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The Pressures Facing Procurement on EPC Projects.

ConstructionCategory managementCross-Functional CollaborationProcurement Levers+-
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In this guest post, Saner Atis, supply chain manager with Calık holding-Gap Construction, looks routes to closer collaboration on engineering projects and the key questions procurement needs to ask. 

The execution and operation of EPC (Engineering, Procurement, Construction) projects requires close collaboration between procurement and construction. 


For those who manage EPC projects, the 'E' component generally is the most important, with procurement depending upon decisions made by engineering.The traditional setup dictates that engineering defines the project specifications and quality requirements essential to the successful execution of procurement. If engineering is not properly executed, then procurement fails.

 

But that shouldn't imply that procurement has a passive role in the successful execution of this kind of project. 


During the execution of engineering-related matters, procurement managers have to ensure that equipment and materials are purchased at the best available total cost, meet the required due dates by site, meet project specifications and quality requirements and are supplied in time to meet project schedule requirements.


In case of any conflict of engineering execution, procurement faces pressure. The pressure on procurement managers today are not that different from yesterday, but the ability to anticipate needs, forecast conditions, set goals and standards, plan and schedule work is needed more quickly than in the past.


We can separate the pressures by their origins. Many come from engineering; others are financial or related to supplier or materials management. Without coordinating EPC functions and processes, 'P' –procurement organizations– struggle against 'E' and 'C'.

 

The solution, then, is for procurement to demonstrate improved technical and quality skills. Procurement is also dealing with intracompany pressures that come from financial project management (i.e., payment, delivery terms etc.), highlighting the need for improvements in teamwork and communication come improvements in project management.


There are four elements for success which revolve around understanding procurement's role in the project:


What objective?

A well-organized, comprehensive and collaborative approach. Most of the pressure is reflected in procurement by the “E” and “C” in an EPC project. Hiring capable staff (and external consultants as needed) to minimize technical queries, apply the latest technologies and improve opportunities for reducing overall project costs should help reduce these pressures.  

What kind of analysis do we need?

Strategic analysis is necessary to achieve key success factors:

  • Analyze approach cost
  • Identify objectives, requirements and specifications
  • Innovation in relationships with key suppliers
  • Streamline business processes (internal and external)

How to define our approach?

  • Define objectives, plan, organization methods
  • Develop total cost strategies (acquisition, logistics, training, others)
  • Identify risk
  • Refine sourcing operations (suppliers, terms and conditions, scope, costs, etc.)

How to implement?

  • Identify implementation team and develop organization
  • Share implementation internally and externally
  • Manage policies with nearly everyone in the loop
  • Review sourcing results

Procurement is an ongoing journey and not isolated from the pressures. Taking necessary measures will help strengthen procurement against the pressures.


Saner Tanju Atis is supply chain manager at Calık holding-Gap Construction. He is a Mechanical Engineer Msc.

 

 

This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.


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