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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
