Procurement and Materials Management: A Decade of Improvement

1. Procurement and Materials Management: A Decade of Improvement

2. Percent Improvements • Reduced bulk surplus (40%) • Improved supplier performance (24%) • Cash flow savings (23%) • Reduced site storage, handling (21%) • Improved craft productivity (16%) • Improved project schedule (16%)

3. Background • Project Materials Management Handbook originally issued by CII in 1988 • Updated to include value-added concepts • Procurement & Materials Management: A Guide to Effective Project Execution

4. Al Franks, Jerry Whetstone Amoco Corporation David Timberlake Bechtel Group. Inc. Steve Daniels, Jim Scotti Brown & Root, Inc. Doug Moore Chevron Corporation Mark Coleman CITGO Petroleum Corporation Lance Bell Clemson University Glen Meadows Commonwealth Edison Co. Bob Ferguson Fluor Daniel, Inc. Greg Pisklo Hilti Corporation Ed Ruane J. A. Jones Inc. James Steenbergen Union Carbide Corporation Jim Goodwin H. B. Zachry Company Team Membership

5. Approach • Surveyed membership to identify awareness and use of effective procurement and materials concepts • Executed structured interviews • Utilized survey input, site reports, and team member experience in the update process

6. Immediate Usefulness • Update includes: • Checklists • Sample reports • List of concepts and technologies • Sample templates • Guidelines to assess contractor’s systems • References

7. Internet, intranet Supplier alliances On-site supplier stocks Bar code controls Common commodity codes Global logistics planning Supply chain management Evaluated receipts settlement MRP and trial allocation Document imaging Procurement cards Simulation packages New/Developing Concepts

8. Gaps • Survey of CII members • Sizeable gaps between awareness and implementation of procurement and materials management concepts

9. Owner Contractor Evaluated Receipts Settlement Minimal Awareness Moderate Awareness Intent to Implement Current Utilization 0 20 40 60 80 100

10. Owner Contractor Bar Coding (Tool Control) Minimal Awareness Moderate Awareness Intent to Implement Current Utilization 0 20 40 60 80 100

11. Management Role • Champion procurement and materials management as a value-added process. • Provide resources for implementation and training. • Implement effectiveness measures to track improvements over time. • Promote supplier alliances.

12. Welcome to the … Procurement and Materials Management “Skins Game”

13. 1. What is a purchasing technique for several companies to combine their material requirements into a single plan to attain greater leverage with suppliers? A. Consortium buying B. Leasing arrangement C. Subcontracting

14. 1. What is a purchasing technique for several companies to combine their material requirements into a single plan to attain greater leverage with suppliers? A. Consortium buying B. Leasing arrangement C. Subcontracting

15. 2. What are examples of procurement and materials management system metrics? A. Stock outs B. PO cycle time C. Both A and B

16. 2. What are examples of procurement and materials management system metrics? A. Stock outs B. PO cycle time C. Both A and B

17. 3. What is“Evaluated Receipts Settlement”? A. Analysis of warehouse operations B. Payment w/o hard copy of invoice C. Process similar to Alternate Dispute Resolution

18. 3. What is“Evaluated Receipts Settlement”? A. Analysis of warehouse operations B. Payment w/o hard copy of invoice C. Process similar to Alternate Dispute Resolution

19. 4. What are examples of services expected of strategic, integrated suppliers? A. Take-off assistance B. Accurate inventory control C. Both A and B

20. 4. What are examples of services expected of strategic, integrated suppliers? A. Take-off assistance B. Accurate inventory control C. Both A and B

21. 5. What is the average percent improvement CII members have achieved in “craft labor productivity” when effective procurement and materials concepts were used? A. 2% B. 4% C. 16%

22. 5. What is the average percent improvement CII members have achieved in “craft labor productivity” when effective procurement and materials concepts were used? A. 2% B. 4% C. 16%

23. True or False6. The following are examples of areas that should be included in a contract for transportation services: • Carrier liability • Origin and destination services • Rate structure

