Infrastrcture project management
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Infrastrcture project management

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Managing infrastructure projects requires a professional orientation, especially so in developing economies like India. Herein a materials management and suppl chain management orientation is taken to ...

Managing infrastructure projects requires a professional orientation, especially so in developing economies like India. Herein a materials management and suppl chain management orientation is taken to highlight some of the successful projects.

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Infrastrcture project management Infrastrcture project management Presentation Transcript

  • Infrastructure Project Management : Special requirements Dr S G Deshmukh Director, ABV-Indian Institute of Information Technology & Management Gwalior deshmukhsg@gmail.com 9 Apr 2012 Session at TECHNO-CONCLAVE 2012 ITM University, Gwalior
  • Preamble Infrastructure is the key driver for the Sustenance of India’s economic growth Courtesy: Manage India (Newsletter of PMI )2011, Vol 3(4)
  • 3 Typical Scenario in our country
  • Solution..  Infrastructure development involving Public utilities to improve the Quality of life
  • Some examples..  National highway development and Prime Minister’s Gram Sadak Yojna  Reliance Jamnagar Refinery  Konkan Railway project  Delhi Metro rapid transit system  Bandra—Worli Sea Link Bridge Project in Mumbai  Mundra Port & Special Economic Zone (SEZ): India’s largest private sector port and SEZ  New/modernized airports—Hyderabad, Bangalore, Delhi  Nationwide telecom networks
  • Several changes taking place..  Public Private Partnerships (PPP) using models such as Build Operate Transfer (BOT)  Increase in size and capacity of Projects  Consortia, joint ventures, strategic Alliances  Rapid entry of new entrants and rapid corporatization  Improved practice of project management  Improvement in productivity, quality, and delivery capability  Mega project financing, both within and outside India
  • Infrastructure Projects  Typical examples  Road  Power  Telecom  Airport  Port  Gas-oil Pipeline  Urban facilities' (Housing )
  • Characteristics of infrastructure projects  Huge stakes involved  Time and Cost overruns  Issue of ownership  Multiplicity of agencies
  • Speaking points..  SWOT Analysis of Infrastructure  Project Management Approach and issues involved  Application in Construction industry  Role of Materials Management  Role of IT  Supply chain orientation  Learning from Delhi Metro  Concluding remarks
  • Present scenario in Infrastructure ..1..  Infrastructure projects, in terms of number, size and complexity, have grown dramatically in the past few years. The overall investment and spending have almost quadrupled in many infrastructure sectors.  Managing infrastructure projects is no easy task. The gestation period is long. The capital investment is high.  There are many stakeholders to address.
  • Present scenario in Infrastructure ..2..  There are also many variables beyond the control of the developer, such as government policies, clearance process and weather events. These projects are thus quite prone to time and cost overruns.  At the same time, project developers and managers can minimize risks by following the basic principles of project management – proper planning, execution and monitoring.
  • Reasons for cost/time overruns of central govt projects Reasons Projects Fund constraints 31 Law and order matters 10 Land acquisition issues 22 Slow progress in areas other than civil works 79 Delay in equipment supply 5 Environmental clearance 2 Others (proper technology selection, award of contract, delay in civil works, geo-mining, court cases, inadequate infrastructure support, bad weather, government clearances) 48 Source: Project Management Practices in India 2010 (Indicus Analytics and Ace Global), Project Implementation Report (MOSPI)
  • SWOT Analysis Strengths  Liberalized and Growing economy  Strong financial base  Good consumer base with a focus on Urbanization  Improved Connectivity with the world (Thanks to IT infrastructure!)  Availability of Competent manpower and natural resources Weaknesses  Bureaucratic mindset  Inadequate facilities  Lack of proper orientation on Cost/Time awareness  Emphasis on Rules and regulatory approach
  • SWOT contd.. Opportunities  FDI increasing in infrastructure projects  Success stories of T3/ Delhi Metro  Development of Quality infrastructure to improve quality of life , and  Development of quality manpower  Our strategic Positioning in Asian Region Threats  Foreign investors may choose other countries  Economic meltdown  Danger of moving away from original mission?
  • A Project Management Approach to Infrastructure !
  • Project  A temporary endeavor undertaken to create a unique product or service. Ref: Kanda A, 2011, Project Management: A Life cycle approach, Prentice Hall India Ltd Project Management  The application of knowledge, skills, tools, and techniques to project objectives to meet stakeholder needs and expectations.
