Alternative Supply-Chain Configurations For Engineered or Catalogued Made-To-Order Components

(Excerpts from a research report.)

Many construction industry inefficiencies are due to supply-chain (SC) problems that occur at the interface between processes or disciplines.

A detailed analysis of value added and non value added tasks concluded that only 4% of the supply chain lead time for a given product component adds value to the final product

We identified alternative SC configurations for pipe supports and captured them in five distinct SC maps showing engineering and fabrication.

The maps indicate that different SC participants, according to their competencies and capacity, may take responsibility for the design and/or detailing of pipe supports in order to suit different project requirements.
To complement the maps, we suggest a set of metrics to gauge performance in different SC phases.

Construction Supply Chain Management

Up until the 1980s, procurement in construction was achieved through processes based mainly on the concept of one-to-one transactions between a buyer and a seller to meet individual project needs.

In the late 1980s, internal integration was adopted.
Subsequently, engineering and construction firms began integrating their materials management practices with their first-tier suppliers.
Supply-chain management (SCM) takes such initiatives significantly further, beyond the boundaries of one or a few firms.

SCM in construction requires a group of companies and individuals to work collaboratively in a supply network of interrelated processes or activities designed to best satisfy end-customer needs while rewarding all members of the chain. This requires a new management philosophy based on a global-systems perspective.

Traditional vs. Supply-chain Managerial Approaches in Construction

Traditional Managerial Approaches	New Supply-chain Managerial Approaches
Project-based Management	Supply-based Management, leveraging needs for multiple projects
Separation of Design, Fabrication, Construction/Installation, and Operation Functions	Total Life-cycle Management
Uniquely Engineered Facilities and Components	Assembly of Unique Facilities from Standardized Modules and Components
Liquidated Damages	Target Costing and Problem Solving through Strategic Alliances for Key Products and Components
Competitive Bidding	Emphasis on Long-term Working Relationships
Information Hoarding	Extensive Use of Communication and Information Technology to Create Information Visibility so that the Value Chain Supports the Supply Chain
Late Payments and Retainers	Prompt Payment to Minimize Cost of Capital (Time Value of Money is an Inventory Cost)
Long and Uncertain Lead Times with Extensive Use of Expediting	Short and Reliable Cycle Times from Raw Materials to Site Installation
Early Delivery of All Materials to the Site	Phased Delivery of Materials to the Site to Match Installation Rates

Supply Chain of Pipe Supports: Case Study Background

A pipe support is an assembly of components that attaches to the pipe and transfers the pipe's load to the building structure. Therefore, pipe supports represent the interface between the building structural system and the piping systems, which interact with the location of equipment and vessels in the plant. A piping system is not complete and ready for start-up testing unless all pipe supports are in place.

Problems often start in the design phase, which requires input regarding the design of the structural steel system; the location of mechanical equipment, vessels, and instrumentation; as well as the physical and system characteristics of the pipe.

Current practice is to define these inputs first and to push pipe support design towards the end of the power plant design process.
Since power plants nowadays are managed as fast-track projects, support design gets done in a rush and at the last minute, thereby potentially constraining the downstream SC.
Failing to allow sufficient time for design, procurement, and fabrication of pipe supports can make it necessary for field workers to use temporary supports so that they can make progress on pipe installation (though this also increases rework in the field) and circumvent erection delays.

Current Supply-Chain Practices for Pipe Supports

To characterize this SC, five alternative configurations have been captured in distinct cross-functional maps showing various roles played by the SC participants, namely:
(1) Engineering firms,
(2) Pipe support suppliers,
(3) Contractors.
Pipe fabricators may play a role in this SC but are not necessarily directly involved.

Configuration 1: Engineering firm designs the pipe supports. Supplier details, fabricates, and supplies the supports. Contractor installs. This model describes, by far, the most common practice in the industry.
Configuration 2: Engineering firm routes pipes and performs pipe stress analysis. Supplier designs, details, fabricate, and supplies the supports. Contractor installs.
Configuration 3: Supplier fully designs pipe supports. Contractor installs.
Configuration 4: Contractor takes responsibility for pipe-support design and fabrication, though likely will subcontract this work out, and then installs.
Configuration 5: Pipe Fabricator takes responsibility for pipe-support design and fabrication. Contractor installs.

Selection of Supply-Chain Configurations

The selection of a SC configuration to best suit any one project must take into account numerous factors, including the capabilities (e.g., core and non-core competencies), capacity, and strategic corporate goals of each of the companies involved, as well as industry trends and the current and forecast market situation.

In practice, engineering firms may use more than one SC configuration to balance the needs of several concurrent and prospective projects.
Engineering firms or power plant owners usually select and manage these configurations.
A benefit of having several SC configurations is that one can balance the abilities and constraints of SC participants in order to achieve project goals.

Some owners have established direct alliances or long-term agreements with pipe fabricators and with pipe support suppliers.

Engineer-procure-construct (EPC) firms have also focused on establishing alliances with support suppliers.
Electronic Data Interchange (EDI) initiatives ease and expedite the interfacing between processes, as well as provide a foundation to support increasing levels of standardization of products and processes and of power plant modularization.

Supply-Chain Metrics

SC performance can be measured through different types of metrics applied to the SC as a whole or to any of its different phases. Examples are, in terms of lead times, the time to approve detailed drawings, the time to fabricate the supports, the time to deliver the support to the site, and staging time on site.

In terms of value, one metric is the actual work time vs. the total time in system, also computed as the ratio of the value-added time over the lead time.

In terms of how information is released from one activity to another, the analysis of batch sizes as units of handoff from one SC participant to the next is extremely helpful. Batch sizing, multitasking, and variability affect lead time. Other considerations in comparing different SC configurations may include the distance or directness of control and communication between the various SC participants and the number of process steps in the SC (length of the SC).

The amount of process iteration during the design phase may be investigated using a design-structure matrix that provides a clear representation of a complex system capturing interactions/interdependencies/interfaces between elements in the system.

Toward Further Supply-Chain Improvement

To achieve further performance improvement, not only in terms of product and process design but also in overall SC configuration, several recommendations emerge from this case study, including:

Industry-wide standardization of pipe supports
Selecting a supplier earlier in the process
Better computer software to improve design
Closer coordination and communication between pipe support fabrication and pipe fabrication

Additional research needs to be done to

Investigate opportunities for improving the synchronization of parallel SCs such as those of pipe, pipe supports, and instrumentation, including delivery and matching at the site
Relate modularization efforts to improved SC performance
Determine the effect of "commoditization" of engineering services as a contributor to SC performance improvement

Although problems with pipe supports start in the support design phase, the solution for these problems is found even before this point, as this research indicates.

(The full text of the research report is available.)

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