UNIVERSITY of NORTHERN BRITISH COLUMBIA LIBRARY PrinCe Georgi!, B.C. BUSINESS PROCESS ORIENTATION (BPO) - A CASE STUDY OF A CANADIAN FIRM by Vincent Amanyi B.Eng, Federal University of Technology Minna, 2000 PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION UNIVERSITY OF NORTHERN BRITISH COLUMBIA October 2013 © Vincent Amanyi, 2013 ABSTRACT The first part of this project study is to identifY all the processes in the engineering procurement and construction (EPC) organization, with a detail view of how all disciplines interrelate to accomplish an objective of producing an engineering deliverable. Most of the activities involved input from various technical and business units of the organization or even third party supplier or vendor which is external to the organization. The process involves lots of activity mapping between related departments through detailed investigation of the relationship between process operations and the locations of resources made available in the organizational structure and hierarchy of the EPC. The second part of the project was an attempt to identifY the root causes of the problems occurred and its impact on project duration and then finding possible solutions to eliminate similar problems in future. The study is based on the data and information retrieved from the projects completed in the past. The study indicated required manpower shortage, lack of required core skills among personnel hired, delayed payments on invoices led to project delays and increased cost of project execution. ii TABLE OF CONTENTS ABSTRACT .............. .... ......... .. ...................... .... .................... . .................... ii TABLE OF CONTENTS ................................................................................ .iii LIST OF TABLES & FIGURES .......................................................................... iv ACKNOWLDGEMENT/DEDICATION ........ . ............... .. ......... . ...........................v Chapter 1 ..................................................................................................... 1 INTRODU-CTION ..................................................................................... I 1.1 Research Scope ................................................................................ 1 1.2 What is Business Process Orientation ........................................................ 6 1.3 Why BPO on EPC .............................................................................. 7 1.4 Study Objectives/Importance of Study ..................................................... 8 Chapter 2 .....................................................................................................9 REVIEW OF LITERATURE ........................................................................... 9 2.1 Literature review .......................................... ... .................................. 10 Chapter 3 ................................................................................................... 14 RESEARCH APPROACH ............................................................................. 14 3.1 Database and Methodology ............................................................... l4 Chapter 4 ... . .............................. . ................................................................. 16 ANALYSIS /FINDING ................................................................................ l6 4.1 Past EPC Projects ............................................................................. .16 4.2 EPC organizational structure .................................................................. 29 4.3 Business Process in the Organization ....................................................... 31 4.4 Process & Management position Interaction ...... . ........................................ 36 4.5 Problem Areas Observed in Process ........................................................ .47 Chapter 5 Conclusion ....................................................................................... 59 Summary................................................................................................. 59 References ..................................................................................................... 62 iii LIST OF TABLES AND FIGURES Table 4.1-4.8: past completed project information ....................................... Page 16-26 Table 4.9: Causes of delays and their cost impact. ...................................... Page 56 Figures: Organizational Chart ofthe EPC .. ............. ...... ........................... Page 29 Figures: Daily flow Diagram of activities ....... .... ...................................... Page 30-36 Figures: Business process of the organization ............................. ... .. ... ........Page 3 7-45 Figures: Identified Problem Areas process diagram ....... ... . ....... .................... Page 47-56 iv ACKNOWLEGEMENT/DEDICATION I want to use this opportunity to thank my supervisor Dr Balbinder Deo his superb professional advice and guidance in the research, analysis and completion of this report. Special thanks go to all my committee members for their support, most especially Dr. Ajit Dayanandan who has never gotten tired of me with all my questions. I want also thank Dr Raymond Cox who was always there to resolve any issue encountered all through my program. I want to thank my family for all the support all through the program. Above all, I want to give God all the glory for seeing me through. v Chapter 1 INTRODUCTION Companies in the modern world faces multitude of business challenges. Top performance companies take a methodical approach to meet customer demand and production planning of their products and services. The true drivers of performance of companies are related to how companies manage their business processes, capabilities and decision making processes (Constantine et al., 2009). Many companies, such as; Wal Mart, and Dell Computers have harnessed the power of technology to improve their supply chain, "unlock value", and transform their business models (Kanakamadeala et al., 2003). Supply chain management refers to all operations involved in moving, handling, assembling and final delivery of products to customers. The first challenge that management face in the supply chain management area is to decide which raw material or tasks it should link with an external provider (off shoring configuration). The entire task is to coordinate the internal and external tasks which are often very complex, because it involves lots of collaboration with vendors and their sub suppliers. Most of the vendors have more than 3 sub suppliers supplying different types of components that make up one unit of package or equipment. The present study uses 'case study' approach and examines how one can re-engineer the business process and unlock value from the supply chain. The case study is based on actual engineering company that conducts its business operations in the area of Engineering Procurement and Construction (EPC). The real name of the company is suppressed to ensure anonymity of information. As the firm is conducting business operations in Engineering 1 Procurement and Construction area, so