction. As such

engineers will be able to respond faster and follow up with vendors more meticulously. Buyers

will advance certain orders to guarantee the goals they set, as part of scheduling are met

instead of waiting for batching orders. This in turn increases administrative efficiency.

Efficient management of client changes:

The value stream manager has extensive responsibility. The delayed decisions on some

projects can affect the overall system flow and it’s the responsibility of the manager to observe

the impacts and to supervise the review process. At present, the leads of the project measure

client changes with regards to the increment efforts for their own department and they do not

base their decision with regards to cost to other downstream functions.

Project /engineering mangers are not expected to be there in all client technical

meetings and so the overall decision making on operational flow has to be pushed down to the

Page 73: MBA Project Report M00328327 (1)

73

projects which is considered to be a system wide approach. As a result, value streams create a

mental map facilitating the system view. This gives clear visibility of the total system cost of

changes, and it also helps provide solid basis to push back client changes.

Effectively address common Issues:

From the Causal Analysis explained in the unit-4, it can be clearly seen that a value

stream organization solves many of the common project issues. As Millard (2001) describes, it

avoids sub-optimization, avoids focus on man-hours, helps looking at holistic system view,

creates appropriate metrics, avoids out of sequence work, reduces matrix conflicts and enables

closer procurement and engineering coordination. The most critical benefit of the value stream

is that it creates a correct mental picture on the final goal in any Engineering & Construction

projects both internally and externally.

This clearly defines that EPC is not merely getting engineering work done in lowest

possible man-hours or achieving lowest procurement costs. It re-iterates the focus of delivering

a time effective and cost effective end results on the site.

Facilitate Lean:

The most important aspect of value streams is that it helps in meeting tighter budgets as

well as deadlines by enabling clear and continuous interactions within cross functional teams.

As a result of a system wide approach of moving down the decision making capabilities, an

environment is created for continuous improvement.

Thus according to Millard (2001), “value stream creates a homogeneous modular

approach to projects by enabling new cross-functional procedures, data/information handoffs,

benchmarking etc., leading to extensive productivity improvement”. It creates operational

teams that have enough capabilities to monitor the information flow, skill requirements and

work dependencies on their own.

Page 74: MBA Project Report M00328327 (1)

74

As it can be seen clearly, teams are now aligned towards project goals and in order to

have more informed decision-making capabilities at project’s operational level, they can/should

be given more authority.

5.5 Barriers for Implementation

The proposal for changing the project organization can give rise to many issues. The key

issues that came up during the analysis are discussed below in the Table 4 with the possible

suggestions.

Table 4: Barriers for Implementation

Page 75: MBA Project Report M00328327 (1)

75

Table 4: Barriers for Implementation

Page 76: MBA Project Report M00328327 (1)

76

5.6 Leadership Strategies

In order to build a broader support for this proposal few leadership strategies were

followed, as depicted below. The initial interviews, discussions/meetings were useful to draw

out a stakeholder mapping (refer Appendix-1), which was very useful to frame these strategies.

It was useful to indentify the internal champions and the necessary work was done to gain their

support. As discussed in the Appendix-1, there were evidences to understand their inertia

towards lean was very positive. It made the things easier to convince the management and to

buy in their decision towards this value stream approach.

Page 77: MBA Project Report M00328327 (1)

77

5.7 Future Paces

Given the results shown from this report, Dodsal started adopting the proposal, with

their first initiative of planning and scheduling a project along value streams using the WBS

created. There are steps taken within the Project planning and control department to do the

DSM analysis for all other value streams and identify areas for process improvements. The

metrics for measuring performance along value streams are yet to be started. As a result of the

discussions in the report, the internal initiatives that will be launched will have a span of 2-3

years for complete execution. The following Gantt chart 2 with time frame was depicted below

to show the different levels of activities in implementation. This was done on the basis of

discussion with the project Manager and projects control and planning team.