24. True or False6. The following are examples of areas that should be included in a contract for transportation services: • Carrier liability • Origin and destination services • Rate structure

25. 7. Which of the following are characteristics of a contractor’s comprehensive computer system? A. Electronic links to ERP B. Multi project procurement database C. Electronic distribution of catalogs

26. 7. Which of the following are characteristics of a contractor’s comprehensive computer system? A. Electronic links to ERP B. Multi project procurement database C. Electronic distribution of catalogs

27. 8. What are the trade terms published by the International Chamber of Commerce (Paris) that divide obligations between a buyer and supplier in 10 areas? A. Uniform Commercial Code B. Napoleon’s Code of Warfare C. INCOTERMS

28. 8. What are the trade terms published by the International Chamber of Commerce (Paris) that divide obligations between a buyer and supplier in 10 areas? A. Uniform Commercial Code B. Napoleon’s Code of Warfare C. INCOTERMS

29. 9. What are very common applications of bar code technology? A. Receipt of fabricated items B. Tool control C. Both A and B

30. 9. What are very common applications of bar code technology? A. Receipt of fabricated items B. Tool control C. Both A and B

31. 10. What multi-industry initiative has developed more than a million standard material identifiers and descriptions? A. CIMIS B. APICS C. NAPM

32. 10. What multi-industry initiative has developed more than a million standard material identifiers and descriptions? A. CIMIS B. APICS C. NAPM

33. 11. What is an effective software platform with which to develop a materials management computer system that interfaces with design systems? A. Trial and error B. MRR C. Object-oriented programming

34. 11. What is an effective software platform with which to develop a materials management computer system that interfaces with design systems? A. Trial and error B. MRR C. Object-oriented programming

35. 12. What important function of a materials control system compares material requirements to requisitions, purchases, and inventory to ensure material availability for construction? A. Packaging B. Trial allocation C. Proration

36. 12. What important function of a materials control system compares material requirements to requisitions, purchases, and inventory to ensure material availability for construction? A. Packaging B. Trial allocation C. Proration

37. 13. What communications link will exert fundamental change on procurement and materials management in the next several years? A. Fax machines B. Electronic commerce C. Morse code

38. 13. What communications link will exert fundamental change on procurement and materials management in the next several years? A. Fax machines B. Electronic commerce C. Morse code

39. True or False14. The following are benefits of a “Supplier Alliance”: • Shared vision and goals • Lower total costs • Integrated vs. duplicate teams

40. True or False14. The following are benefits of a “Supplier Alliance”: • Shared vision and goals • Lower total costs • Integrated vs. duplicate teams

41. Final Question15.How can you learn more about Procurement and Materials Management? A. More supplier lunches B. Fewer supplier lunches C. Attend the Implementation Session

42. Final Question15.How can you learn more about Procurement and Materials Management? A. More supplier lunches B. Fewer supplier lunches C. Attend the Implementation Session

43. Summary • Innovative concepts have emerged in past decade. • Utilization of these concepts has resulted in significant improvements. • Not all CII are aware of or utilizing these concepts. • New CII publication provides details of these concepts.

44. Implementation Session • Pros, cons, benefits, & advantages: • Lance Bell (Clemson): Moderator • Bob Ferguson (Fluor Daniel): Electronic Tools/Systems • David Timberlake (Bechtel): Logistics • Jim Scotti (Brown & Root): Supplier Alliances • Ed Ruane (J. A. Jones): Collective Group of Concepts • Share experiences • Take-home tool

45. Percent Improvements • Reduced bulk surplus (40%) • Improved supplier performance (24%) • Cash flow savings (23%) • Reduced site storage, handling (21%) • Improved craft productivity (16%) • Improved project schedule (16%)

46. Our thanks to Varese Sarabande Records Inc. and Robert A. Israel for the use of the theme song... The Price Is Right (See you in the LaSalle Room)