for the purpose of identification we name this finn as 'Engineering Procurement and Construction Company' (EPC) in this project. The Engineering Procurement and Construction (EPC) Company manage industrial projects in oil and gas sector from conception stage to completion stage. The EPC is 100 years old finn in Canada, with major core projects in western Canada with headquarters in United Kingdom. Its present turnover is around $3 billion. The company banks on customer satisfaction with repeat orders as the prime driver of profit and growth. The finn design plants, refineries, mines and is also involved with designing and managing all types of equipment for all projects and this process involves large scale supply chain operation management from planning stage to delivery to construction management. Apart from the above listed services, the EPC also provide services in general project consulting area that involves most of the engineering disciplines. The EPC has grown over the years to become a multinational engineering consulting finn with presence in five continents with employees of over 22,000 worldwide. The customers of the firm include Husky Energy, Shell Canada, Suncor Energy, Imperial Oil Venture Resource Ltd., Nexen etc. The company works on tum-key type projects for oil companies and executes projects on time and also under budget. The company builds long term relationships with its customers and this long term relationship helps EPC to reduce the cost of projects and also improve its expertise on the projects undertaken. Most of the projects undertaken by the firm have multiple production cycles and span over time frame of 3 to 7 years. 2 The knowledge, practical skills and experience gained at each phase of the project helps the company to improve its process by reviewing the lessons learned from the previous phase of the project and this is one of the major reasons why the oil and gas fim1s depend on EPC for all their capital projects. However, EPC faces a considerable share of its challenges as well. For example, there is a wide range of problems occurring at the EPC related to the long lead time for approval of engineering documents, and for the completion of manufacturing, and these kind of problems extends the project I process time as well as product/ service delivery cycle time. Generally, the standard time for the vendors to start manufacturing is 8 weeks after the purchase order has been issued to the vendor, but it varies sometimes from case to case based on the complexity of the project or equipment. For example, different equipment has different engineering documents and drawings and different lead times. The initial drawings come from the vendor and it takes approximately two weeks for the EPC engineers to review it with corrections and then code it. Generally, the vendor commences fabrication only when the EPC engineer's code authorizes the vendor to start manufacturing. In addition, sometime lot many changes happen in scope, or modification of specs when the drawings have already gone to advanced stage of approval. High turnover of engineering professionals in some engineering departments add to the overall lead time of the equipment final delivery. Management decision becomes critical when an employee leaves in the middle of any project with a tight deadline with its client and this makes it difficult to predict a reliable delivery date, because it slows the turnaround time of drawings between the EPC and vendors. The presence of non- value added activities within the delivery cycle, and rework on parts and equipment causes long duration to complete the equipment delivery as well. 3 Sometimes, the problems are also caused due to the package that an engineer need to modify or increase the capacity of equipment and these problems increase the turnaround duration for drawings. Such problems add to the cost which has to be trended or estimated for approval from clients before actual execution of projects. The problem of long lead time to deliver packages can be resolved or reduced by reviewing all operations or processes within the supply chain to identify the root causes of problems. This study is based on the common practices followed by an engineering firm involved in design and management of major engineering projects. The process of the organization starts with kick off meeting to review all specs related information with a vendor. These meeting officially start the turnaround time of documents between the EPC and vendors. The vendors will commence manufacturing when the engineering drawing achieves code 2 status. There are lots of activities that are performed between drawings approval and equipment delivery. For example~ change of materials by the suppliers of the vendors will require approval from the client, and also deviation of design will require management decision from both the EPC and the client. The existing templates also limit innovation on the part of vendors and the EPC which also add to the current extended duration within internal processes at the EPC. The outcome of these problems is poor change management system, slow decision process and complex information management systems. Business Process Orientation (BPO) Business process orientation is a new approach of changing an existing process of an organization or business to increase output or productivity (Chris Barry 2009 Page 725). 4 Bjlrn Anderson (2007, page 32) also defines business process orientation as logical series of related transactions that converts input to results or output. Business process orientation can be used to redefine the sequence of processes that are dependent on each other and to eliminate or streamline the processes that are not functional. Business process orientation is a way of altering the current or existing process in organization to increase performance. BPO can be applied to change the current process and make it more efficient. A good functional management envirornnent requires an excellent business process in place to thrive in the ever competitive industrial project market. BPO can be useful to drive the lean concept to achieve the desired change in a timely manner. Lean could be explained as the process of creating values using fewer resources. Initially, the lean concept was meant for the manufacturing envirornnent, but as the time progressed, it was discovered that lean can be applied to service industry too. The lean philosophy became necessary to drive customer value stream in the process of a production envirornnent for both manufacturing and service industry. The business process orientation approach centered on the whole organization to measure the effectiveness of all the existing process and identify any bottleneck or where problem exist and design a solution by reconfiguring the business process for better result .Functional process orientation focus on the functional department of an organization. The business process approach takes a holistic approach to look at the big picture of business, while the functional approach looks at the functional process with specific discipline. 