Page 78: MBA Project Report M00328327 (1)

78

Page 79: MBA Project Report M00328327 (1)

79

Unit - 6

6. Conclusion

The UAE Oil & Gas industry is spurred with rapid growth rate and resultant external

factors has forced the EPC contractors to adopt for concurrent engineering setups to execute

projects. The existing functional organization structure in Dodsal has led to many productivity

issues, raised due to the inability of handing concurrent engineering tasks, resulting in project

overruns. This report has set the basis for adopting Lean principles to address those issues

effectively. The idea behind this report is to split the macro sized projects into micro mini

projects using value streams. This concept has been adopted from the upstream EPC businesses

and onsite construction processes. The value streams were identified using the updated project

schedule of an executed project, developed using Primavera. The methodology used to identify

them is very well explained. The value stream identified in this report clearly defines the

boundaries between them and the WBS created for each value streams evidently demonstrated

that it is better than functional boundaries in handling such complex projects.

Then a key value stream identified was analyzed using design structure matrix to

identify the planned and un-planned iterations in the value stream. The steps involved in

preparing a value stream for DSM analysis was explained. Then a causal root map analysis was

made on the outputs from DSM exercise. It highlighted the existing behavioral patterns that led

to rework. The idea of this approach was used to show Dodsal, how value streams and DSM

analysis can be used to identify specific areas that needs process improvement. It also showed

that this approach facilitates orderly flow of information/work, better accountability and

enables cross functional culture. As a result, this exercise played a significant role in shifting the

management mindset towards value stream based organization.

The last part of this report proposes a value stream based organization structure, an

implementation plan with its implication. It also discusses how these principles complement to

their strategic decision of acquiring IDEA engineering and membership with Lean Construction

Page 80: MBA Project Report M00328327 (1)

80

Institute (Refer Appendix-1). The effort in this internship has helped to get buy-in the

management towards value stream based organization. It also discusses about the leadership

strategies used to build a broader support for this proposal. The implementation starts from

project planning & scheduling for a new project, along value streams and is expected to

continue at stages. Building on the effort of Millard (2001), we demonstrated the suitability of

value streams and DSM in an industry like Engineering and Construction, which is information

centric. This strategic move towards value streams will open a new window for Dodsal,

providing a comprehensive solution to the issues discussed in this study and can help them

provide their customers more lucrative EPC business solutions.

Page 81: MBA Project Report M00328327 (1)

81

7. Appendices

Appendix 1: Outcome of Interviews/Discussions

The following questions were asked during various phases of the client visit to get

essential information about Dodsal. These questions helped in analyzing the issues further and

provide feasible recommendations for the project. As said, the questions were divided into

three phases.

In the first phase- the first 5 questions gave us an understanding about the operations of

Dodsal and the interest of Dodsal towards lean initiatives.

1. Give us an overview about your EPC construction model and please explain the

characteristics, advantages having this model?

2. Please list the Lean initiatives that you have been involved with in your organization?

3. Please list the departments and/or areas of your organization in which the Lean

initiatives have been implemented?

4. What was the original aim of the Lean initiatives your organization has implemented?

5. What are the business factors to commence a lean initiative?

From these questions we were able to analyze from the information, the top business

factors for adoption of lean as shown below (Figure 25).

Figure 25 : Top Business Factors

Page 82: MBA Project Report M00328327 (1)

82

The Second phase consists of 6 questions from which Dodsal’s previous lean initiatives

were probed to understand the procedures they follow to adopt lean. It also gave

understanding about their strategic moves through lean adoption.

6. Does your organization have any plans to implement Lean in other areas / departments?

7. What proportion of your overall organization has been involved in implementing Lean

Initiatives?

8. What have been the other resource (time, finance) implications of implementing the

Lean initiatives?

9. What tools and techniques have been used in the Lean?

10. What external support is your organization utilizing to assist with the implementation of

any lean initiatives?

