Supply chain reaction

mark goodwinFor all the recent technology developments, project management methodologies, and innovations in the offshore oil & gas supply chain, completing major capital offshore projects on time, on budget and to exact specifications remains a considerable challenge. McLaren Software's Mark Goodwin (pictured) looks at some of the challenges facing document managers and controllers and identifies some of the options for a more integrated and flexible approach to document control and improved asset integrity management.

A 2012 study conducted by consultants Booz & Co of 34 large-scale oil and gas industry projects (many of them offshore) found that almost half underperformed with 30% costing more than initially planned, 12% completed late, and a third demonstrating significant operational issues once commissioned. In addition, 2011 research from Schlumberger Business Consulting found that 20% of large oil and gas projects ran more than 50% over budget – a doubling of the figure of 15 years previously. Why is this?

Certainly, many offshore projects have become larger, more expensive and more complex over the last few years. Australia's Gorgon LNG project, for example, is now running at a budget of US$42 billion!

The structure of projects has also become more complicated. Rather than the nomination of a single EPCM (engineering, procurement and construction management) company, today there is an increasing number of interfaces between different stakeholders and differing contractual arrangements.

Probably the biggest challenge, however, is the management of the vast supply chain that defines so many major offshore projects today.

Managing the supply chain

Today, the supply chain on a major offshore project can stretch to hundreds of vendors from different parts of the world – all with their own processes, cultures and standards. Subsea equipment parts, for example, may be manufactured in China, constructed in eastern Europe and then integrated into sub-assemblies in South Korea before being deployed by the EPCM company in the Gulf of Mexico.

The sheer volume of documentation generated, the number of organisations involved as well as an environment of stringent deadlines and contractual obligations makes managing vendor documents and engineering deliverables a highly challenging process. Yet it still remains a process that is central to the successful completion of offshore projects and in reducing risk.

Against this backdrop, an effective engineering deliverables and vendor document management system is more important than ever. Get it right and you can track the thousands of project-related documents, ensure that all regulatory requirements are met, manage corporate risk, and ensure the eventual successful handover of the project. Get it wrong and you are potentially facing huge pressures on resources, time lost chasing suppliers, project slippages, cost overruns and potentially damaging disputes with suppliers and regulators.

With so many compliance requirements on major capital projects today, not reviewing the appropriate documents, providing incorrect information to regulators or failing to put in place the appropriate procedures to ensure that vendors are compliant can have significant ramifications.

A status update

So how successful have operators and contractors been to date in putting in place effective engineering deliverable and vendor document management processes? The answer is mixed.

While many offshore projects are characterised by strong project management methodologies and innovative document management technologies, a lot of processes continue to remain ‘manual-focused'.

Contractors, for example, often have to engage in large-scale copying between files systems in ftp sites, web collaborations site and document management systems while, at the same time, trying to track metadata, such as document names and numbers, between spreadsheets and databases.

Huge distribution matrices also need to be built to inform document controllers which documents have gone where. Such an approach, however, remains highly vulnerable to human error as well as putting huge pressure on existing internal resources.

There is also little consensus at the technology and systems level as to how best to manage documents on large-scale projects.

Some owner/operators tend to build their own customised engineering deliverable and document management systems using internal resources or system integrators, where appropriate, but basing all the main processes on existing databases. Others purchase ‘off the shelf' software which provides a configuration layer on top of their existing systems. Some look to outsource their entire vendor document management systems with data often based externally in the cloud.

So, how can a systematic approach to engineering deliverables and vendor document management be achieved? What are the main prerequisites of an effective vendor document management system on offshore capital projects today?

Automation with the human touch

Successful engineering deliverable and vendor document management can only be achieved through the widespread automating of business processes, reducing human error and resource requirements and improving integration across the project.

Automation comes in a number of forms but might include the automated calculation of planned workload from the forecast submission date of documents across multiple contracts and purchase orders (POs), transmittal gap reporting to determine who received the last issued revision but has not received the latest one, and increased visibility into the performance of projects and contracts by looking at the status of deliverables.

These automated capabilities, however, need to run side-by-side with the project team. A typical vendor document management process, for example, would see contractors and suppliers uploading their documents over the internet to a transmittals portal, a secure portal outside the corporate firewall that receives and submits project documents, drawings and work packs. Audit records are then automatically recorded.

Documents are then automatically validated and released to the data repository with no manual release processes required. The engineering manager would then be informed about the newly transmitted documents and the review process would be triggered where changes can be marked up in electronic format simultaneously by different parties.

One particularly useful tool for monitoring the project is what is called a projects dashboard. The dashboard provides graphical indicators of progress according to key indicators and allows the contractor to drill down into detail on highlighted areas. What is the current status of each deliverable in each procurement package? What contract packages are running behind with overdue reviews? What milestones are we missing, or endangering because vendors are not submitting information in time? These are the kinds of questions that can be addressed and answered through the projects dashboard.

Such information is crucial in providing transparency to the vendor document management process, providing increased control and visibility and an example of manual and automated processes working alongside each other.

One such example is a vendor document management system McLaren recently deployed for a major oil & gas project offshore Western Australia to cover the FEED phase. A third party interface and a transmittal system needed to be rolled-out to meet the requirements of document controllers, project and business unit consumers, and other contributors. Different levels of security were also required.

The McLaren solution consisted of automatic numbering, standard document templates, and a transmittal management process and worked alongside the engineers and existing document controllers.

‘On' or ‘off' premise

Another key decision that contractors will have to make will be on how much they are prepared to outsource their vendor document management systems.

There are differing arguments here. Those who rely on their existing ‘on-premise' internal processes and look for light customisation often end up bringing in system integrators with potential costs spiralling and technology becoming the key driver as opposed to the project's supply chain needs.


Alternatively, those who opt for an outsourced solution, with the benefits of a web-based collaborative approach, all too often ignore their existing internal processes and ERP systems which have been built up over time and which can offer significant value.

As is often the case, the ideal solution tends to be a compromise between the two approaches. The easier integration with other internal inter-departmental processes of ‘on- premise' solution combined with an ‘off-premise' cloudbased application where the project world can integrate with the operational world and where numerous organisations can collaborate within a more external-facing environment.

So what are the key characteristics of the ideal engineering deliverables and vendor document management system?

As mentioned earlier, it should strike a balance between the latest automation and the human touch and should be able to integrate with existing internal systems. Such systems might include engineering data warehouse, enterprise asset information (EAI), maintenance repair and operation (MRO), or enterprise resource planning (ERP).

While leveraging internal processes, it should also take advantage of the cloud-based environment that many IT systems are operating on today.

An ideal solution to counteract security concerns would be a ‘cloud-based' system run on ‘on-premise' systems in the building of the organisation using the software, rather than at a remote facility, such as at a server farm. In this way, project engineers can enjoy real-time collaboration across different projects and access information from a single, truly scalable system while at the same time generating value from existing systems.

The ideal solution should also be configurable to meet specific needs but without heavy coding and customisation. It should also provide consistency across business processes and user experiences with access given to all project participants.

Finally, it should be flexible. No one project is the same and any process put in place will need to have the flexibility and scalability to meet changing needs as the project ramps up.

Successful engineering deliverable and vendor document management is dependent on a series of integrated capabilities from hundreds of different companies that come together to form a project specific engineering supply chain.

Through the adoption of a consistent systematic approach and a combination of different systems, operators/owners can look forward to more efficient and cost effective projects and a seamless handover at project completion.OE

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