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Fig. 4 - Pareto diagram of failure type                  Without visibility and accurate and timely informa-
                                                         tion coming from the field, whichever analytics, si-
The results                                              mulation and optimisation tools are in tatters, and
                                                         hence the ability to make the right decision. Cisco
The current global completion strategy was dee-          sadly experimented this problem: in May 2001, the
med to be the optimum. Instead, margins of impro-        company reported that it had to write off some in-
vement were found in order to increase the opera-        ventory as unusable—to the tune of $2.2 billion,
tional efficiency. Suitable solutions were identified    the largest inventory write-down in the history of
in terms of:                                             business. Cisco was competing as a general con-
•	 reduction of Non-Productive Time (NPT),               tractor in the booming market for Internet hardwa-
                                                         re. Having no production capacity of its own, Cisco
      mainly consisting in the development of opti-      passed all its anticipated demand directly on to its
      mized procedures for the deployment and use        contract manufacturers. Those contractors added
      of “critical” equipment, and the enforcement of    this to the demand they saw coming from Cisco’s
      contractual approaches that focus on QA/QC         competitors, some of which were bidding on the
      (Quality Assurance / Quality Control) aspects;     same business, and as each contractor looked
•	 standardization of planning procedures, throu-        at the demand independently, this led to double
      gh more precise criteria for the estimation of     counting of the same demand. Cisco failed to reco-
      the average timing for well completion acti-       gnize the extent of the double orders and therefore,
      vities, and the adoption of a proprietary sof-     although the tech economy had already begun to
      tware that enables an enhanced time and cost       slow down, Cisco maintained its ambitious sales
      estimation and a more effective management         forecasts. The result was that component suppliers
      of risks;                                          worked overtime to fill orders that were never pla-
•	 increase of current performances, mainly              ced. The order backlog disappeared as customers
      through the identification of minor design im-     cancelled duplicate orders, and new orders anti-
      provements for those pieces of equipment           cipated by Cisco failed to materialize. Cisco was
      that had been found to have a major impact         saddled with excess capacity.
      on the operational efficiency. The implementa-     The systematic exchange of digital information
      tion of the above improvements has resulted        between the OEM (Original Equipment Manufac-
      in an on-time delivery of the well completion      turer) and first-tier suppliers is certainly old hat in
      projects executed up to now.                       manufacturing, with the forerunner Electronic Data
                                                         Interchange (EDI) standards developed in the 80’s;
IT enabled collaboration                                 since then, impressive IT developments allowed to
and extended enterprise                                  connect and coordinate with an unprecedented
                                                         ease numbers of suppliers and partners across the
In large ETO projects, Supply Chains encompass           Supply Chain. In this regard, EDI and Web-EDI so-
hundreds of suppliers and subcontractors distribu-       lutions can be considered quite consolidated in the
ted along several echelons, both upstream (design        Construction industry too (Baldwin et al., 1999),
and manufacturing) and downstream (transporta-           and its use is rapidly going beyond just ordering
tion, building and operating). General contractor’s      materials.
visibility and control diminish the further in the tier  Let’s consider the example of TurnkeyCo, a disgui-
structure, while risks increase.                         sed name for a global turnkey contractor in the oil
                                                         & gas industry, operating in the Engineering & Con-
                                                         struction and Drilling businesses. TurnkeyCo relies
                                                         on a 4-tier supply chain, involving about 40 Tier 1
                                                         suppliers, 2,000 Tier 2 suppliers and more than
                                                         10,000 ones in each of the other tiers. TurnkeyCo
                                                         has a good visibility on Tier 1 suppliers: item master
                                                         files, bills of materials, order status, planning data,
                                                         and transactions are all visible to TurnkeyCo, and
                                                         data accuracy is good. Thanks to visibility, project
                                                         risks are kept low, both in terms of frequency and in
                                                         terms of magnitude, as well as the value of project
                                                         contingencies. Thus TurnkeyCo is highly competi-
                                                         tive (trading margin increases as well as company
                                                         profitability) and it is now looking for getting visibility
                                                         on the Tier 2 order status.
                                                         The easiness in exchanging data has consequently
                                                         increased the demand for new technologies capa-
                                                         ble to capture such data, and eventually bridge the
                                                         gap between the physical world of the Construc-

22 Impiantistica Italiana - Maggio-Giugno 2015
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