Mining supply chains, on the surface, might appear to be less complex, however, don’t underestimate the influence they have on the project’s overall success.

Within this context, many organisations are seeking efficiencies in supply chain management to improve overall operating efficiency and positively impact project outcomes.

A focus on transport and logistics management will help you deliver the right components to the right place at the right time and will have a major impact on the success of your supply chain and ultimately the project outcomes.

Background

Historically, projects may have been less complex. For example, modularisation as we know it today did not exist. In the 1980s, freight forwarding was the new niche logistics process and larger projects would involve thousands of trucks arriving at site during the construction period with no coordination or concern for sustainable organisational goals.

It was not unusual for logistics to be completely outsourced and not aligned to the strategic objectives of the business. This practice was characterised by budget over-spend, fractured supplier relationships, poor service and minimal opportunity for innovation.

Practical examples

Today’s environment is quite different.

Imagine for a moment you are managing ten fabrication packages, each with four tenderers and 300 large overdimensional modules. In this context, a strategy to determine and leverage logistics efficiencies should be developed from the beginning. Considering the logistics aspects of contracts or work packages in a siloed manner will not enable a project to realise transport and budget efficiencies.

More efficient logistics management can result in:

• Modularisation schedule efficiencies: Transport schedules linked to fabrication and construction scheduling for high level detail. 
• Transportability: route surveying, freight budgeting and review of service providers. 
• Organisational resourcing: matching logistics personnel to package engineers or contracts and procurement specialists and communicating role and responsibilities unambiguously. It’s worth noting in this scenario that transport and logistics personnel are facilitating, examining and reporting on issues and not managing contracts.

Chain of Responsibility (CoR)

There is often a lack of awareness around Chain of Responsibility (CoR) processes and laws within a project. CoR means that everyone involved in the transport of equipment - consignee, consignor, administrative staff, fabricator, project buyer, and expeditor - are locked into legal responsibility during transportation. CoR law clearly states that supply chain participants must take reasonable steps to properly manage their responsibilities and to act by addressing known inconsistencies which may give rise to safety incidents. The transport and logistics team needs to take this one step further and communicate these aims to the entire team on a regular basis.

Terminology

Another factor influencing efficiencies is the clarification of logistics industry terms and the flow-on statutory adherence – this is especially important for projects which involve modular fabrication. Shipping terms are different to purchasing terms and the knowledge of each in order to avoid inconsistency leading to unpleasant surprises needs to be available to the project team.

International commerce terms (Incoterms)

Incoterms are a series of international sales terms, published by the International Chamber of Commerce (ICC) and widely used in international commercial transactions. These are accepted by governments, legal authorities and practitioners worldwide for the clarification of most commonly used purchasing terms in international trade. This reduces or removes uncertainties arising from different interpretations of such terms in different countries.

All contracts and procurement personnel plus transport and logistics team members should be aware of the 13 Incoterms and each contracts package obligations under them.

Transport, ports and roads

Understanding the project’s transportability envelope and constraints should be known at the beginning of the project to establish:

• An optimum engineering envelope design window 
• Route clarification and port of entry selection 
• Estimating costs for infrastructure upgrades 
• Scheduling and planning for logistics tasks 
• Overall logistics methodology

The resources to perform these activities should be located as close to the project team as possible. Having resources close to the project will help achieve better results, with associated activities, such as a project specific route survey.

The route survey should provide precise detailing of all infrastructure points of interest, in particular overhead wires and bridges. Having the transport and logistics team and resources in one central pool for the benefit of ongoing project support at front-end stages is beneficial to budgetary and strategy formation activities.

Referring back again to the ten fabrication packages ... all arriving over a six month window...

If the packages are sourced using the silo approach described earlier, you might ask yourself, who is looking at overall port berthing congestion and also factoring in other port users? Who is looking at total storage and handling restrictions?

Using a central team and holistic approach, the logistics process will be managed more effectively. The plans will have been communicated to statutory and related stakeholders to help with the effective handling of the vessels and modules.

With main roads and police escort management, a similar path should be followed - integration into the project plan with formal communications to key stakeholders to avoid unpleasant surprises.

At the start of the project feasibility phase there are a several more strategies to consider:

• Budget and availability of logistics services 
• Global reach of the project from equipment point of origin to point of final site installation 
• Programme level management for economy of scale, opportunities for fewer interfaces, tighter HSEC management and resource reductions 
• Productive relationships with stakeholders and sub-contractors to cement clients’ expectations, trust and understanding 
• Controlled communications and regular meetings to facilitate improved co-ordination between contractors and their service providers 
• Time efficiencies and information management assists with the flow of information available to make informed decisions about critical path incidents, resource planning and ultimately budget building 
• Involvement of the risk-management team to support mitigation measures 
• Checking of all pre-shipment compliance with relevant national quarantine /border security legislation 
• Integrated traffic management planning – main roads, police and community in one document

If the projects are cross-border, the transport and logistics processes can better contribute to smarter and innovative project delivery managed by a central team. By setting up virtual teams and centres of excellence to provide logistics planning and management, budgets and methodologies can be prepared after preliminary visits, and resources and time efficiencies can be optimised.

Collectively, a smarter supply chain is the aim. From an organisational perspective it should be considered in the same category as any continual improvement process and have clear organisational responsibility and ownership.

There are a number of variables around transport and logistics management, however integrated planning and execution can achieve better, “on-time” and “on-budget” outcomes.

One of the most important factors is using the skills of logistics specialists.

Transport and Logistics is a specialist discipline. Leveraging the capability of transport and logistics professionals early and providing them with an unambiguous mandate to get the job done will pay off in terms of savings in time and budget.

This article has been written from a presentation at the 3rd Annual International Modular Construction & Pre-Assembled Fabrication Conference. 18-19 November 2009, Perth, Western Australia, given by Jamie Bradford jxbradford@skm.com.au

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