Consulting Services for Engineering and Construction Businesses
An Engineering and Construction (EPC) company’s ability to grow and sustain sales and profits is limited by constraints in Project Management and Sales.
Delivery of EPC projects
Reduction in working capital deployed
Release of capacity in departments
Improvement in profits
Improved return on capital employed
Increased sales project delivery sensitive customer segments
EPC organizations that take up turnkey projects (involving engineering, procurement, and site construction) operate in highly uncertain and risky environments. To execute these construction projects, the EPC organizations require co-ordination and co-operation among many stakeholders like state-owned companies, individual landowners contractors, and so on. What’s more, they even may need the weather to be on their side.
In addition to external uncertainties in an EPC environment, internal aspects such as delay in arrival of designs and staggered arrival of the large variety of material needed for each construction project create de-synchronization. Often, work at the project site is force-started without complete drawings or materials. Frequent interruptions, and inadequate resourcing by contractors add to the delays in EPC projects. Eventually, these construction projects are prematurely commissioned (despite a “tail” of incomplete tasks and billing). These incomplete-but-commissioned projects are unfavourable for both parties. They tie up valued resources of the EPC company. At the same time, customers of these projects have to contend with long periods of low performance (as compared to initial specs).
Most EPC projects in the country suffer chronic delays despite investment in “planning-heavy” solutions and expensive project management software to better manage external and internal uncertainties. This is because none of these project management solutions addresses the key challenge: “How to manage resources and projects DESPITE an environment of high uncertainties.”
Vector Consulting helps EPC companies to deliver projects faster (with shorter lead-times) and within budget and scope. Vector’s solution helps seamlessly align flow of material, design, contract labour, and issue resolution in construction projects. Know more about Vector’s consulting solution:Read More
Increase in overall sales
Efficiency to maintain adequate order backlog without dropping prices
Improved quality of customer servicing
Ability to intervene in early stages of the customer ordering process
Stable or improved market share
When EPC projects are completed faster, the sales team has to source more project orders (or bid and win more orders) to leverage the released project execution capacity of the company. This is a time-consuming exercise, and often involves engaging with prospective customers at an early stage (even before specs are defined or bids are floated). The sales team’s ability to expand its efforts in the market is restricted when its band-width is taken up by execution, coordination, and documentation-related activities such as design submission, collection coordination, procurement coordination, etc. of existing EPC projects.
With the help of the domain expertise and consulting services of Vector Consulting Group, EPC companies can increase bandwidth and effectiveness of the sales team.Read More
The health of Engineering and Construction (EPC) companies is best assessed not by studying their turnover growth but by analyzing the flow rate of projects into the company.
A comparison of the cumulative curve of new project orders in the system and completed projects would reveal that there are three stages in the evolution of an engineering and construction (EPC) company (see graph). In the green stage, an EPC company is able to maintain the rate of project completion in line with the rate of starting new projects. On the other extreme is the red zone in which the EPC company continues to open new projects even as previously opened projects stay incomplete. A project management company approaching the red zone can show turnover growth. However, severe margin losses (during project execution) and ballooning receivables can together restrict entry of new projects (by high margin pricing) and shackle the company’s focus on closing older projects. A standalone small or mid-size EPC company can get wiped out in the red phase!
Conduct a detailed diagnostic on your company with this test designed by Vector Consulting Group to enable EPC companies to evaluate their businesses. You can also get suitable and practical project management solutions.
With the help of Vector’s consulting services, EPC organizations like Bajaj Electricals Ltd, and many others have adopted rapid project execution and management solutions based on Theory of Constraints thinking to transform their project operations.
Turning around the engineering and projects business – Bajaj Electricals (EnP)
When Bajaj started implementation, it too, like most of its EPC competitors, had a large number of open projects that suffered cost overruns. With the new paradigm of TOC-based synchronized supply and execution management of its EPC projects, Bajaj was able deliver projects with much shorter lead times, and with healthy margins.
- Improved by 126%
- Improved by 177%
- Net working capital turns
- Improved by 68.3%
- Improved by 162%)
- On-time completion
- Mostly ahead of schedule
We have partnered major names in the EPC industry to create and implement radical solutions which have redefined industry benchmarks. These include:
Bajaj Electricals Ltd. started implementation of flow processes of Theory of Constraints (TOC) in 2012 in their transmission tower projects business.
A. Erecting and commissioning Transmission Tower (TL) is among the most complex projects environments. Towers are erected across vast geographical expanses, many times on private land; often these projects can be derailed by legal hurdles. In addition, there are conflicts between how the manufacturing plant can supply the materials required and how the engineers on the site want to erect the towers. It can get further complicated with the involvement of customers (Government bodies or PSUs) who play a major role in execution. (They supply part of the material; every major step in execution like creation of BOQs, material dispatch etc., requires customer inspection and approval.)
A. Earlier, we managed projects to meet monthly and quarterly turnover targets. This meant poor subordination to site requirements. Therefore, we switched focus to overall project flow. We were richly rewarded with high turnover. For example, previously we prioritised large batches of ‘A’ type towers over other material. These towers are easy to make and are good for turnover (in the short term). However, eventually we saw that this wasn’t serving the interests of the project as whole. For fast stringing, what the site needed was an assortment of towers. We had to shift gears. It called for dramatic changes in manufacturing, procurement, and management thinking.
A. We began implementation in April 2012 with Vector Consulting Group as our consulting and implementation partner. Yes, it was an arduous journey because we had a high number of open projects with severe delays and overruns. We had the challenge of closing all the old projects, and simultaneously, bringing in proper processes for new projects.
Closure of chronic old projects inevitably led to extra expenses and write offs. The Projects division almost wiped out the profits earned by other departments of the company. We had to bite the bullet. We closed a record number of sites in a single year. At the same time, with the help of Vector’s consulting services we put in flow processes for new projects. Today, every new project is well ahead of schedule. Power Grid has recognized us as the best in project execution in category of TL tower projects unto 765KV.
A. In the last two years, we have focused on flushing out old projects. So profits have taken a beating. The portfolio has been getting cleaner with new projects. This should translate into better profits next year. On the top line, we are growing by more than 75 percent. Working capital has more than halved. Next year this will improve further.
A. We realized that when your own house is in order, it is much easier to control external variables. For example fast execution reduces chances of legal issues cropping up at the site. (The site does not remain open for too long which means the window is much shorter for any legal trouble to crop up).