Delivering Predictability, Maximising Supply Chain Value

Stephen McNeil
When embarking on any project, confidence in the outcome throughout its lifecycle is essential for the project team and the business.

This is never more critical than when executing complex, high value, long-term projects in frontier locations with an integrated supply chain. A predictable schedule and cost outcome effects more than just the project result. Share price, market reputation, partner relationships and supply chain perception are also at stake. The process of supplementing Approval for Expenditures (AFEs) is not an easy one or a quick fix for a distressed project.

Delivering Predictability

To help increase the predictability of your project outcomes it needs to start with ‘right sized baselines’. Creating a master control schedule and estimate, covering all project phases and scopes, allows you to conduct a qualitative and quantitative risk analysis, measuring the probabilistic cost and schedule outcomes and defining the areas which present risk. This should include a review of the integrity and quality of the contractors’ submissions through benchmarking and the use of forensic analysis tools. Throughout the project the contractors’ schedules and reports should be validated and the master control schedule utilised as the company source of progress status as well as the single source of forecasting.

Ongoing risk analysis and rigorous implementation of scope containment via change control will further guarantee the predictability of the cost and schedule outcome of your projects. Cost and schedule trends should be monitored in detail and utilised to generate unbiased forecasts. The predictability is based on understanding the uncertainty and location factors, setting the right baselines, accurately measuring performance and trends and communicating unbiased forecasts.

Maximising Supply Chain Value

We often perceive that we have little control over the value we get from our supply chain; this is a misconception. The correct specification, exploiting competition in the market and applying the required effort are key to maximising value. As an example, in our personal lives we have a requirement to commute; we might drive in a Fiat which costs $15,000 with $2,000 annual OPEX or a Ferrari which costs $250,000 and $5,000 OPEX; we might consider leasing as an option on either vehicle, alternatively we could take the bus or train. That gives six options in the supply chain which will all meet the requirements of getting to work, with four of them requiring zero CAPEX.

Selecting the optimal contracting strategy for your projects based on a balanced scorecard including; CAPEX constraints, geography, interface risk, technology challenge, schedule requirements, project drivers and third party factors, will highlight the interfaces and feed back to ‘delivering predictability’. These early decisions are where value can be seeded. Poorly let contracts will not only be to the detriment of value but will adversely impact the predictability of the outcome. Tender and contract documents need to be developed in a way which engages and motivates the supply chain; which manages, contains, motivates and rewards as well as maximising the value and minimising the risk of delay or claim.

Releasing the maximum value from the supply chain is based on understanding the project and business drivers, fully engaging the supplier community in the right way, motivating the elimination of waste and applying rigorous administrative management.

In Summary

Getting the most value from the money you spend in projects and operations clearly benefits your company, whether that be share price, employee satisfaction, supplier satisfaction or any other measure. Adding predictable outcomes to your projects is a significant enhancer to the above and in areas such as reputation in the market place, employer of choice, customer of choice and partner of choice. By being tactically aware of what you are doing and by applying the right effort in the right places at the right time and getting the basics ‘right’; you can deliver predictable outcomes and can release the maximum value from the supply chain.