  • Project Management  Management of time, scope and cost of project  A project is a non-routine, non- repetitive, one-off undertaking with discrete time , financial and technical performance goals ! Ref: Kanda A, 2011, Project Management: A life cycle approach, Prentice Hall India Ltd
  • Knowledge Areas in PM  Scope Management  Time Management  Cost Management  Quality Management  Human Resources Management  Communications Management  Risk Management  Procurement Management  Integration Management
  • Project Management Context  Project Phases and Life Cycle  Stakeholders  Leadership Skills  General Management Skills  Communications Skills
  • Project Phases and Life Cycle  Divide Project into Phases  Better Management Control  Review Deliverables and Performance  Fast-tracking
  • Example of Project Phases  Conceptual Design  Detailed Design  Coding and Testing  Training and Documentation  Deployment
  • Stakeholders  Individuals and Organizations  Actively Involved in Project  Interests Affected by Project
  • Key Characteristics of PM approach  System Approach, Integrator  Multi Faceted, Multi Disciplinary  Focuses on delivery ,timeliness, flexibility, cost as performance characteristics  PM has a set of tools and techniques, the list is expanding with the increase in the complexity of business.
  • Typical characteristics in a construction project..  Finite horizon and the associated transient involvement of the firm contracted to execute the project  Unique nature of many of the equipment/materials  Drastic impact of material shortage
  • Conception Planning Implementation Completion Leadership and Team work Organization & People Management Skills Project Management Techniques, Models Computer Support & Information Systems THE PROJECT PROCESS Identification Appraisal Selection Work breakdown Networking Scheduling Time/cost tradeoffs Resource issues Monitoring & Control Updating costs & times Problem solving: - Behavioural - Technical Accounting Report writing Disbanding team Handing over ENABLERS
  • Typical Phases in a project  Concept and Feasibility phase  Planning Phase  Design Phase  Commissioning phase
  •  Role of Materials Management in a Project (Construction)
  • Role of Materials Management ..1..  Concept and Feasibility Phase: estimate costs of major items, develop list of vendors , estimate availability and lead time of critical items  Planning Phase- Contribute to specification of requirements, evaluate contractor bids, prepare project procurement plan of execution
  • Role of Materials Management ..2..  Design Phase-Expedite design on long lead time items, work with engineers in timely development of specific equipment and materials  Construction Phase- Check when installation of key equipment is possible and how it will be handled, influence construction schedule when appropriate  Commission Phase- dispose of surplus, ensure availability of spare parts , operating and maintenance instructions
  • Informational role of MM..  General information on lead times  Supply sources with associated lead times  Development of new sources  Information on new equipment and material
  • Imperatives  Significant Cost of materials  Invisible costs  Complexity due to various alternatives  Implications on delays  Customer-supplier chain everywhere
  • Perspective... A total concept involving an organizational structure unifying into a single responsibility for the systematic flow and control of material from identification of need through usage and accounting of the same.
  • Importance..  Materials represent a major expense in projects (for example in construction projects), so minimizing procurement or purchase costs presents important opportunities for reducing costs.  Importance of Purchasing  A multi-dimensional function comprising  Acquisition of materials required to support the project  Procurement of capital equipment needed for development projects  Procurement and upkeep of public utilities by adequate material support
  • Importance .. (contd.)  Decisions about material procurement may also be required during the initial planning and scheduling stages. For example, activities can be inserted in the project schedule to represent purchasing of major items such as elevators for buildings.  The availability of materials may greatly influence the schedule in projects with a fast track or very tight time schedule: sufficient time for obtaining the necessary materials may be allowed.  At times, more expensive suppliers or shippers may be employed to save time !
  • Typical Benefits  Improved availability of materials may reduce craft labor costs  Reduction in project delays  Enhancement in productivity  Reduction in storage costs  Reduction in chasing and firefighting !!
  • Concerns..  Poor materials management can result in large and avoidable costs.  First , if materials are purchased early capital may be tied up and interest charges incurred on the excess inventory of materials. Materials may deteriorate during storage or be stolen unless special care is taken.  Second, delays and extra expenses may be incurred if materials required for particular activities are not available Accordingly, a timely flow of material is an important concern of project managers.