11. If you have utilized external support, how effective has this support been?

The findings from these questions were pretty much satisfactory as it gave us an insight

towards their lean approach and the strategic moves behind this adoption. It can be concluded

that they were in the right path towards achieving operational excellence. The Acquisition of

India’s AE&E IDEA (India) Pvt. Ltd was considered as a strategic fit and further strengthens the

company's existing business footprint in the energy, industrial and infrastructure sectors. This

acquisition has further helped in achieving its core mission of serving customers globally.

There had been outstanding results by aligning with external agents for their lean

operations. This can be confirmed by the fact that they have a membership with Lean

Construction Institute to further leverage their competitiveness. This was also considered to be

a strategic move towards operational effectiveness. The following passage briefs about the

Lean construction Institute.

The Lean Construction Institute, (LCI) was founded in August 1997 and is a non-profit

corporation. They are involved in developing expertise related to project based production

Page 83: MBA Project Report M00328327 (1)

83

management system in the field of executing large scale engineering and construction projects.

They are the pioneer in extending Lean production revolution started in manufacturing, into

construction industry. These are following benefits Dodsal can enjoy by being a member of LCI.

The membership can give them the best opportunity to learn about the new concepts and

techniques that are developed for executing large scale engineering and construction

projects.

The employees are up to date with the current trends and practices in the industry and

this act as source of motivation for them to adopt those practices in their work.

The members can build a competitive advantage in the industry through a long term

relationship with LCI. It is by fitting new tools and techniques to the organization and

association with leading thinkers and implementers will bring the firm out in front as the

industry changes

In the third phase that consists of 5 questions, the questions aimed at finding the ways of

communicating the lean principles in to the organization as a whole and any obstacles that can

occur. In addition to this, evaluation methods of lean initiatives had been sought.

12. What strategies have been used to engage staff in the Lean initiatives?

13. How has progress on the Lean initiatives been communicated through the organization?

14. What have been the barriers to implementing Lean Initiatives and/or realizing success?

15. Has there been any evaluation of the impact of the Lean Initiatives?

16. How long do you think the implementation phase of the Value stream would take?

From these questions, it was concluded that by changing the organizing structure, the

value stream can be smoothly implemented. From the information received we were able to

develop a matrix for stakeholder analysis as shown in the below figure 26. It can be clearly seen

from the figure, there are four major blocks. We were able to identify those personnel.

Page 84: MBA Project Report M00328327 (1)

84

Change Agents: It was the Engineering Director and Senior Project Manager who had the power

to influence to change gave a broader support.

Change Facilitators: They were the Managers and Engineers from the Project control & planning

department.

People to Convince: Managers and staff from the Engineering & Procurement functions are

reluctant to the change but they have higher levels of authority.

Minor Skeptics: These are usually laborers and front line employees for whom the change

would be trivial.

Figure 26 : Stakeholder Mapping

Page 85: MBA Project Report M00328327 (1)

85

Appendix 2: Work Breakdown Structures for Value streams The Work breakdown structure for each value stream is shown below. These were created by

the use of primavera as discussed in the Unit 4. Refer the following figure 27.

Figure 27 : Work Breakdown Structures

Stakeholder Mapping

Page 86: MBA Project Report M00328327 (1)

86

Page 87: MBA Project Report M00328327 (1)

87

Appendix 3: IBC Code of Conduct and Professional practice

The Institute of Business Consulting is the professional body for business consulting. It is

an organization within the Chartered Management Institute. Both Institutes combined to form

a code of professional practice to be followed and competencies to be followed by consulting

professionals. It defines the responsibility to the consulting professions in relation to the

professional conduct, levels of competence and standards of behavior in the consulting

Business. This entire piece of consulting works was in line with IBC Code of professional

practice.

Figure 28 : IBC Competency Framework

Page 88: MBA Project Report M00328327 (1)

88

Appendix 4: Updated schedule from Primavera used for the analysis

The Updated Schedules used for the analysis part is shown here. The Updated schedule

is comprises of 900 activities and 80 pages long. So the first 10 pages have been attached for

the purpose of understanding. The Project name used for this purpose is Ruwais sulphur plant,

Abudhabi. Dodsal executed this project in 3.5 years, which was planned for 2.5 years originally.

