Overcoming Challenges in the Oil and Gas Industry: Keeping Projects On Time and Under Budget
This blog continues our five-part series on overcoming challenges in the oil and gas industry, which identified the following problems facing EPC operational efficiency:
- Keeping everyone safe during SIMOPS.
- Keeping projects on time and under budget.
- Making informed decisions throughout the entire project lifecycle.
- Ensuring uninterrupted flow of information.
- Keeping an eye on the whole project with accurate information.
EPC construction execution and asset maintenance in oil and gas and other industrial sectors often struggle to keep projects both on time and under budget. This blog looks at how going paperless through the implementation of digital solutions helps meet and exceed targets, ensuring successful project outcomes.
It is divided into the following sections:
- The problem: Keeping projects on time and under budget.
- The solution: Inventory management tools for successful project outcomes.
- What is Materials Management?
- The bottom line: Digital inventory solutions keep projects on track.
The Problem: Keeping Projects On Time and Under Budget
One of the most significant challenges facing EPC contractors and operators is the ability to execute construction and asset maintenance projects on schedule and on-or-under budget. The majority of energy-sector projects overrun, deviating from schedule by 29 percent and at a whopping 80 percent over budget.
These figures highlight the severity of this challenge, the magnitude of which increases with project scope and complexity. For convoluted brownfield as well as high-value greenfield and other mega-projects, keeping work both on time and on budget can be an uphill battle.
Reliance on paper-based systems and labor-intensive processes makes it difficult to achieve targets, leading to excess costs, lost productivity and a lack of resiliency. Filing paperwork alone consumes 5 percent of operational budgets, wasting on average 4,500 USD per employee per year.
For offshore industries, the use of paper-based systems requires up to 85 percent more person-hours. Energy-sector businesses that rely on paper spend three-times more person-hours on operations and maintenance tasks than initially forecasted.
Time is money. Plus, human error invariably results in lost information when everything is paper based, which impacts an organization’s ability to pivot and respond flexibly and proactively.
This negatively impacts resilience, making reliance on paper a risky business model and revealing the paradox of those who continue to implement outdated working methods. A staggering 70 percent of businesses would fail within three weeks if a natural disaster such as fire or flood destroys paper records.
In this digital age, tools exist that supplant paper and manual work systems, controlling expenditure, managing productivity and making businesses resilient.
The Solution: Inventory Management Tools for Successful Project Outcomes
To keep projects on time and on-or-under budget requires outfitting teams with the necessary tools, equipment, materials and information at the right time and in the right place. From onsite workers through managerial and even executive levels, it’s essential that all those involved have access to the same information that is accurate, complete and in real-time so that schedules and logistics flow smoothly.
Digitizing systems and processes and/or upgrading existing digital systems into ones with greater levels of integration and functionality kicks off the digital transformation journey in a way that eases project management. This eliminates time lags, inaccuracy and confusion, allowing staff to make evidence-based decisions from the get-go.
The more sophisticated digital tools not only reduce room for error and allow all players to access real-time project and materials information anytime from anywhere, but they bring a myriad of other benefits.
Inventory management is essential to coordinated construction execution and facility maintenance. Digital software solutions provide one single source of truth that eliminate paper trails and ensure that anyone, from anywhere, has access to up-to-date materials information.
What is Materials Management?
Industrial construction and maintenance projects rely heavily on inventory control of materials from fabrication through installation, completion and repairs. Having the correct materials at the right place, at the right time and in the right sequence relative to other materials is extremely difficult. This logistical quagmire can make or break successful project execution in terms of both budget and schedule.
The suite of common materials-related challenges includes supplier or warehouse delays, lost or stolen materials, scheduling and/or project changes, unreliable or inaccessible inventory management system, and a lack of tracking on shipments, repairs or returns.
Materials management systems that rely on hard-copy printouts and spreadsheets need high levels of manual intervention and are, therefore, subject to significant human error that leads to delays, mistakes and losses.
Materials Management software replaces laborious and error-prone systems, taking advantage of barcoded materials that are easy to track. Digital materials management systems identify potential supply-chain bottlenecks in advance, enabling management to respond flexibly to the logistical realities.
Such digital solutions, possible when implemented in partnership with the right software group, help keep even the most complicated projects on time and under budget.
The Bottom Line: Digital Inventory Solutions Keep Projects on Track
With EPC contractors facing energy-sector projects that regularly run upwards of nearly double budgeted value, embracing new ways of working is essential for favorable outcomes. There’s a reputational element as well as financial.
Remaining competitive necessitates striving for increased efficiencies, as well as fostering positive, accurate and trouble-free communications that are transparent, provable and above-board. Additionally, the ability to accurately predict potential materials bottlenecks and other pinch points well in advance aids in overall project coordination and cooperation.
It’s the outcome that matters most. Harnessing new tools and technologies while phasing out paper and other outdated systems is the way forward to ensure reputable, quality project work that meets and exceeds time and budgetary constraints.
Next week we’ll discuss a third challenge facing Oil & Gas, as well as other industrial-sector projects: Making informed decisions throughout the entire project lifecycle. Stay tuned.