  • Concerns...  Cost of materials and  Cost ON materials  Timely delivery so as to have smooth flow and avoid PROJECT DELAYS  Service centric approach
  • Typical Costs..  Costs of purchasing  Packing costs  Transportation costs  Insurance premia  Cost of Receiving  Inspection costs  Material Handling costs  Loss caused by scrap, rework  Inventory carrying costs  Cost of Paper work
  • Objectives of Materials Management  Support operational requirements  Manage the material process efficiently & effectively  Select, develop,& maintain sources of supply  Develop strong relationships with other groups  Support organizational goals  Develop integrated strategies that support organizational goals
  • Types of Materials : Examples from construction projects  Bulk Materials  Example: Wet concrete mix, earthwork to be excavated required in large quantities  Standard off-the-shelf material  Example: Standard piping and valves required in chemical processing  Fabricated members or units  Example: Steel beams, columns for buildings are pre-processed in shop
  • Example: Impact of Materials Rs Lakhs @ 2 % saving on matl. @ 2% saving on labour Materials 70.00 68.60 70.00 Labour 16.00 16.00 15.68 Overhead 26.00 26.00 26.00 Profit 18.00 19.40 18.32 Total 130.00 130.00 130.00
  • Scope of Materials Management  Materials Requirement Planning & Control  Purchasing  Inventory control  Receiving and Inspection  Transportation  Material handling  Disposal of materials  Value analysis
  • Materials Management: Procurement • Definition of Procurement Activities – Identify or reevaluate needs – Define and evaluate user requirements – Decide whether to make or buy – Identify the type of purchase – Conduct a market analysis – Identify all possible suppliers – Prescreen all possible sources – Evaluate the remaining supplier base – Choose a supplier – Receive delivery of the product or service – Make a post purchase performance evaluation
  • Item Procurement Importance Matrix
  • Reasons to Hold Inventory  Meet unexpected demand  Meet variations in customer demand  Take advantage of price discounts  Hedge against price increases  Quantity discounts
  • Types of Inventory  Raw material  Work-in-progress  Maintenance/repair/operating supply  Finished goods
  • Factors contributing to high inventory ..1..  Surplus inventory  difficulty in disposing of items  No scientific policy  difficulty in standardization  ineffective powers of delegation  frequent modifications  upgradation of technology hence items become obsolete
  • Factors contributing to high inventory ..2..  Inability to predict the consumption pattern  inability to decide on critical/non-critical items  overbuying of items  few suppliers sending items in more than desired quantities  improper organizational structure  Lack of control
  • Possible options for managing projects  Selective inventory control  Use of Inventory models  Standardization  Vendor management  Lead time management  Use of IT  Supply Chain orientation
  • Selective Inventory Control  Prioritize items on some logical basis  Prioritize managerial efforts  Monitor and control selectively
  • Pareto (ABC) Analysis : Vital few/ Trivial many ! 10 20 30 40 50 60 70 80 90 100 Percentage of items Percentageofdollarvalue 100 — 90 — 80 — 70 — 60 — 50 — 40 — 30 — 20 — 10 — 0 — Class C Class A Class B
  • Selective Inventory Control  ABC (Based on Price and volume of use)  VED (Vital, Essential, and Desirable)  FSN (Fast, Slow, and Normal).  HML (High, Medium, and Low)  SDE (Scarce, Difficult, and Easy to Obtain)  GOLF (Government, Ordinary, Local, and Foreign)
  • Multi-Unit Selective Inventory Control (MUSIC)-3-D Analysis  CONSUMPTION VALUE  High value vs Low consumption value  LEAD TIME  Long LT vs Short LT  CRITICALITY  Critical vs non-critical items Classify and Analyze Items in the above categories and Review them periodically
  • Decisions based on  Purchase quantity  Follow up  Tighter procedure/systems  Safety stock  Average inventory  Powers of delegation  Information systems  Consumption norms  Application of value engineering  Development of new sources  Reporting  Central purchase/stocking  Delegation of authority  Planning  Vendor rating  Forecasting
  • Use of Inventory Models..  Tradeoff between Inventory carrying and ordering costs  Basic issues to address: When to order and How much to order  Economic Order Quantity (EOQ) based models  Computerized models
  • Standardization
  • Facilitate international exchange of goods and services and to develop mutual co-operation in the sphere of intellectual, scientific, technological and economic activity Benefits to  Manufacturer Trader  User Society at large Objectives of standardization (as per ISO)
  • Benefits of Standardization  Standardization helps in having a common platform for communication  Interchangeability of items, sub- assemblies etc.  Facilitate the process of documentation  Reduces inventory !