Page 89: MBA Project Report M00328327 (1)

89

Updated Project Schedules from Primavera (p89- p95)

Page 90: MBA Project Report M00328327 (1)

90

Page 91: MBA Project Report M00328327 (1)

91

Page 92: MBA Project Report M00328327 (1)

92

Page 93: MBA Project Report M00328327 (1)

93

Page 94: MBA Project Report M00328327 (1)

94

Page 95: MBA Project Report M00328327 (1)

95

Page 96: MBA Project Report M00328327 (1)

96

8. Reflective Summary

Acknowledgement to the Transformation:

When I try to look back after my past from now, I see things entirely in a different

perspective than when I did the same thing a year before doing my MBA. My Previous

experience is around a technical environment in steel construction industry. I had been myself

in a variety of roles starting from technical roles to team leader and to managerial roles.

My professional role taught me a great deal not just about the construction industry,

but also about project management, team building, and challenges with cultural diversity. I

would like to believe that my extrovert nature, good communication and negotiating skills, and

my sheer ability to work hard made me successful even in a very demanding economic

environment. As I stared progressing in my career, I noticed that other than technical expertise

there is something one has to posses to become an efficient Manager. It was then I realized the

importance of a good management degree that would not just teach me business skills, but also

hone my leadership abilities and help me understand trade and business from a global

perspective. So I finally decided to pursue MBA from the University that matches my learning

abilities and I was firm on getting admission in Middlesex University Business School. It was

here that I learnt firsthand, how a single managerial decision qualitatively and significantly

affected performance in every facet of the organisation.

As part of my MBA, I got an excellent opportunity to do an internship with Dodsal, which

is one of the biggest achievements in life. I can see myself transformed from an Engineer to

Engineering Business Consultant. It all happened only with things I learned from my MBA and I

owe a massive debt of gratitude to all my professors in Middlesex University for this

transformation.

Consulting Project:

Reflective practice suggests that the development of professional practice can be

brought about by the analysis of significant events or "critical incidents". Here I mean my

consultancy project as a critical incident in my life.

Page 97: MBA Project Report M00328327 (1)

97

In a broader sense, management consultancy refers to the activities done by an

individual or a group of people aimed at making the firms improve their performance. The IBC

model & Simon speller cracker model have suggested that whole consultancy process starts

with identification of the issue, then focus moves on to analyze such issues and formulate

recommendations for the firm to resolve the issues identified. The final stage is to help the firm

or client in implementing them. Salder (1998) states that each of these stages are unique,

serves it own purpose but in the mean time inter linked with each other and occurs in a

sequence. This reflective summary is going to explore the learning outcome from the practical

process of consultation with Dodsal. The implementation stage is not covered, as this didn’t

happen due to the time limit. However the implementation plan was made with the

consultation of Dodsal.

Consulting Process with Dodsal:

The entire piece of consultancy work with Dodsal consisted of three phase as explained below:

The Entry Phase

Understanding their Concerns/Identifying the issue

Agreeing the Brief and its scope

The first official meeting in this was phase was really important for both of us. According

to the literature, in reality, a good first initial meeting normally would mean the winning of

contract for the consultants. The whole atmosphere was pleasant. The client was very friendly

and polite. They were ready to help me on any information I was asking for. The three main

objectives achieved in the first meeting were:

Understanding the issue

Building the relationship

Selling and getting the contracts.

There were few negotiations on the key objectives of the project. This was largely

because of the different perception they had on the problems. It was all explained and the

project scope was narrowed down to Lean solutions. This was achieved by the knowledge

gained on the Lean literature before meeting them.

Page 98: MBA Project Report M00328327 (1)

98

Data collection and Analysis Phase

During this phase, there were frequent visits to Dodsal‘s Head office and their

construction sites. The data was collected from almost all the points of contact. This was very

constructive, as both client and I were able to learn something from each other on the industry

and about the possible solutions for the problem.

