Logistics Planning for Projects in Remote environments

The success of planning the Logistics Support for Projects,  is often a direct contributor to the overall project success, and nearly always has a direct influence on cost and schedule.  After all, the way that materials are provided for a project, and are controlledand utilised can affect Cost, Schedule and Quality (the 3 pillars of project management).   In a developed environment, where suppliers are close by, transport is regular, security is sound, IT systems are in place and ‘interconnected’ and we have well trained and largely ethical staff involved through the process,  you have a fair chance of getting it right.

But what needs to be done when one, some or all of these factors are not in place?

The delivery of Supply Chain support for a Project in a remote location has a number of differences which need to be considered during planning. The easiest way is often to identify these variances at each stage of the Project Cycle to develop a clear and effective support plan.

Buying for the Project.

Materials are probably being sourced far from the end project location. For example, materials may be purchased and supplied from Australia, or the US, for delivery to a project in a developing country such as Papua New Guinea, Africa, or even Antarctica.

Project Materials. Inappropriately packaged for forwarding to remote environment. Wasted time and cost that could have been avoided.

Two principles should be considered in these cases…

1. Ensure the goods are properly inspected before payment, and do so as close to the supplier as possible. This often goes against what is now common practice to accept delivery and make payment when the goods arrive at the site.  A ‘receiving and inspection point’ needs to be established outside of the remote location. A shipping or consolidation point before the goods are forwarded to the remote location is often sound.  This should be controlled and tightly managed, preferably supported with a receiving system linked to the Purchasing and Payment system.

Why? Well, you don’t want to find out that you have the wrong goods once you have paid for expensive freight and handling half way accross the world.  Also, if you are going to pay the supplier on time, that is only going to be put at risk if you are going to inspect and pay after you have freighted the goods through some of the worst conditions imaginable. Consider the potential for delays, damage and theft. No supplier wants to wear the responsibility or consequences of that.   If you find a supplier who will accept terms such as this, expect to pay for the privelage.

2. If systems are poorly connected (perhaps an immature site, or poor communications infrastructure limits IT integration), make sure that the system which will be used to manage the goods through the supply chain is the one used to actually raise and manage the Purchase Orders.  In some cases, this can mean that the order are perhaps done on behalf of a contractor, as opposed to the contractor raising their own orders utilising their own ERP systems. At first this appears inefficient, but in many cases the end result is often a smoother operation where the Supply Chain has been integrated into the one system.  Often too, having on-site staff who understand the operation take ownership of the material supply early in the process adds to increased ownership of the project and early identification of other  issues that might not be identified by someone at the Head Office.  For example:

• Identifying local import/customs issues, that the contractor may not be familiar with.
• Incorporating local transport, storage and handling issues into the plan.
• Identifying alternative sources of supply, often local, that may offer a lower cost.
• Advise on the most practical and efficient shipment methods.

Transport and Import arrangements.

As above, hopefully planning has been started to identify solutions early in the process. However, too often the first moment these issues are identified are when the goods arrive at the Port (perhaps without correct documentation) or everyone is scratching their head about how to move the goods, and who will pay for it.

Often, for a remote site, there is only one well established transport route that has been especially developed (or evolved) to meet the requirements of the operation. This is different to a well connected operation where there may be a multitude of roads, airports and providers to move freight inwards.  Not recognising this in the early stages of planning will mean that either the existing Transport chain will be stretched to accommodate the project requirements or the ‘new’ arrangements which may be put in place independently could be unproven or note even appropriate for the environment. This could result in unexpected risk and cost to the project.

Often, contracts are struck with delivery terms stating payment for materials to be provided to the work site, but in many remote locations this is not appropriate as the supplier or contractor does not have control over the Distribution chain through to the end location. Thought needs to be given to who is best equipped to manage the risk of the Transport chain, and who best to operate it.  Transfer of custody and ownership needs to occur at this point,  normally where the supply cain transitions from ‘developed’ to ‘undeveloped’ and where there is a resource to contractually manage that transition.

Liability and Ownership of the Transport Chain

Both parties will also need to appreciate that some risks and factors associated with the transport cannot be managed effectively by either party.  For example, road closures due to weather, road accidents, or civil disturbance. In these cases, consideration needs to be given to ensuring adequate insurance for some of these events (if possible) and incorporating transport delays into the project plan.

Another common mistake is to mobilise a work crew on the assumption that the materials will arrive for a project on a given day.  When the materials don’t arrive on the often over-optimistic time, the crew is often sitting idle incurring cost.  While it may delay start by a couple of days, major mobilisation of work crews should be considered once the ‘risk period’ of material delivery has passed.

Managing the Risk of Transport in a Remote location

Receipt and Control of Materials.

The control of materials once at the worksite is often a problem area.  Ideally, the location and resources that will be required to control materials will be determined, and resources put in place, before they arrive. Project Materials may often be ‘directs’ and more often than not will not be established within an inventory system. An alternative system will often need to be developed to ensure the materials are tracked and controlled. This can be a simple Excel spreadsheet, which references the orders that have arrived, who has collected the materials and when.  Ideally, materials should not be issued to the project in less than the base Unit of Measure from the order.   Care should be given to who will actually collect the materials as well, with perhaps an ‘authorised’ list of people being developed who are given the authority to collect and sign for the project materials.  Either way, all players at the start of the project should be advised of the arrangements and suitable care given to keep the materials in order.

Poorly Planned Project stores - Lost Control, Project delays, Cost.

Because a unique system may need to be established for the project, the control of the store often lends itself to being clearly assigned to a single person, or small group of people. This also facilitates building  a rapport and effective working relations between the project group and the supporting supply chain.  The team controlling the stores should be recognised as stakeholders and participants in the project, and also be asked to contribute regularly status-updates to project stakeholders and be encouraged to propose new ideas for improvement that will help in the flow and control of project materials.

Well Organised Project Lay Down yard - Controlled, Secure, Accountable.

Close Out.

This is another area where the ‘remote’ project has a few issues of its own, and one that few people consider.   Because of the difficulties in supplying the project, there is often a tendency to over-supply with greater than usual levels of contingency built into the Bills of Material. This inevitably leads to a large surplus that nobody wants to know about.  The tendency is to put it ‘into the site inventory’ for a rainy day.  This also usually means that the surplus is written off the account for the project, hence there is little disincentive for the project to minimise surplus.

Disposal is often difficult as well, due to cost of getting the gear out again, and the limited options for disposal of the materials.  There are no easy answers to this issue, but the following suggestions can assist:

• Ensure there is an incentive for Project Managers to minimise surplus materials in their planning.
• At least look for other ‘surplus’ materials that are already in location during the planning stages for the project.
• Ask contractors to provide proposals for what to do with Surplus materials. They may know of other buyers or projects nearby where the surplus materials can be transferred and utilised.

The remote project can have a number of unique characteristics that need to be recognised and addressed, in order to develop a project plan that will be successful.   This report covers just some of the issues that may be encountered.  Overall, it is about engaging in a planning process. Understand what is different about the remote environment you are working in, and develop solutions that are integrated and will work. Trust the people who work in that environment every day as they will know what can and can’t work, and are often more resourceful and responsive to change than their developed world counterparts.   I also strongly recommend drafting a specific ‘Logistics Support Plan’ for a project, so that the concepts which will be applied for a project can be clearly communicated and understood by all involved.