5 Why BPO in EPC? The major advantage of deploying BPO in engineering organization leads to cost saving and becoming good at what they do, from the design phase to final delivery to construction management team. BPO help in providing guidance to make changes in the current process to eliminate the root causes of problems and simplifying all the communication channels with various departments and disciplines associated with product/service, from design phase to final delivery of packages to construction management team. BPO helps identify the presence of non-value added activities too. The present study focuses to use business process orientation approach to study the organizational position related structure with reference to the required business for the engineering procurement and construction firm that provides service to its clients. The following are the various defined areas of this study in the EPC organizational process. The listed areas support each other to carry out daily activities and non performance in any one area cascade to the overall poor performance of the entire process. 1 The establishment of project by signing a project charter (Feasibility stage). This is the stage when the project is born at the conceptual stage. 2 Resource acquisition and team building (Transferring employees & Screening/interview). This is the process of recruiting all team members for the project (Human resource planning function). 3 Establishment of Draft schedule (Identify duplicate scope/modified scope). This is the process of classifying the project scope. 4 Project evaluation. 6 5 Project accounting link to milestone (Align project schedule to invoice). The process of verifying deliverable before invoice payment. 6 Project Monitoring and Control (The process of controlling cost and schedule of the project). 7 Change management & design deviation. This is the process of making changes that will affect the final deliverable; the change could result in the increase in cost and lead time. Applying lean in EPC will eliminate any trouble areas from their internal process and speed up good package delivery rate to the construction management team. BPO can drive the timely change needed by EPC using the lean concept to reorganize the flow of activities between different departments. The application of BPO helps understand the process complexities and provide guidance to simplify the process to enable the organization to react differently in delivering packages to modyard and site. Modyard is a contractor location where the equipment module is set together with all related equipment material before shipping to site, while site is the final destination of the equipments to be installed. Business process orientation makes it easy for the organization to measure and evaluate performance indicators and work on continuous process improvement. BPO speeds up the management of operations of all internal process and can help make the process more effective to meet customer satisfaction. Objectives of the Study • To examine the current business processes followed by the company (EPC) and identify the bottlenecks, slacks and identify areas of improvement/efficiency. 7 • To understand and list important causes of project delays and suggest changes in the business process of the company (EPC) to deliver end-to-end efficiency. • To measure possible cost savings from business process changes. 8 Chapter 2 Literature Review There are several definitions of Business Process Orientation (BPO) available from past literature but the essence and meanings of all definitions (more or less) remain the same that is to increase efficiency, eliminate waste, increase productivity, streamline complex processes within an organization etc. BPO conceptual framework can be applied to any organization by taking a detailed analysis of flow of activities between all departments or business units to identify and resolve the problem areas. BPO can be helpful to identify the trouble areas in any organization as it focuses on efficient use of resources (input and output) to meet customer requirements (Arshad, Kashif and Mohammad, 201 0). Business process orientation (BPO) is an approach to improve enterprise supply chain that requires change in a whole system. Several concepts have been developed during the last few years relating to business processes, organizations and performance. Michael Porter introduced the concept of interoperability across the value chain as a major issue within firms (Porter 1981 page 576). Michael Porter' s (1985 , page 17) ' value chain' concept helps to systematically examine all activities and their mechanism of interaction to provide competitive advantage. Edward Deming developed the "Deming Flow Diagram" depicting the connections across the firm from the customer to the supplier as a process that could be measured and improved like any other process (Walton 1986 page 46). Many studies available in literature are related to supply chain operations in organizations to identify areas where constraints exist within the supply chain from manufacturing stage to final stage of product distribution to customers. The applications of BPO to solve supply chain problems are mostly available in the production and manufacturing 9 environment. However, some of the studies available m literature also included service industries, such as the retail industries. Business process orientation emphasizes delivering value to customers by streamlining and accelerating work patterns (Schutta, 2006; McCormack and Johnson, 2001; Davenport, 1993 page 2). It involves eliminating all the non value activities from the entire value chain of the organization to increase efficiency. The general goal of BPO is to make organizations identify the problem spots and introduce efficiency within its internal process to increase productivity. As per Kevin McCormack and Bill Johnson (2001 page 33-37) BPO is not a new strategy. It is an emphasis on process as opposed to hierarchies of organizational structures with special emphasis on outcome particularly customer satisfaction. It is a tool used to eliminate inefficiency or constraints in an organization. It is used to map all the functional structure of an organization to identify the problem areas that is not contributing to the overall value chain and thus resolving those problems to make its activities more efficient. Business process orientation is a good business enabler and excellent tool for-business process changes on a regular basis to get the best performance. It has been noticed that companies with strong measures of BPO showed better overall business performance (Kevin 2001, page 51). The idea of the business process orientation is gaining momentum and a constant process improvement is now becoming a mandatory requirement for managerial performance as well (Levi, 2002 page 95). Levi's concept simply states that no organization can survive without constantly looking at its business processes if management actually wants organizations to be competitive. In other words, in conformity with new business philosophy, the organization should be designed to provide both vertical and horizontal information flow as necessary to accomplish the organization's overall goals (Daft, 2001 page 36). 