Integrating-supply-chain-and-critical-chain-concepts-in-engineerprocureconstruc

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International Journal of Project Management 20 (2002) 253–262 www.elsevier.com/locate/ijproman

Integrating supply chain and critical chain concepts in engineer-procure-construct (EPC) projects
K.T. Yeo*, J.H. Ning
Centre of Engineering and Technology Management, Division of Systems and Engineering Management, School of Mechanical and Production Engineering, Nanyang Technological University,Nanyang Avenue, Singapore Received 21 September 2000; received in revised form 28 November 2000; accepted 2 March 2001

Abstract The present practice of Engineer-Procure-Construct (EPC) projects in the engineering and construction industry receives many criticisms and requires improvement. This paper examines the nature and characteristics of EPC projects with special interest in projectprocurement management. An enhanced framework for procurement is proposed by coupling the concepts of Supply Chain Management and Critical Chain Project Management, with the latter drawing ideas from the Theory of Constraints. The proposed framework broadly embraces three streams of approaches namely, cultural, process and technological. Special attention is given to a systems approach of buffermanagement as a mechanism to improve the management of uncertainty in procurement. # 2002 Elsevier Science Ltd and IPMA. All rights reserved.
Keywords: Supply Chain; Critical Chain; EPC projects; Procurement; Uncertainties

1. Problematic engineering and construction industry The engineering and construction industry faces formidable challenges. As a whole, the industry worldwide continues to performunsatisfactorily. It suffers from low profit margin, persistent project overruns in schedule and budget, and is plagued with claims and counter-claims. A recent UK construction industry survey showed that the profit margin on construction work is 1–2% [1]. American Construction Industry Institute (CII) finds that approximately one-third of the projects miss cost and schedule targets [2]. A criticalaspect of project failure is construction delay, which often results in construction claims. Another survey in UK shows that 52% of UK construction projects end up with claims of some type [3]. The construction industry receives many criticisms. Mohamed [4] claims that the current practices and mechanisms of the construction industry are inherently inefficient, which inevitably leads to wastes [4].Lim’s [5] study on construction productivity in Singapore shows that the industry is perceived as a low-productivity sector.
* Corresponding author. Tel.: +65-799-5502; fax: +65-791-18-59. E-mail address: mktyeo@ntu.edu.sg (K.T. Yeo).

De la Garza [6] thinks that the construction industry productivity has been static for almost two decades. An investigation on time waste reveals that the siteworkforce spends a considerable amount of time waiting for approval or for materials to arrive on site. The amount of work on non-value-adding activities was found to be as high as 40% of the overall project duration from inception to completion [4]. The CII in the US, in their industry-wide investigation, concludes that project performance, measured in terms of cost, schedule, technical, quality,safety, and profit objectives, has room for substantial improvement for the industry as a whole [2]. The Construction Industry Board (CIB) of the UK specifically suggested that the construction industry should be more competitive and aim at reducing construction costs by 30% [7]. Mohamed [4] reckoned that 25% time saving is achievable in a typical construction work package without increasing allocatedresources.

2. Integrated EPC activities An EPC project can be a complex one-of-a-kind product development, made up of a large number of

0263-7863/02/$22.00 # 2002 Elsevier Science Ltd and IPMA. All rights reserved. PII: S0263-7863(01)00021-7

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K.T. Yeo, J.H. Ning / International Journal of Project Management 20 (2002) 253–262

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