1. Lean thinking in EPC Projects
November, 2014

2. Outline
Characteristics of EPC industry
Lean and its traditional connotations
Lean in a new light: Essence and example
The basic questions

3. The traditional approach is to look outside to find reasons why EPC Projects exceed timelines and bleed profits
Often cited reasons
Controls
Long drawn projects - 2 to 4 years
Each project is different - business model, customer, location, risks
No right of way, clearances not obtained, fronts not available
Local influences - weather, culture, political climate, access and logistics, skills, unionized work force
Client pays for material supplied to site, that does not get installed
Customer’s inability ability to pay
Many hand-offs – internal / external
Customer urging to “go slow”
Many opportunities for problems to be hidden behind externalities
Scope
Schedule
Cost
Quality

4. Lean Construction: Most often understood as a project site level waste elimination approach
Tools stored far away from the workmen
Poor communication systems (e.g., operators move to get instructions)
Equipment and practices not ergonomically designed
Material transported to the working area several weeks in advance
Threading more reinforcement bars than required
Unbalanced activities (e.g., many workers wait until some others finish their activity)
Workmen waiting as reinforcement material is not available when required
Overall work delayed as design drawings are not available from client
Tying reinforcement multiple times due to improper tying the 1st time
Assembling formwork material in the incorrect sequence
Changing activity plans because of wrong interpretation of design drawings
Unidentified and mixed materials
Storage areas not marked clearly
Excess stored material prone to damage
The benefits of waste elimination seem obvious…
… but do we see profits at the business level from such initiatives?
Reinforcement material handed off multiple times
Use of slow speed tower cranes`
Confusing work instructions
Multiple versions of daily activity plans

5. We used Lean thinking to evolve an operating strategy for timely and profitable execution for an EPC business
Proposal, Bidding and Contracting
Procurement
Construction / Installation
Commissioning & Testing
Planning & Mobilization
Engineering
Earlier: Entire project is one big batch
Now: Finish one “work unit” at a time
Entire project with some conventional milestones – material delivered, tonnes of pouring, tonnes of fabrication 1 5 2 3 4
Finish all engineering for the project in shot
Place all procurement orders at once
Make erection schedule for the entire project
Engage contractors for the whole project
Break project into “invoicable” work units
Sign off delivery sequence of work units with client
Each work unit has its EPC plan
Finish one work unit and move to next one
End result
End result
Poor profitability and delay
Timely and Profitable delivery

6. Once the operating strategy was in place, local process changes were introduced using Lean principles
Quantity release mechanism
Introduction of Quantity release calendar
Full kitting for Invoicable work units
Lot/project wise Production
Project wise full kitting
Packaging& forwarding
Weekly invoicing
Engg
Introduced Concept of
AMT (Area management Teams)
OEE (Overall equipment effectiveness)
Process x
Process Y

7. Earlier: Transportation lags demand Now: Transportation meets demand
We used lean thinking in construction for demand levelling resulting in reduced operating costs
Earlier: Transportation lags demand
Now: Transportation meets demand
Factory
Demand
based To
Work Front
Daily
Milk run
Factory To
Yard To
Work Front
Higher Logistics Cost
Lower Utilization of trucks
Material non availability
40% lower Logistics Cost
Higher Utilization of trucks
90% + Material availability
Demand Fluctuations
Supply strategy to meet demand at site

8. Next we adopted a manpower levelling strategy to improve productivity and reduce waste at project site
Earlier
Bottleneck
Manual unloadingManual unloading
Manual segregationManual segregation
Threading
Shifting
Fixing 1
Fixing 2
Fixing 3
Fixing 4 x6
x10
x12 x4
x25
x60
x50
x12
Now: Resource balanced & Waste eliminated
Manual unloadingManual unloading
Manual segregationManual segregation
Threading
Shifting
Fixing 1
Fixing 2
Fixing 3
Fixing 4 x6 x4
x25
x60
x130
x12
Productivity increase by 60% and manpower reduction by 9% through resource balancing & eliminating waste at each stage

9. Lean applied at both strategic and local levels leads to breakthrough results
Factory- OEE
Complete utilization of factory capacities
40% increase in throughput
Qty release from Sites to Supply Chain as per invoicable work units
Supply Chain delivering right material for the work units at the right time
Quantity Release
Lot-wise production
Manufacturing cycle time of invoicable work units reduced to 30%
Production and dispatch of kits required for work units
Kits for invoicable work units
Reduction in manpower at stores by 90%
Immediate issue of material to subcontractor in kit form
Erection cycle time of work units reduced by 30%
Lean Logistics
40% lower Logistics Cost
Higher Utilization of trucks
90% + Material availability
Resource balanced Execution
Labour Productivity Improvement
Reduction in Construction Cycle time

10. …Through what deliverables
Processes introduced for transparency, coordination and execution discipline – not relying only on mindset change
What was done…
…Through what deliverables
Open interaction and consultation among all stakeholders
Eliminated “wishful thinking” about target quantity and dates. No imposition of targets that cannot be achieved.
Process for site build order consolidation and prioritisation for factory supplies
Adherence to time schedule for releasing quantities – build orders, procurement orders, manufacturing raw materials
SOP for quantity release
Responsibility and action-by dates
Documented Qty Release process
Activity timeline with dependencies

11. Lean thinking in EPC: a few basic questions to answer
What is our invoicable work unit?
What is our “EPC factory” - structure and processes that deliver the work unit profitably and on time?
How are the drawing requisitions, vendor POs, build order quantity releases, manufacturing quantity releases aligned to the schedule for delivering the invoicable work units?
How do we enable front-line people to solve everyday site problems (e.g. resource sharing) at their level?
How do we set up local level processes / systems for resolution (e.g. resource levelling, site skill development centre)?