10 Thomas Davenport and James Short (1990 page 79) described a process orientation within an organization as a key component in the "New Industrial Engineering" area. BPO is a core component for re-engineering and changing and improving complex processes to eliminate problems. As per Hammer (2002) implementation of business process orientation should also be within a specific time frame to see better results (Michael Hammer 2002 page 1). The duration of implementation of BPO should be planned to measure real impact on productivity. However, it may take longer time to complete the implementation in large organization and short time duration to implement in small organization. A Reengineering effort is a term used by Dr. Hammer to describe the development of a customer focused, strategic business process based organization enabled as a strategy to overcome the problem of cross-functional activities that present major performance issues in firms that involve many disciplines. Kevin (2005 page 42) states that BPO works better in horizontal organizations because it gets at the core of activities and corporate mindsets. BPO help map out all the related activities within all the departments and identify all the problem areas. The BPO as process tool can easily be implemented in horizontal layers of organizations, because most business activities are interrelated with different business or functional units both at the operational level and at the tactical level. So far, Business Process Orientation isn't recognized as an independent discipline, it rather represents a generic concept of numerous management philosophies which use process perspective to improve business performance (Lindfors, 2003 page 95). This "new way of 11 thinking" or "viewing" the organization has been generally described as business process orientation or BPO (McCormack and Johnson, 2001 page 172). Although in literature there are many definitions of the business process orientation but the McCormack's and Johnson's (2001 page 172) definition of process orientation appears to be more appropriate as it centered more on business process improvement. However, business process orientation should be distinguished from a process-based organizational structure concept that represents the understanding of the business flow, and that is only the first step toward improvement Some findings also indicate that major way to develop a competitive advantage in value chain as described by Porter (1999) as managing linkages (Kevin, William, 2000, page 18), and the linkages are basically the relationship network of all value activities that shows the flow diagram of all the activities and the durations it take to complete each task and how all the activities connect with each other. Keeping logistics costs down is the hallmark of retailers, such as Wal-Mart, and they prosper on their ability to keep prices low (Mckinsey quarterly 1996 number 2). Other industries such as retail industry also perform large logistics operation that interconnect many vendors to warehouses using robust inventory application to control and manage movement of goods in real time to achieve the objective of timely delivery. Although business process orientation has been around for some time now, but, a few studies talked about process reengineering in technical organization to gain productivity. It has become imperative to note that business process orientation (BPO) can result in a key competitive advantage in the supply chain in new economy (Kevin McCormack & Bill 12 Johnson, 2001 page 33-37) because it help improve the performance of firm by reducing the turnaround time and cost of activities by creating visible value. Business process orientation can also be applied to improve the performance of an EPC firm by identifying all the processes within the EPC and by eliminating or simplifying the troubled areas that has issues. Resolving the trouble spots within the process can help improve the process and productivity of the entire organization. The application of business process orientation analysis to review the entire EPC firm, from design phase of its products and services, including all activities to final delivery of deliverables to contractors involves a holistic look at all the functional areas of its operations. Such approach can easily identify the problem areas in the process. Although fixing a problem might take some considerable time, but application of BPO may resolve the large set of problems and may also help simplify the organizational processes. The application of business process orientation to EPC can be effective if emphasis is placed on the detailed analysis of process within the technical segment and within the functional side of all related activities from design phase to final phase of equipment delivery. It may also be helpful in reducing the cost of managing packages with a great cost savings to the client, reducing or shortening the turnaround time of activities, adding value to internal processes. It can make the entire supply chain efficient by improving the performance of all disciplines involved with daily operations of the EPC. 13 Chapter 3 DATA BASE AND METHODOLOGY This section discusses database and methodology used to identify the inefficiencies in engineering procurement and construction (EPC), Calgary, Canada. The focus of this study is to identify the input-output processes of engineering procurement and contracting (EPC) firm located in Calgary, Alberta. The entire supply-chain of the EPC firm has input-output processes that capture the dynamics of current process. In the analysis of the input and output process, effort is made to identify the current inefficiencies, bottlenecks etc and suggest an alternative efficient business processes. This study uses both quantitative and qualitative data available for one year delivery cycle of packages or equipments. The data flow diagram (DFD) is used to study the current process and identify the inefficiencies which have affected the bottom line of the organization. The DFD approach was used to measure and capture all details of delays with related impact of all information, which depict the interdependence of all related activities. The applications of data flow diagram exposed all activities with related transactional information and easily identify the problem areas. The analysis of the process provides clear information on the current inefficiencies and actions required to improve the process. The data required for the study is collected from the EPC current operations, and it includes the information about the vendors. The methodological framework of business process orientation (BPO) is used to identify weakness or inefficiencies in the current process and suggest alternative to improve the current processes. All the data was collected from the EPC project database system and analyzed using the data flow approach to capture information 14 while considering all various drivers that cause the changes. Historical information of past projects was used in the analysis to identify all the changing variables. Several approaches such as quality management, continuous process improvement and business process reengineering have been proposed to the case of business process orientation (BPO). One of these approaches is business process management (BPM) which is structured, analytical, cross-functional and is useful for continuous improvement of processes. Its emphasis is on processes as opposed to hierarchies in all areas with special focus on outcome and customer satisfaction. The data used in this study is based on the critical information that drives the changes in all variables such as • Various flows of packages from the responsible engineering discipline from January 2012 to December, 2012. • Duration it takes to complete the manufacturing of the required packages from design phase to delivery. • Time duration in terms of man hours for operations which is mostly dependent on the number of changes that occur during design, drawing and general calculations of data sheet. All the changes that occur are termed modification factors. 