- Supply Chain Costs are not carefully managed
- Supply chain scheduling is not properly thought through
- Supply chain risks are not properly understood
- Recruiting logistics talent for remote locations is difficult
A brief introduction to Urs by John Edmonds
This guy is something of an Indiana Jones. His career started out ordinarily enough in the 1990s as an engineer. Work in the logistics and supply chain sectors inspired him to complete an MBA focusing on supply chain management. Since then, his career has taken him to the most extreme of climates and the remotest of locations - jungles, deserts and mountains - in Peru, Siberia, Egypt and many other exotic places.
He has worked primarily on massive gas projects, mines, and more recently, solar projects. And he has done this from both the supplier and the logistics sides.
His contributions to project planning and execution are always immense and he has worked on some of the largest supply chain projects there is. Take, for instance, Chevron TCO Future Growth and LNG Canada; both projects run into the tens of billion dollars investment.
If that’s not Indiana Jones enough for you, how about delivering 450-ton equipment up into the Andes? He had to invent, design and build 700-ton temporary bridges across raging piranha-infested rivers. Did I mention the part about the port being destroyed by an earthquake? He built temporary structures to hold the pier in place while the heavy equipment was discharged from the vessel. It’s all true – except for part about the piranhas.
Utility-scale solar is held back by inefficient supply chain management
Right from the first big project, one thing became very clear. The planning did not properly include logistics planning or cost visualization. The big decisions were invariably driven by fabrication and engineering demands, which was strange given the biggest savings we made were in logistics, not project execution.
My first utility-scale solar experience was ten years ago, installing large towers in the Nevada desert. I have since worked on photovoltaics and concentrating solar-thermal power plants and it has taken most of my focus in recent years, with projects in Egypt, Saudi Arabia, Oman and the UAE.
It is no secret this industry has some big opportunities and that it is growing spectacularly.
But I wasn’t joking about the title of this article. The supply chain is holding utility-scale solar from growing faster and becoming even more profitable. The more it grows, the worse this problem will get.
Utility-scale solar projects suffer the same supply chain issues as any big project in a remote location. I have studied those issues from the four challenges of costs, scheduling, risk and recruitment, although, of course, they are all intertwined. In each of the following sections, I state what I see as the foremost problem, briefly outline how to solve this and relate a real-life example from my experience. I haven’t focused on the problems but believe me I can talk for hours about them - and also about the solutions.
Supply chain costs are not carefully managed
I would say the root cause for most cost issues on utility-scale solar projects is poor visibility of transport costs, both budget amounts and actuals. This spawns many problems, such as:
- Containers not being properly utilized.
- Detention and demurrage costs being catastrophically high.
- Difficulties with validating invoices, and costs not being transparent.
The places best suited to large scale solar development are hot but that is not always properly considered in planning when budgeting transport costs. Three scenarios immediately spring to mind.
Firstly, the heat is exhausting, and that hits a truck driver's efficiency. Although the budget may have allocated two deliveries each day, drivers may only be able to complete one, which will not only increase transport costs but also potentially slow the project.
Secondly, costs can blow out on work sites that only operate at night because of the heat. Truck drivers must stay awake overnight, sleeping during the day instead of returning the empty container and reloading. Rather than daily deliveries, drivers deliver a container only every second day. This not only directly increases transport costs and potentially slows the project, but also leads to detention and demurrage charges mounting up.
The third common scenario is when a facility must shut down once the heat rises above a certain temperature. In this situation, drivers wait out until the temperature drops again. On top of the obvious additional transport costs, validating invoices can take an age. That is because the key information to determine eligibility for additional excess-heat charges is collected and stored manually.
There a plenty of ways to solve this challenge. In my experience, the most effective solutions are:
- Clearly spell out, understand and document SOPs, and communicate service expectations.
- Electronically connect to service partners to gain operational transparency of shipment statuses, capacity utilization and on time performance.