Presenting Advice and solutions phase

This was a formal power point presentation, and it was a big success. The proposal was

accepted by the client and initiatives have been taken by the client to start the implementation.

The presentation was in a lively manner as the client got involved rather than just listening to it.

It was a very open discussion in a relaxed way. This turned out to be the success for my

proposal. However this didn’t work out with my presentation at the University. The problem

here was that, the presentation was more into technical things rather than speaking about how

I have applied the management principles to attain that. I was also marked for the same. But

instead I got a good constructive feedback from my mentors and it is incorporated as such in

the report. The most important thing I learned here is that “I have to suit the theme according

to the place”.

The Process Evaluation:

Looking back at the overall piece of this consultancy work, it was reflecting the model

suggested by IBC and the framework followed Simon speller cracker model.

- Consulting Approach:

Different situation requires consultant to be in different mode in order help the client.

There is always a dilemma faced by a consultant during the process and either he take up the

role of an ‘expert’ to give advice on resolving the issue or plays as an ‘facilitator’ to help the

client to figure out the solution for themselves. So it is very critical to understand what role a

consultant should play in different situations. This was clearly understood and was followed in

the right way by the use of “IBC code of conduct & Competency frame work”.

Page 99: MBA Project Report M00328327 (1)

99

- Client Consultant Relationship in ‘Dodsal’:

My relationship dimension with Dodsal was half way between contractual and idealized

relationship. The relationship had four dimensions: Knowledge, Skills, Attitude and Emotions.

These dimensions vary at different situation and the important thing is to use these dimensions

at right level.

This is because of the fact; I was there to help Dodsal to improve their operational

effectiveness. On the other hand they were looking me as an MBA student and helping me to

complete my MBA Project work. As a result of this, there was a constant change in the role I

had played. In the initial stage, it was like I was there to learn and show them what I can do. In

the Later stage, I become more like an expert trying to persuade them in accepting my ideas

and findings for the Project. Thus there was no particular role to play in this consultancy work.

What is important is that to choose the right role for a particular situation as discussed in the

section consulting approach.

Overall Evaluation:

Overall from my experience in doing this consultancy project for Dodsal, was priceless. I

had learnt a lot from this consultancy and from my MBA. Personally I had gained knowledge,

required skills and attitude to become an efficient Manager/Consultant. In addition to this, I

had acquired key emotional traits in managing client relationships. Also on my entrepreneurial

side, the key lesson learnt from the course is that for any organization, the core objective is the

achievement of competitive advantage or the edge that the business firm has over its

competitors in the industry.

Page 100: MBA Project Report M00328327 (1)

100

9. References

1. Eppinger (1997), A Planning Method for Integration Of Large-Scale Engineering Systems,

ICED 97 Tampere, August 19-21, 1997

2. Millard, R. "Value stream analysis and mapping for product development" MIT Master's

thesis, June 2001

3. Rother, M., and Shook, J., "Learning To See: Value Stream Mapping to Add Value and

Eliminate Muda" Lean Enterprise Institute, 1999

4. Backhouse, CJ and Brookes, NJ (1996). Concurrent Engineering, What's Working Where,

Gower, Brookfield, VT: The Design Council

5. Ford D,N and Sterman J.D, The Liar's Club: Concealing Rework in Concurrent Development,

Concurrent Engineering: Research and Applications, September 2003

6. McManus, H.L, and Millard, R.L, "Value Stream Analysis and Mapping for Product

Development" The International Council of the Aeronautical Sciences, 2002

7. Petakis S.T and Pultar M, Modeling detailed information flows in building design with the

parameter based design structure matrix, Elsevier Ltd 2005

8. Colin Drysdale, “Causal Mapping for Benefit Analysis”, Atkins, 2009

9. Madhu pillai and Eric Sandelands, Developing the EPC value chain in the upstream Oil & Gas

sector in Middle East, Kentz Qatar, 2010 (http://www.ogbus.ru/eng/)