15 Chapter 4 4. ANALYSIS The EPC have completed 8 projects in the last five years and 5 projects are in the process that will span over 4 years. The 8 projects completed by the EPC are briefly described in the following section. Design and construction of open pit mine (Oil sand) - Two projects completed The EPC designed 2 different types of open pit mines in the oil sand sector and also managed the construction deliverables from the beginning to the end of the project. The 2 projects are located in Fort McMurray Alberta with 38634 & 37172 (table 4.1 &4.2) man hours of work completed in construction, procurement and project execution. Open pit mine project have a basic concept that does not have complex issues to troubleshoot and manage turnaround maintenances like other oil field projects. Each project is divided into stages and each stage is completed through the completion of distinct activities. The open pit project completed in 8 stages and each stage has its own distinct activities and each activity took some specific time for its completion. The two projects are shown in both tables below identifying the cost of delays based on one employee. Table 4.1 shows a detail break down of lost of man hour which result in cost impact of a project (open Pit Mine) with much of problem area in the project study stage. Table 4.2 is also another open pit mine project in northern Alberta that was executed after completing the project. In table 4.1, all the man hour indicated is based on one employee among the involved discipline, which means the total man hour expanded by one employee in all the departments. As indicated from the chart, much of the cost is incurred in project study. 16 P rolect # 1- Oll u nd n r< ;eel Stage# STAGE NAME Activity# Activity Name 1'-'"'" 5040 3 Approval Stage 720 Total '• Listing the skills required 168 168 3 Transferring Employees 336 4 Advertising vacant positions 336 5 Screening and Interviewing 216 6 Engaging new hires 264 7 Orientation 336 Total I Identify and Duplicate scope 1944 1 2160 3 Identity Milestone 4 Complete Draft schedule 2880 1 Identify CWP 240 2160 l . Align payment system to milestone 432 1 144 3 Verify milestone 720 Total 384 1680 I Review the final schedule no I 2 Map all planning/schedule to cost 792 3 Interface the complete schedule to cost control 768 4 Monitor Progress Update 366 Total 2646 1 Change management Analysis 1soo 2 Cost Impact Analysis 504 3 Schedule Impact Analysis 1800 4 Close change management__ Total 8 Closure 336 5616 2 Align project schedule to invoice 4 Complete payment 7 Change Manage !<'nt ~ 2sso I 2 Classify deliverable to level 3 Total 6 Project C{)ntrol 1440 3 Apply the Estimating technique 4 Complete Estimating 5 Project accountin 168 1992 2 Identify Modified Scope Total 4 Estimation 72 13032 2 Listing the professionals with the Skills 8 Team building 3 Project Draft ~ 2 Feasibility Stage 4 Project Charter 2 'P r oject Resourc 1\g Man houn I 508 4612 I Control 168 1 2 Monitoring 196 3 Closure & lesson learned 96 4 Audit 172 Total Grand Total 632 38634 17 ~ Pro ect 12· Oil s.nd proJect St-c•• M•n hours STAGENAM£ 1 Ptojectaudy 1 Conceptual stqe 7200 2 ll ~ 5040 3 ApprO'o'al Sta&e 672 4 PrcjKt Charter 72 12014 Tot.\ 2 Project Resou rcint: 1 3 Jrans.ferrinc mp 336 ~ 4 Advertisinc vaGJnt po5itlons 336 S Serecnin& ;tnd lnterYiewinc 240 6 Enaaeirc new hires 192 ., orientation 144 8 144 Teem buildin1 172S Total 3 ProjectOraft 1 Identify and Duplicate lt.ope >150 2 l ~ 1920 3 kientify Milestone 4 Complete Draft Modified Scope 21180 1 IOentifyaYP 2 Oassify ~ 21180 Apply the EstirMtinc ~ 4 Completa btimallna .. ,..., 1 Allen Plyment system to m le e ~ ~ to invoice 3 Verify milestone 4 Complete jHyment Total 6 Project control 1 SS1: Review the final schedule 2 Map all planntna/schedul.t to co)t 288 3 1 1nt.er1ace the eomplete Khedule to cost control 168 e 240 .oQI . 1176 1 a a ~e manacemenr Analysis 1800 2 Cost Impact Analysis - l ~ ~ l~ lmp~ aose ~ ll~ Analysis em~ 1 Control 2 Monitorinc 3 ~ & lesson 1e1rned 4 Audit Grand Total I 504 Total 8 Closure ,. ., . ,... 1061 ~ p 1 Change Management .. , 2160 ll 'Total Ali&l'l pro}Kt I 336 e a le to lewf 3 3 2 I 1440 ...., ~ le ~l S Proj«t ..cc:ountint ,.. 168 Lk"lirw; tht skills required 2 Ustine the professionals with the ~lll 1800 504 ,.. I "" ,., 102 ... 17172 Design and construction of Plant - Oil sand: The EPC design and managed the construction of froth treatment plant for oil sand slurry. The project is located 75 km north of Fort McMurray, Alberta. The total man hours expended on the project was 39124(table 4.3). Design of plant project is typically different from open pit mine project, because of the required skill set and the complex nature of module assembly. The total duration of the project from start to 18 finish was 21 months. The work chart in terms of stages, activities and man hours required for each activity for design and construction of plant in oil sands sector are shown in Table 4.3 ~lll ..n - Piou,. l760 2 .Fe•sibiWtv Stqe 7200 720 3 :.A,pprD'Iil suee .( ·Pro)«tCharter 48 ll728 olal 1 .Ustinc: thr sk.llb required 2 Ustine tht! p 168 al~ with ttM! Skills e 3 Tr•nsfertinc Employees 336 o4 [Advertisint: vaGant positions 336 .S ScrHninl ancllnlervit:winc 144 6 En&atl,. new l'lires 7 Orientation J20 72 168 8 Team b..l!ldin 1512 oul 1 Identify 1nd t>uplicate scape 2160 2 Identify Modififll Scope 2160 3 identify MHestone 4 Complete Dnft schedule: e to leve-13 ~ 3 Appty tlw: btim1tinc trdlnique 4 ~ e .5712 1 Allan p.ayment s.ystem to milestone 2 AJi&n project schedule to invoice m l~ e aavm•nt 1 Review 13>2 ~ final le ~ Map all planninc/schedule to cost lnterfae« the m~ ~le e schedl.lit to cost control .....4 ~ PtClfilr.•ss__Upc!!JW AnOilysis Cost lmp.ct AMiysis Schedu .. lmP«t Atlfllysls a~ chuce m1narement Jotal 8 Closure 1 Control 2 Monitcfinl l C'tosun!! & lesson ~ lm Audit 4 total Grand Total """I 648 360 336 1824 Total 1 ChanJe m~m eme 4 144 336 Total 6 ProjKt control 4081 504 3 Verify milestone 4 336 2160 336 h1im.tinl Tohal 5 Project accounrins 1440 792 2880 I 1 ldentityCWP 2 Oanifv I 6552 otal 4 Estimation 168 1800 I 504 ....,.., 1800 '504 128 108 48 ...... <21 21 Prolect ,. 5- De:sjcn and Constnn;tion or ~ e~m AN.isted Gravity Drafnace ISAGD1 ActivityN.me STAGE NAME Conc:el)tuai staail! 