- Establish full financial transparency with a landed cost data model and monitor performance.
Supply chain scheduling is not properly thought through
Ultimately, poor scheduling means that timelines are not met, triggering costly delays. That happens because:
- Assumptions and planning data are not carefully thought through, validated, or communicated.
- Onsite construction and logistics schedules are not synchronized or continuously monitored and adjusted, leading to bottlenecks.
- Purchase ordering and shipment execution are managed by spreadsheets and emails, resulting in multiple versions of truth, misalignment, confusion and delays.
Here is an example from my experience how a challenge with supply chain scheduling played out on a project. After studying all the base documents for logistics and transport, I could see there was going to be a problem. The sheer volume of containers arriving at the site meant it would be impossible to keep to on time delivery. I thought through all the assumptions, did some simulation modeling, and devised a plan to mitigate against bottlenecks.
However, not all the stakeholders agreed this was necessary, and my proposal was rejected. The next few days were like watching a car crash in slow motion. Trucks lined up all over the job site and many of the trucks needed first could not even get to the site. We produced a band-aid solution, which was to create a check-in site located before the yard where deliveries could be rearranged.
If the project had been proactive, taken simulation planning seriously and automated on time delivery, we would have stayed on schedule.
The three key takeaways for keeping on top of supply chain scheduling are:
- Deploy network planning and simulation modeling.
- Devise an optimal logistics plan within a cloud-based solution that continuously updates forecasts according to capacity constraints and dynamically synchronizes and adjusts operational plans with all stakeholders.
- Deploy a cloud-based supply chain management system that integrates purchase order, inventory and shipment execution capabilities to provide live control tower functionality for all stakeholders.
Supply chain risks are not properly understood
The worst-case scenario with poor risk management is that the project fails damaging the brand and the business.
I personally think managing stakeholder priorities is the most difficult part of a big project and it can easily backfire. Projects have been shut down in North America because they restricted accessibility to hospitals and in South America because of social unrest by indigenous groups. Transportation needs to be planned around convenient times for daily needs like access hospitals supermarkets or schools. In the developing world those daily needs may be collecting water getting the cows to the field or children walking to their school for several kilometres.
On one project I worked on, this was in another industry, we needed to bring some heavy equipment into a site, but that meant the only entrance to a care facility would be blocked for several hours. We completed the planning with the standard tools – spreadsheets, emails, meetings - but with such sensitive alignment requirements, we could have really done with a visibility tool that ensured specific information was proactively provided to all involved parties.
Aside from failing to consider local stakeholders concerns, there are two other significant ways big projects run unnecessary risks, both of which can be exacerbated by being remotely located:
- Team roles, skills and capabilities may be inadequately thought through, objectively assessed, or expertly adjusted. That means project ramp-up will not be sufficient which will cause delays and stress.
- Suppliers may not be carefully selected based on the objective criteria of capacity and capability. This will lead to bottlenecks, frustrations and damages.
Among potential solutions, the three that most stand out for me, are:
- Free up logistics managers from low value administrative tasks and reactive firefighting by deploying tools that optimize transparency and execution.
- Establish clear requirements and robust evaluation and analysis tools to reduce performance risk and avoid unpleasant surprises.
- Understand and document stakeholder priorities and concerns and devise a plan to meet objectives with frequent communication to report performance.
Recruiting logistics talent for remote locations is difficult
Attracting good logistics people is a problem for all big projects in remote locations. In my career, I have had some amazing opportunities, but it has meant enduring challenging living conditions. I haven’t met many others that are keen on those experiences, no matter how exotic the location sounds.
It doesn’t help when advance workers are sent in to familiarize with local conditions but spend much of their time troubleshooting instead. When they get to planning, it is mostly boring repetitive spreadsheet work. Neither of these make for high job satisfaction. The solution is simple - give these people the appropriate supply chain technology so they can better focus on planning and optimizing. The right tools also mean fewer logistics workers are required.
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