  • Supplier Management
  • Models for supplier Arms Length Model  Closed, Competitive  Evaluation on lowest bid  Data/Information sharing very limited  Inspection based quality regime  No shared R&D Partnership Model  Collaboration based  Multi-criteria evaluation of sources  Sharing of data/information encouraged  Participative attitude towards quality  Shared R&D
  • Long Term Strategic Partnerships • Develop supplier partners, especially in the commodities key to their company's growth and future success • Ensure that there is a close match in technology, growth plans, and corporate culture to have an open and successful relationship • Plan and execute for a long-term relationship • Exchange much more data than traditional relationships
  • Lead Time Management Time between feeling the need for materials and the time when that need is actually realized.
  • Components of Lead time ..1..  Need is felt for an item  Specifications are drawn  Approval by relevant authority  Indent transferred to purchase dept  Rates, terms etc identified  New sources to be identified  Tabulation and comparison of quotations  Rates/terms of contracts negotiated and finalized  Requisite number of POs prepared
  • Components of Lead time ..2..  Acceptance by supplier  Manufacturing of the item  Follow-up with the supplier  Stage-wise inspection  Transport  Material received  Invoice quantity checked  Material inspected  Accepted material used  Rejected material sent back  Cheque issued to the supplier  Documents filed
  • Increase in Lead Time due to ...  Bad planning  Wrong specifications  Incomplete indents  Incomplete POs  Too much centralization  Improper/incomplete negotiations  Inadequate technical support  Inadequate inspection/testing  Sources not known  Inadequate legal knowledge  Wrong estimation of requirements  Wavering on choice of mode of transport
  • Compress Lead Time Select and Involve Supplier Early in Design Value-added Time/Lead Time = 3.8% Lead Time ± 33 weeks … …± 1 week Select Supplier direct work time = Value-Added time … ± 2 mh Start Design … Lead Time Ready to Ship
  • Compress Lead Time Value-added Time/Lead Time = 4.6% New Lead Time ± 25 weeks ..± 6 weeks ..Engineer and Supplier Collaborate Ready to Ship Start Design .. ..
  • Use of IT
  • Information Technology: An Enabler  Information links all aspects of supply chain  E-business  replacement of physical business processes with electronic ones  Internet/web enaled  allows companies to communicate with suppliers, customers, shippers and other businesses around the world, instantaneously  Bar code and point-of- sale  data creates an instantaneous computer record of a sale  Radio frequency identification (RFID)  technology can send product data from an item to a reader via radio waves
  • Use of IT  Full integration of various functions at office as well as at site  Sufficient flexibility to respond to various contractual arrangements  Line reporting on various purchase orders  On line status on various projects  Hardware portability  Compatibility with other engineering, cost accounting, and project control software
  • Use of IT: Desirable Features  Full integration of various functions at office as well as at site  Sufficient flexibility to respond to various contractual arrangements  Line reporting on various purchase orders  On line status on various projects  Hardware portability  Compatibility with other engineering, cost accounting, and project control software
  • Use of IT: Enterprise Resource Planning (ERP)  Accounting oriented information system for identifying and planning enterprise wide resources needed to take, make,ship and account for customer orders  As an enabler to quickly access information and integrate different functions.
  • ERP system: Typical Modules  Purchasing  Inventory management  Waste management  Invoice Verification  Information System  Project monitoring & Control
  • Supply Chain Orientation
  • Supply Chain Management Supply Chain Management (SCM) is the practice of a group of companies working collaboratively in a linked chain of interrelated processes designed to best satisfy end-customer needs while rewarding all members of the chain.
  • Why SCM?  Process improvements  Cost and time reductions  Enhancements in profitability  New business opportunities
  • SCM Stakeholders • Owners • Engineering firms • Contractors • Subcontractors • Equipment and material suppliers • Raw material suppliers • Lenders and insurers
  • Construction Supply Chain RAW MATERIALS PROVIDER tier 3 tier 2 SUB- CONTRACTOR tier 1 tier ... tier 2 SUPPLIER tier 1 OWNER CONTRACTOR specialists ARCHITECT/ ENGINEER EPC FIRM
  • Salient features of construction environment  Changes in schedule and scope are common  Constraint on availability of resources and poor site conditions pose real costs and limits on subcontractors and suppliers  Retarded information sharing  Transient nature of projects
  • Insights...  Decisions in each part of the supply chain affect the other parts  Accelerator or Bullwhip effect  Demand changes by the end-user create an acceleratory effect in the supply chain which magnifies the size of demand changes in upstream Supply Chain elements  Best way is to reduce Lead Time !