500 Fus:ibilityStiJ8• 8100 Approv•l Stage 71JJ 4 ProjKI:Charter 48 1 Pro;-=tstudy 2 PtcJt!itt Rfl01.1ttln& Ustina tM skills1"C!'quired 168 Listina: the- proreuionels with the S&ills 418 S4S 3 Transferring Employees 4 ncant po5itions ~ 5 Screening and l l ~e l 6 Encaaull new hires 72 8 Tumbulldlng ~ a l 308 Total 2112 tdenttfy and DIJC)(Iate scope 2160 2 ldentrfy Modified Scope 2160 3 kimtify 2100 l~ e Total 1 >880 1 l ~ 2 aasslfV ~ to lew! 3 336 m~l~ tKhl\lque 2160 e 3 Apply the 4 Complete [stimatint: 336 5712 .Tot.l S Proj«:t accountil'l& 1 Allen payment system to milestone 2 Alian project schedule to irwoftt 144 3 Verify milastone 504 4 mp~ e PJVment 336 1392 Tot:JI i- Project control 1 Revit!w thefinal.sdltdi.H 2 MaQ ~ p a l a ~ e to cost 3 Interlace the complete schedutt: to cost control 4 Mortitor ~ Upd.litt: ••• 360 336 W4 Total 1 Chante mal'lqement al~ 2 Cost Impact Antilysis 3 Schedule Impact Analysis 4 dose ch•n&e m1nqernent Tohl a Closure I 880 4 Complete Dr.aft schedule 4 Estimation 144 uo 7 Orientation 3 336 ... 504 1660 1 Control 144 2 Monitorir'W 128 3 OoSUte & l~ 4 Audit ..., l!!:arned 1 108 72 452 Gr11nd Total Design and construction of Mine-Metals Project - Saskatoon: The design and construction of metal mine in Saskatoon is a project that is located 86 km east of Estevan. The man hours expended in the project was 39800(table 4.6) and the duration it took to complete the project was 18 months. Electrical engineering department was one of the major areas that delayed the delivery of these packages. The work chart m terms of stages, activities and man hours 22 required for each activity for Design of Metals Mine Projects -Saskatoon is shown in Table 4. 6 Proiect # 6 • DesU.n of Metals Mine Proiects -Saskatoon Stage# STAGE NAME 1 Project study Activity# ActivitY Name Man hours Conceptual stage 6220 '- Feasibility Stage 8200 3 Approva l Stage 640 48 4 Prqject Charter 15108 Total 2 Project Resourclnc Usting the skills required 168 , Usting the professionals with the Skills 388 3 Transferring Employees 4 ,Advertising vacant positions 336 546 5 's creening and Interviewing 144 6 :Engaging new hires 110 7 Orientation 120 8 Team building 308 Total 3 Project Draft 2120 21601 1 Identify and Duplicate scope 2 Identify Modified Scope 2160 3 Identify Milestone 3420 880 4 Complete Draft schedule 8620 Total 4 .Estimation ----------·-- --------1 Identify CWP 28Bol Classify deliverable to level 3 336 3 Apply the Estimating technique 2265 367 4 Complete Estimating 5 Project accounting Total 5848 Align payment system to milestone 4o81 2 Align project schedule to invoice 144 3 Verify milestone 504 4 Complete_payment 336 1392 E Project control 1 Review the final schedule 648 3 Interface the complete schedule to cost con ol 370 4 Monitor Progress Update To_taj_ 7 Olange Management 4801 2 Map all planning/schedule to cost Change management Analysis ---------···· 386 1884 180ol Cost Impact Analysis 504 3 Schedule Impact Analysis 1660 444 4 Close change management 4408 8 Closure Control Monitoring 1441 108 3 Closure & lesson teamed 96 4 Audit 72 Total Grand Total 420 :i9800, 23 Design and Construction of Tank Farms-Oil sand: The location of the project was 75 km north of Fort McMurray, Alberta. The project was for construction of storage tank that can hold up approximately 150,000 liters of bitumen slurry before transporting to the upgrader in Edmonton. The man hour expanded on the project was 30884(table 4. 7) from start to finish and the project duration was 21 months. The project management department delayed the decision of either proceeding with the project or not. The work chart in terms of man hours for Design and Construction of Tank Farms in oil sands sector are shown in table 4. 7 24 Table4 7 Project# 7 • Des!sn itnd Construction of Tank hrms in oil sands Staael STAGE NAME 1 Project study Activity I Manhouf"' 1 Conceptual Jtage 4320 2 Feasibility Stqe 2160 3 Approval St1p 720 72 4 Project:_Charter .. Total 7l7l 1 listin& the skills requtrel 3 ·Project Draft 1 a~ and pl e ~ e , . 2.160. 1 ~ 2 klentlfV Modified Scope :3 tdentify Milestone 4 ~ a ., 2640 le ... J Total 4 Estimation 1 Identify CWP 2880 2 aasmy detiwnble to Ieveil 3 Apply the Esthatinc ~ 4 l .... 2265 e Com tete [stimlrtin 367 Total S Proj('ct accountlna -J l . Aiiln PI"YmMf: system to milestoM 144 2 Ali&n proj«t schedule to invoi« 3 ~ milestone 334 336 .4 Complde JHYment 6 Project control uu 1, Revitw the final 2. Map all 3 l l~ ~ 4 ~ ~ 4801 e to cost 648 e ~ c:omphete ~e ~ p a ~ otal 1 'chan1e mu•cement Analy'is 2 Cost lm~ Analysis 8 Oosure ~eme 1 ControJ 2 Monltorinc 3 dosure & I@S.SOn ea ~ to co5t ~ l .... I 370 386 1800 50< 3 ScMd'* tmpact Anl:fy$1$ 4 OOR ch•nge . 1440 ~ .... 1710 .... ••• •• 121) 4 Audit 72 Totll ..... Grand Toml 288 Design and Construction of Froth and heat exchangers-Oil sand: The location of the project was cold lake north eastern Alberta. The project expended total man hours of 10704 and project duration was 13 months. The project involved the design and construction of second train to optimize the performance of the froth treatment plant. Supply chain and document control processes were the causes of late delivery of packages to the client. The firm has also been able to execute one power project- which is mainly the front end engineering design in the united state of America which was supported by the group in Calgary. The front 25 end of the project design phase expended approximately 32093(table 4.8) man hours. The work chart in terms of man hours for Design of Froth & Exchangers project in oil sands sector are shown in Table 4.8 Prolec:t # 8 . nO; •• - - ~ ~ r ~ ~ .._ "', ~ - .... ·•- I • ......... ~ 1.: ~ ~ ~ ~~~ - ..- ~ ~ ' ~~ .. ..... Piping engineering: The first step in the process is the development and planning of all piping scope in the project which involves the piping manager and the leads .The second step is the interfacing of all the deliverables with engineering, the stress and piping specialists and engineers collaborate on all standard requirements to benchmark and compare information from similar types of project for the client to make effective decision. The last step is the review and approval of drawings. Fig 4.3. 7 Depict Piping engineering departmental disciplines. 