See the Difference: Strategic Sourcing for Capital Projects in 2023
Sourcing EPC material for a large-scale capital project takes a strategic mindset. Anything else is lighting money on fire.
We’re not checking off 2-day delivery for a box of deck screws on Amazon Prime, here. Unexpected delivery delays, supply chain breakdowns, misplaced on-site material, and last-minute requisitions for overlooked needs are the norm in this business — and they add up.
The Stats on Today’s Sourcing Strategies Are Nauseating
Just look at the numbers. Over a three year stretch, less than a third (31%) of all EPC projects were able to stick within 10% of their budgets. Only a quarter were completed with 10% of their original deadlines. The average budget overrun for construction projects across the nation is at least 16% and usually more. It’s no wonder that lenders are urging project leaders to build a 20% contingency buffer into every budget.
These figures are a disaster that turn into billions (or trillions) of wasted dollars per year. McKinsey pins the cost of project inefficiency at a cool, annual $1.63 trillion, largely due to wasted time and poor productivity. After all, 45% of all construction professionals are spending more time than expected on “non-optimal” tasks like fixing mistakes, looking for the project data they need, and dealing with conflict resolution between teams.
This is basic stuff, guys. Better sourcing, capital procurement, and material management could prevent this. Every re-order for lost material, every re-work from poor material quality, every day lost trimming your fingernails because you don’t have the stuff you need to get the job done…it’s racking up bills that are making project leaders sick while clients breathe down their necks.
The True Cost of Waiting On Material
Every EPC mega-project experiences delays. But how much of it is really due to unproductive time and non-strategic sourcing? Let’s look at a real example.
A Chemical Plant expansion at Ingleside, Texas was a huge, $1.3B project. They racked up 405 “Lost In Field” requisitions in just the first seven months. If you consider that it takes an average of five days (more like 7-10 days) to process each one, you’re looking at 2,025 total days of delays as teams are waiting to get mission-critical material into their hands.
With 10-hour workdays and five workers, that would be more than 100,000 man hours of watching paint dry. What’s the cost of 100,000 man hours? Are you paying $45 an hour? Well, you’re looking at a $4,500,000 bill in exchange for…nothing. Just waiting on material. That’s going to be a difficult conversation with the client.
And THAT’S the true cost of waiting.
No More — You Can Flip the Script in 2023
Transactional suppliers seem easy. You call and order. They deliver (maybe). That isn’t gonna cut it anymore. Too many contractors are used to placing orders every day on an as-needed basis, and this is where the millions are falling through the cracks.
The best material suppliers and distributors go above and beyond, with proactive solutions and a strategic sourcing approach that prevent needless downtime and keep capital projects profitable. It’s critical to get procurement, contractors, engineers, and distributors all involved as early as possible to keep things aligned from pre-planning forward. And it’s easier with expert guidance and the disruptive, data-intensive strategies that are now available to the EPC world.
A study from Deloitte proved that “data, and specifically the ability to organize, manage, process and utilize that data has become a competitive differentiator.” The digital revolution, when combined with a tactical mindset, can realize huge boosts in cost and productivity. Their study said targets are usually around 10-20% improvement. One government commissioned an EPC project that achieved a 48% reduction in capital costs with this integrated project management approach.
Real Results From Strategic Sourcing
Back to the Chemical Plant expansion. The massive EPC project called in Troop Industrial for help, because we have a reputation for putting millions back into mega-projects. Our PROJEXX GROUP slashed their time lost per REQ down to 1 day.
The end result? Net savings of 78,750 man hours and $3,543,750 over the old way of handling material management. These are real numbers from just a seven month picture of the project.
Call in the Troops
The PROJEXX GROUP from Troop Industrial is your personal special ops team for optimized material management and strategic sourcing. After 20 years in the biz — and more than 100 years of combined experience on our team — we’ve seen it all. A partnership with Troop as your distributor keeps every project moving ahead on schedule and on target with cloud-based material management technology.
Use our predictive project intel to identify material needs before material is needed. Troop’s proven experience means we can predict the key materials you’ll need for your project before you order them — and when you’ll need to procure the material way ahead of time due to current market trends.
Get alerted to bottlenecks and delays before they happen and closely monitor all of your PODs, FMRs, MTRs, and project spend through proprietary software. Our experience enables us to be proactive instead of reactive.
Stop waiting (and wasting) in 2023. Call in the Troops for truly strategic sourcing. We’re here to help.