5+1 Things the right logistics brings to your Project

Very often logistics is regarded as a 'necessary evil' or a 'dark art' by Project Managers and Engineers. They regards the costs as negligible to the overall project when compared to the capital equipment value or the design spen. Historically, many continue to simply take a figure of 5-7 percent as an allowable for the logistics section, however this is grossly oversimplifying, but worse that that, the wrong logistics strategy and plan can delay a project heavily and grossly influence the costs and penalties, not to mention potential fines and an inability to move items out of certain countries again due to improper importation.

Here are 5 benefits from identifying and employing the right logistics leader and his team early enough, can bring to any project, as well as one major effect this will have on your overall project:

1) Ensure Procurement is Optimised. Easy enough to start, provided they are involved early enough, a proper logistics team will check the import requirements at site, and on any transit countries, to ensure that not only is the transport envelope clearly defined and all are aware of it, but also ensure any regulatory requirements are brought to the procurements teams attention, to ensure all correct requirements and documents are included in the sales contract. They will further continue to monitor these, so that at time of shipment there are no sudden surprises prior or at shipment.

2) Assist with Sourcing. Experienced logistics persons, will have several projects behind them, and will no doubt know many of the suppliers for key items in Capital projects, and may even have worked with them before. They should be able to assist ensuring all possible suppliers for particular items are sourced, that the best are included and any potential challenges with suppliers, such as being known for late deliveries or poor aftersales service, are brought to the procurement teams attention.

3) Reduce costs. This is possibly the most obvious, but always overlooked. Too many shipments involve multiple parties acting as brokers only. While there is a distinct need for brokers and their expertise, these should be kept in check and where possible and advisable, agreements should be made as direct as is advisable. (Note many times it is advisable to have a broker to ensure all are on the same page) At the same time, routings must be considered to balance transit time against price, for example, somethings the more indirect route is actually faster due to better connections. The logistics team should evaluate all of these in their intial strategy, but then also have a plan 'B' and 'C' at least.

4) Schedule Integrity. Related to cost and to the terms of procurement, this is one of the biggest challenges I have experienced in projects throughout my career. Many EPC's and project managers try to reduce risk by procuring on CIF or DDP basis, ie delivered on or as close as possible to site, however this allows someone with no interest in the overall project schedule, but rather in cost saving, to control the shipment. A recent though piece by Deloittes on ROI on Capital Projects, puts the overruns on project at 28 percent, with a large portion of this due to insufficient front end planning and misaligned procurement skills (including Logistics.) The piece states, 'Although the procurement function manages 80% of capital project costs, it lacks involvement early on in the strategic planning phase of the project. This results in fewer opportunities to monitor and drive performance of outsourced functions,' Allowing the logistics function to control the shipment ex works, allows more control to the shipping functions, and hince less risk to the schedule. simple, no?

5) Safe Delivery. As with the last items, this is all about control of the shipment and logistics chain. One project I worked on in West Africa involved generators that were procured CIF at port in Ghana. They were shipped by a less than scrupulous shipping company, who we would likely have never used, but were selected by the supplier. We were unable to monitor the handling of the units until they were on site, but quickly confirmed once they arrived that they had been damaged on route. Had our logistics team been in control, we would have insisted on shockmeters with a modem, and would have been able to monitor and jarring movements immediately, but more than that, we would have planned all moves according to the sensitivity and urgency of the piece.

+1) Improve project Risk Profile. All of the above put together all help to reduce the risk profile of the project, so this is theoretically an extra bonus, but there is more to this than meets the initial eye. Logistics managers, by their nature, are trained to consider the 'what if's' of the logistics chain and plan backups and alternatives to be ready, just in case any scenario plays out. This means by nature, they need to be pessimists, thus including them in risk assessments will often have them raising questions about procurement, transport and instillation that are far more basic than those considered by an engineer, but necessary all the less.

Hence, in summary, I can only recommend that when looking at starting a large capital project, identify a top logistics manager and team, and bring them on as early as possible, even if it is intially 1-2 persons, or you bring on a parttime skill intially for the concept phase, and then bring them back when starting the feed. It may seem like an extra cost, but the saving and risk reduction potential of this team are significant, and they will pay for themselves quickly.