42 Process engineering: The first step is the development and planning of process scope which involves the process manager leads. All the process scope is usually determined at the first step of the department. The second step is interfacing with engineering deliverables and this involves input from all the engineers and their leads. The last step is the review and approval of drawing after completing all calculations and the engineers are responsible for the last step of the process. Fig 4.3.8 Depict Process engineering departmental disciplines. ----1------ Process Engi neeri ng Manager Lea ds Engineers Document management: The first step is the establishment of the document structure and policies which involves the document manager and the leads. The second step is publishing transmittals to engineering group for review, the transmittals are sent through an internal system known as fusion. All the activities in this process are done by document analyst and DFO leads. The last step is publishing of transmittals to vendors. The document leads and 43 document technician are involved with sending transmittals to vendors. Fig 4.3.9 Depict document control departmental disciplines. Docu ment ma nagement Ma nager Civil/structural engineering: The first step of the process starts with the development of civil and structural scope of the project, the manager and leads are involved with the planning scope. The second step is interfacing all construction work packages to engineering deliverables and the leads and all the engineers are involved in this process. The last step is the review of drawings and approval and the engineers are primarily responsible for this process step. Fig 4.3 .1 0 Depict civil engineering disciplines. Ci v i l/structural en g ineering manager Leads 44 Design engineering: the first step in the process is development of all design scope of the project which involves the design manager, package leads, technical coordinators and engineering special ists. The second step is managing all deviation design request (DDR) and non-conformance report (NCR). Change in material during manufacturing of equipment result in this type of report. The engineering specialists, technical coordinators and technical specialists are responsible for managing DDR and NCR. The last step is reviewing all the DDR & NCR reports for either approval or rejection. Technical specialists are primary responsible for this process. Fig 4.3.11 Depict design engineering departmental disciplines. Engineer mg design mana ger ~ ~ ~ -~ - . ~~ ./ 45 PROBLEM AREAS OBSERVED IN THE PROCESS 4.5 The project management department manages project deliverable and resources. The feasibility study and identification of project scope takes long duration of time because the project manager is not involved on time. The reason he/she was not involved in the feasibility stage was because project manager is not authorize to be part of feasibility process to protect unbiased information or feedback. Input from different departments to project scope also takes time due to the shortage of man power when specific information is required which is generally due to vacation planning problems. The problem is as a result of unplanned vacation planning /schedule in most of the key resource departments and transfer of personnel to other departments. Fig 4.4 .1 Flow diagram in project management area Conceptual Stage Project Charter .. , Feasibility Stage - tJ- ------+ l Approval Stage Project stu nf'onnation gathering Feasibility Stage Opera.tion Developm nt of' Scope Long duration of project study without clear time line 46 2 Slow information gathering due to shortage of manpower 3 Long duration of developing scope of work 4 Unending regular review meetings The problem with the establishment of project by signing a project charter is feasibility stage and non commitment of resource to provide input for the project charter, which is due to lack of man power in Calgary labor market. It takes long duration to complete the feasibility study; this issue drives the probability of the project existence to be very low and complex. The success ofthis type of project depends on how thorough and effective the feasibility was done. The existences of issue like long duration and high turnover among the staff develop into a major constrain and it is part of the labor shortage problem in Canada. 5-6 months duration of feasibility study is one indicator that shows the existence of the problem. High turnover is one area with one major symptom that could be a good indicator that delays project charter mile stone. The development of an effective template, which will capture the complete scope of the feasibility work and eliminate any opportunity of causing a long term problem. Establishing a clear gate phase on all time line can help save 2 months from inception. An excellent check list should be develop listing all required expertise in any feasibility study, which will help the firm have a clear proactive plan in place to deal with any contingencies of resource planning. The supply chain strategy planning and control scope are developed at these process level which involves all the silo managers. The issue at this stage is the duration it takes to develop the supply chain scope of work. Purchasing and material control process takes longer duration because of late arrival of technical requisition to material assistant. Expediting and equipment delivery pitfall comes from disconnection between construction management team and project execution. The problem can be resolved by reducing the number of interface between 47 executions and expediting. The singular point of contact between the vendor and the project team should be the expeditor to streamline the flow of communication Fig 4.4 .2 Flow diagram in supply chain area Supply chain planning and control t - --oot Technical ReQuisition Interface and CMT Justify need lnit.ia.t:ion oCtcchnica.l note e ~ and sign o n · preparation ol-Requisition 1 Long duration of initiating technical note 2 Poor justification of need delay sign off 3 Lack of expediting mechanism to register and sign off 4 Long duration of preparing technical requisition The problem area is the technical requisition which takes lots of time to prepare technical note for purchasing, because it takes lots of analysis based on criticality of material as specifi.ed by project standard. The process takes over 3 months to complete. The root cause of the problem is lack of evidence to justify the requisition. 48 The problem can be eliminated or reduced by establishing time line for all technical requisition and processing change order even after any changes, it saves over 2 weeks from the current 6 weeks. The process will require reducing the number of meetings to 3 instead of the current countless numbers of meetings and establish a standard check list to capture both complex and simple requisition, which will help speed up the current processes Account departmental process issue is in the invoice reconciliation and verification. It takes long duration to process invoice which involves input from all responsible discipline which is not specific, these add to the current lead time causing the problem. The process can be streamline by eliminating all non value activities. Fig 4.4 .3 Flow diagram in account department area Align payr.n.en't syst.em miles1.one 1:0 ~ ple e .J»ayxnent. Definition o Alignment. und vertfY 1 long duration it took to define milestone 2 long duration it took to establish payment schedule 3 High rate of turnover of staffs of this department 4 Poor tracking to capture all actual The problem starts with Payment definition without physical verification is a major problem in this stage which makes it difficult to match real payment by actual work performed. The process delay mile stone verification by 3 months which is against the norm of industry 49 practices. Milestone variance from the actual is a sign or good indicator to the growth of the issue. The gap keeps getting wider from the planned to the actual happening which is making it difficult to capture the milestone to execute payment. The lack of standardized variables to capture verifiable milestone payments is a major root cause. The solution will be to develop a comprehensive checklist to define the cost accounting or expenses to milestone payment system to be standard 30 days, which can implemented by combining both verify milestone with align project schedule. The project control departmental process problem is the actual time it takes to set up budget and complete scope of plan. Estimating a good budget is time consuming because of the number of discipline involved, the process can be streamline to be efficient by reducing the duration of providing input by all responsible disciplines that are involved. Fig 4.4 .4 Flow diagram in project control area .Ft...e....,.ie....