  • Challenges in SCM  Project unique design and materials  Specifications  Uncertain demands  Project specific supply chain  Unpredictable environment  Client intimately involved
  • Barriers to SCM Implementation  Traditional contracting practices  Functional silos  Lack of SCM skills  Local project vs. global program perspective  Must be practiced at strategic, tactical, and task levels  Risk aversion  Lack of incentives  Lack of standards
  • Tools & Techniques of SCM  Supplier-Managed Inventories  Supplier Relationship Management  Web-Based Project Management  Strategic Inventory Placement  Core Competency Leveraging  Streamlining
  • SCM Activities  Integrated behavior  Mutually sharing information  Cooperation  Customer Focus  Integration of processes  Partners to build and maintain long- term relationships
  • SC Orientation...  Systems view  Strategic view  Willingness to address  TRUST  COMMITMENT  COMPATIBILITY  VISION  KEY PROCESSES  TOP MANAGEMENT SUPPORT
  • SCM Benefits  Compression in longest paths of the SC  Reduction in variability of lead times  Reduction of cost risks and charges for extra services  Reduction of communication errors and delays  Reduction of waste  Increased net present value due to savings in maintenance, repair and operation  Additional income to all stakeholders Rewards Are Worth the Effort!
  • Remark.. Dissatisfaction due to fragmented processes in construction will lead to Collaborative construction environment and integrated management of materials
  • Case of Delhi Metro
  • Delhi Metro Rail Corporation(DMRC)  Established in 1995  Phase I(67.5 km) and Phase II(125 km) as route length  Investment of US$ 2.3 Billions  Began construction in 1998 and completed Phase I in 2006 (3 years ahead of schedule)  There are 6 lines, and a total of 142 stations  Today a fleet of 280 coaches with 70 trains run daily
  • Features..1..  Appointment of Mr E Sreedharan as Project Manager !  Effective project design  Business culture based on punctuality, honesty and strict adherence to deadlines  Lean organizational structure (just 2 deptts: Project Organization, Opns & Maintenance)
  • Features..2..  GOI enacted Delhi Metro Act superseding local acts/regulations and hindrances  Primavera software for project monitoring  Trained manpower through own training programme as well sent abroad
  • Features ..3..  In order to steer clear of political interference, the DMRC sought autonomy on all major matters and the GoI promised to give it this autonomy.  Financial powers were vested in the managing director. Also, MD was the last authority on tenders,
  • Remarks Major infrastructure projects are often stalled because of a. lack of funds, b. political interference, c. lack of professionalism and accountability, d. property disputes, corruption, etc. Even before the commencement of the project, the DMRC attempted to put in place effective systems to ensure the smooth progress of the project.
  • Summary of DMRC project  Project Management  Project Skills  Quality Skills  Timeliness  Flexibility  Empathy & Safety
  • Learning from DMRC Develop Project Management Systems Organizations must create PM processes using well accepted process groups and knowledge areas. PMI’s global standard, A Guide to the Project Management Body of Knowledge (PMBOK® Guide), focuses on five process groups and nine knowledge areas. Define and Measure Project Success Project success is generally measured using “efficiency measures” like scheduled delivery dates, budgeted costs, and other efficiencies. These are “necessary” measures across infrastructure, but not “sufficient.” Project success must consider long-term impact on customer, project team, business, and preparedness for the future. Ref: Korgaonker MG, India Emerges as a Global Brand in Projects , PMI News, Sep 2011, Vol 3(4)
  • Learning from DMRC Develop Strategic Perspective of PM An international survey of over 400 Architectural, Engineering, and Contracting (AEC) companies revealed acute gaps in Strategic Management (SM) processes. AEC companies are 30–40 percent less involved in SM activities than Fortune 500 companies. They have dispersed SM profiles and pay selective attention to knowledge resources, finance, and markets. Innovate to Manage Complex Project Supply Chains (PSC) There are wide variations in capabilities across the supply chain & gaps exist in design, consultancy, technical talent, specialized technology, and vendors. Coordination and integration of PSCs is a formidable challenge Ref: Korgaonker MG, India Emerges as a Global Brand in Projects , PMI News, Sep 2011, Vol 3(4)
  • Closing Remarks..  Infrastructure development is a necessity for economic development  Management of infrastructure requires project management approach  A systems approach involving all stakeholders
  • Useful Resources Web sources  www.pmi.org  www.iimm.org  www.construction-institute.org  www.wholesaleelectric.com/ns_cmms  www.wasteless.org Books  Kanda A , Project Management, A life cycle approach, Prentice Hall India Ltd  Monczka, Trent and Handfield, Purchasing & Supply Chain Management, Thompson
  • Thank you very much ! My coordinates  Telephone: 0751-2449801  Fax: 0751-2449813  Email: deshmukhsg@gmail.com