10. Kyle Costa, “Contract Management for International EPC Projects”, University of Southeast,

Thesis, 2009

11. Professor Peter Hines & David Taylor, Going Lean, Lean Enterprise Research Centre, Cardiff

Business School, 2010

12. Ballard, G. “Cycle Time reduction in construction”, Proceedings of the 9th Annual Conference

of the International Group for Lean construction, 2001

13. Ballard, G.; Tommelin, I., “Aiming for Continuous Flow”, Lean Construction Institute, 1999

14. Bertelsen S.; Nielsen J., “Just in time Logistics in the supply of building materials”,

Proceedings of the 1st International Conference on Construction Industry Development:

Building the future together, 1997

Page 101: MBA Project Report M00328327 (1)

101

15. Ballard, G.; Howell, G.A., “Lean Project Management”, Building Research & Information,

2003

16. Ballard, G.; Howell, G.A., ”Towards construction JIT”, Association of Researchers in

Construction management, Sheffield, UK, 2005

17. Ali A. Yassine, “An Introduction to Modeling and Analyzing Complex Product Development

Processes Using the Design Structure Matrix (DSM) Method”, Product Development

Research Laboratory, University of Illinois at Urbana-Champaign, 2003

18. Robert M Patty, Michael A. Denton., “End of project overruns: Lean and Beyond for

Engineering, construction and Procurement”, Universal Publishers, 2010

19. Ayuss Kumar, “Lean Construction in the Building Industry”, University of Illinois, Department

of Civil & Environmental Engineering, Thesis, 2010

20. Greg Howell and Glenn Ballard, “Implementing Lean Construction: Understanding and

Action”, Lean construction institute, 1998

21. Qian Chen, Georg Reichard and Yvan Beliveau., “Interface Management – A Facilitator of

Lean Construction and Agile Project Management”, Proceedings IGLC-15, Michigan, 2007

22. Glenn Ballard, “Lean Construction and EPC performance improvement”, Lean Construction

Institute, 2008

23. Construction management of steel construction, American institute of steel Construction

(AISC), (www.aisc.org)

24. Marchini-Blanco, J. (2004). “Lean Enterprise in the Construction Industry”, Masters

dissertation, Massachusetts Institute of Technology

25. Karna, S. and Junnonen, J.M. (2005), “Project feedback as a tool for learning”., Proceedings

of the 13th Annual Conference on Lean Construction, Sydney. Pp. 47-57

26. N. P. Repenning and J. D. Sterman (2001), “Nobody Ever Gets Credit for Fixing Problems that

Never Happened: Creating and Sustaining Process Improvement”. California Management

Review 43, 64-88

27. Morgan, James M. (2002), “High Performance Product Development: A Systems Approach

to a Lean Product Development Process”, PhD. Thesis in Industrial and Operations

Engineering, University of Michigan

Page 102: MBA Project Report M00328327 (1)

102

28. James P. Womack and Daniel T. Jones (2003), Lean Thinking: Banish Waste and Create

Wealth in Your Corporation; Simon & Schuster 2nd ed., Free Press.

29. Booz Allen Hamilton, (2001): Earned Value Management Tutorial Module 2: Work

Breakdown Structure

30. Saunders, M., Lewis, P. and Thornhill, A., (2007). “Research Methods for Business Students”,

(Fourth Edition).Harlow, England: Pearson Education

31. Eriksson Paivi, Kovalainen Anne (2008)., “Qualitative Methods in Business Research”, Sage

Publications Ltd (United Kingdom),

32. McManus, Hugh (2004), "Product Development Value Stream Mapping Manual, Beta

Version, "Lean Aerospace Initiative, MIT, Cambridge MA

33. IBC Code of conduct and practices, (www.ibconsulting.org.uk)

34. Official Website of Dodsal Engineering & Construction Ltd. (www.Dodsal.com)

35. Official Website of Lean Construction Institute (www.leanconstruction.org)


Recommended