- 'tl"-e flz:».al schedule 1\.'lonlt·or pmgress LJpdu&.e 1A-a't:er1B.ce tl"l.e c::omplc t:c tilche-dulc: 'to cost con·L'I"'CJI -st..obJish. ~ ::r.....t:odel 1 Lack of manpower to develop the cost codes 2 Duration it takes to establish the cost model so 3 Long duration to align plan and cost The problem is the long duration it takes to develop all the cost codes and budget. Extension of cost model is one sign that indicate the growth of this problem, it takes an average of 4 months to prepare complete project control dashboard. Wrong forecast and wrong cost impact on all activities is the major root cause in this stage. Link up the cost movement to all planning and manage all segmented scope accruals. Monitor and control of all indicators will help eliminate or reduce all non value activities and justify any change that will drive the schedule and budget. The action will reduce time line to produce budget from the current 4 months to 3 months. Mechanical engineering departmental process issues is interfacing all plan with work packages The process work along with all silos to identify and sequence all deliverables to meet design specification. The problem of long duration can be reduce by mapping all mechanical scope to the detail plan of the project and then request trend for any change of scope or modification. 70% of the mechanical scope can run parallel and can also be accelerated base on criticality of time. Fig 4.4 .5 Flow diagram in mechanical engineering area 51 Develop mechanical scope Interface plan to packages Mechanicalsco .e ntegrate schedule 1 Long duration of establishing the mechanical scope 2 Duration of developing the master plan 3 Duration it took to sequence all mechanical packages 4 Cost of integrating the schedule which will affect the cost of available man power. Problem is mechanical engineering scope duration and interface of deliverables to meet master plan schedule. The causes of the problem are high rate of turn over which is due man power shortage in Alberta. Combining scope development with planned interface will reduce the current lead time of 3 months to 2 months. The instrumentation departmental process problem is aligning all scope to heated enclosure takes long duration, because the complete lead time to align and deliver enclosure after approval drawing is 6 weeks. One of the major issues is dependency on one supplier to supply all the instruments will bump out the delivery schedule, because these will add to the lead time and makes the internal process complex. The problem can be resolved by pre-qualifying more suppliers to provide the instruments. 52 Fig 4.4 .6 Flow diagram in account department area I. _ e l ~~pm~~ae ~~ e ln.tegra.t.jon scope a ~ le ---'L. ! __ m la :Enclo,s.u.;re p e ~e ~ ---- Delivery schedule 1 Expenses associated with all winterization packages 2 Cost and duration of man hour to identify all non heated enclosure instruments 3 Cost of man hour to complete the integration 4 Cost of expediting delivery of all transmitters The Problem in instrumentation is the alignment of instruments to heated enclosures which takes over 6 weeks and impact project execution schedule. The root cause of this problem is duration it takes to identify winterization instruments, which are located in different parts of the world. Cost of man hour is another process that has problem in the operation, because of the cost of instrumentation experts. Establishing a push strategy will eliminating or reduce the problem and also establish a strategic relationship with a sole supplier and streamline the delivery time from the current 6 weeks to 3 weeks. Document control departmental process issue is publishing of wrong transmittals to engineers which generally increase the lead time of completing document review. The 53 problem can be resolve by creating a good tracking system to capture all revision from both engineers and suppliers. Fig 4.4 .8 Flow diagram in account department area Publis h t:rens D1itt:n_t to c nsineerinM Publi s h t:ro n s mitt: a l "to vendor R eview 1 Long duration to download and network problem 2 Duplications of document number 3 Long duration it takes to review all documents 4 Wasted man hour to locate wrong publish documents to fusion The problem with document control is the time it takes to download transmittals and wrong document numbering. It takes an average of 4 weeks to complete all transmittals of engineering documents. Creating an internal system to track all live transmittals will reduce the current duration to 2 weeks. The tracking system will have the capability of reminding the engineer in an emails when documents arrive coHaboration systems. The engineering design department process issue is managing all DDR (deviation design request) and NCR (Non conformance report). Routing of these reports through all discipline could take 6-8 weeks which impact the final delivery of the packages. The report should identify all involved discipline and route it specifically to discipline that will review and provide signature. Fig 4.4 .3 Flow diagram in engineering design department area. 54 Dev elo pment of'a11 design s c ope Manage a ll DDR and NCR R.cv ic '"' a ll t c c h.n ic n l repon.s 1 Longer duration it takes to generate DDR and NCR 2 Wrong registration of discipline with different distribution 3 Delayed processing of information and related expenses with project execution 4 Cost of rejecting DDR and NCR The problem is the duration it takes to generate ddr and ncr, which is mostly caused by both the vendor and engineer exploring all alternatives to avoid it. The registration of wrong disciplines on the distribution list is another cause of delay. The problem can be reduced or eliminated by establishing applicable template to remove all non related discipline when processing NCR or DDR; the action will reduce the lead time to 2 weeks from the current 5 weeks. 55 Table 4.9: Details of delays and cost impact based on one departmental employee #I Nome ofShlil!.. PrULitaa N•l"'" oful'vbkm CMioe!l I Projcc:l monogeme•l Man power Resource? Jack of man power lack of man power Long duration of project study slow informatjon gathering slow definition of project SGOpe Endless long review meetings ,due to transfer of lob SCOile to marw hands 10 10 10 10 6400 Total Delays in initiating technia!l note- due to project 4b 32000 2 2 3 720 1440 2160 Late deliveries 2 Supply ckaia Cost over run review from engineering Change of scope Late deliveries poor justification of needs No expediting mechanism for sign off Long duration in preparing tech requisition - due to del81' in anr.