Sam Wardill introduces CILT Focus to some of the opportunities, challenges and techniques that can be used to deliver more value from the Heavy Asset supply chain.

1. 44 FOCUS AUGUST2017
FOCUS FEATURE OPINION
perators of heavy assets have
historically devoted little
attention to effective
management of their material supply
chains. A recent discussion with a
business associate who sells solutions
across asset intensive industries
highlighted that even the architects of
lean, Japanese car manufacturers, pay
very little attention to the materials that
are used to construct and maintain their
production facilities.
Times are changing. New, more
specialised professional infrastructure
funds increase demands on utility asset
managers. The big energy companies are
no longer the darlings of their investors
and are under pressure to improve
returns. There is a significant opportunity
to leverage some of the supply chain
planning and management techniques
that are now ubiquitous in manufacturing
in order to give heavy asset supply chain
managers the tools to improve the
efficiency of their work delivery and asset
performance.
So why are asset supply chains
so poorly managed?
Whereas retail and fast-moving consumer
goods organisations have long realised
that the supply chain functions are where
they need their brightest and most
numerate recruits, in utilities and energy
sectors supply chains are not as mature.
The stores were traditionally where
organisations sent engineers who were
not very good at engineering. The lack
of focus on supply chain planning
professionals means that the ERP
systems are not used to their full
potential and process discipline is poor.
Engineering project 'supply chain
managers' have historically been
procurement managers focused on
leveraging spend and lowering unit
price. Materials, therefore, tend to be
purchased on long lead-times to get
lower prices.
Capital projects are considered as large,
discrete and independent scopes
ignoring the reality that asset supply
chains tend to capture a huge portfolio
of project and maintenance activities
with overlapping materials. Projects are
assumed to be planned in great detail
with long lead-times when, in reality, the
timelines, requirements and sequence
of the project portfolio are fluid and
evolve for any number of good business
reasons.
Accounting conventions, particularly in
the capitalisation of projects, also do not
help drive performance as materials are
often not visible as 'inventory' when they
are received by the asset owner. This
often leads to materials being issued to
the project or work activity on receipt
and managed manually thereafter.
Sam Wardill introduces Focus to some of
the opportunities, challenges and techniques
that can be used to deliver more value from
the supply chain.
supply chain management
Heavyasset
O
Japanese car manufacturers pay very
little attention to the materials used to
construct their production facilities

2. www.ciltuk.org.uk 45
The lack of standardisation of work scope
makes it hard to benchmark how an activity
should optimally be delivered, what
something should cost, what materials it
should use and how long it should take.
What can be done?
There are many parallels between heavy
asset production and manufacturing
organisations. For example, Integrated
Activity Planning (IAP) has many similarities
to Sales and Operations Planning, the levers
are different, but the themes are similar.
Improved use of the ERP system will lead
to better process understanding and is the
foundation of getting project supply chains
under control. The materials used need to
be standardised and properly described.
Materials need to be held as inventory in
the ERP system and will need to be visible
until they are put to productive use. This
inventory needs to be subject to normal
warehouse management standards such
as location tracking and counting.
The key to driving performance is visible
data and metrics both in the form of KPIs
and PIs. When the same organisation
described earlier started using SAP VPS to
control previously invisible material
inventory, it became apparent that their
project stock had three times the value of
their MRO materials that had traditionally
been the focus for inventory management.
Improving competency and developing
the supply chain skill-pool are, of course,
critical. Initially this is likely to be mainly about
basic policy, process and system use
definition and training. In the medium term it
has to be about improving the profile of the
supply chain function as a distinct skill-pool,
separate from procurement and engineering,
that is critical to business delivery.
Having witnessed the transformation in
manufacturing supply chains over a 20 year
career, having been involved with heavy
asset supply chains for the last 10 years,
and with 20 years of a career left, I confess
a vested interest in finally seeing an
increased supply chain improvement focus in
this area. There definitely appears to be
green shoots of change but we are some
way off the momentum that catalysed
the earlier supply chain revolutions.
The opportunities are rife.
SAM WARDILL
Sam Wardill CMILT is Analytical & Results
Oriented Supply Chain Leader, Shell Upstream.
NOVUS prepares students for a career in supply
chain management and supports companies by:
Working as part of CILT, NOVUS aims to inspire
and help build the talent pool of tomorrow's
supply chain professionals
Find out more at: novus.uk.com
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The lack of standardisation of work scope makes it hard to benchmark
how an activity should be optimally delivered