Merging business ideas – Part 2

Read part 1 here.

Flexible planning

Resource integration

European company culture tends to rely more on manufacturing workshops with several decades of experience, established designs (kiln, preheater, roller press, mill, separator, etc.) and a successful project portfolio; however, some of these companies may arguably lack flexibility and innovation in terms of taking risks and evaluating/selecting new workshops that could result in potential cost savings. It could be said that Chinese companies are more flexible with regard to the selection of new workshops (which have the capability and willingness to follow European QA and QC procedures) in order to reduce costs.

For this project, the plant owner requested high quality standards on a very limited budget. The project management team could not meet these demands by establishing a European-quality plan due to the limited budget, or by following a more flexible Chinese plan due to the high quality standards required. To meet the client’s quality standards and save costs, the team merged a traditional European quality plan with Chinese flexible resource integration using the concept outlined in Figure 1. If the team conducted the project using a traditional European plan (A), selecting European suppliers to manufacture European products, the quality risk was almost nil but the cost was high and the manufacturing period would have been considerably longer. If a Chinese plan (B) was chosen, using more Chinese suppliers to manufacture European products, the cost risk was lower but the quality risk was notably higher. To merge the two plans effectively and meet the client’s budget requirements, the joint venture company selected the core parts for the project from Europe, with manufacturing to be conducted in China under European supervision. The red arrow represents a good balance of both quality and budget.

Figure 1. Important stages of an EPC project execution.

The project team selected highly qualified manufacturers to conduct local fabrication in China in order to ensure the quality of the equipment. European experts used an evaluation tool to select a Chinese production workshop that could comply with European quality manufacturing procedures.

Site construction plans

The construction schedule prepared by the European team members was broken down into more than 9000 detailed activities, ranging from schedule Level 1 to Level 5. In order to complete an international 5000 tpd cement EPC project within 25 months to a high quality standard, the company could not completely adhere to the detailed breakdown schedule and activity order prepared by the European planning experts. Similarly, the Chinese-European team could not follow the rough schedule prepared by the Chinese engineers, as it may have been easy to miss out or overlook a number of important activities. For this reason, the team used the identification programme shown in Figure 2 to execute the project schedule smoothly. The schedule could be adjusted according to daily activities and the team held a weekly schedule review meeting and produced a report. European experts managed the planning schedule and led the identification procedure.

Figure 2. Schedule identification programme.

Matrix management

During the early stages of construction, there were a number of complaints from the Chinese engineers, European engineers and other cooperation partners, which had a negative effect on the overall working environment. The European team expressed a lack of faith in the Chinese engineers in terms of meeting and following European construction standards, while the Chinese team complained about the expense of the European experts’ solution, which included very high overhead costs.

In order to tackle the situation and improve the efficiency of the team, the Chinese-European steering committee developed a matrix communication and management platform. All divisions led by the steering committee were assessed on a weekly basis, including: design changes; equipment quality control; electrical/automation quality control; steel structure modification and quality control; health, safety and environment; logistic management and custom clearance; commercial and claim management. If any division was labelled as “not acceptable”, it would affect the overall result for the management platform (even if the assessment results for all other divisions were “good”). If this occurred, the site department in question would be required to submit a step-by-step action plan within a limited time frame in order to avoid any delays. Similarly, if a division was labelled “acceptable”, it would be required to submit an improvement action plan outlining how it would achieve the “good” standard agreed by the European-Chinese team.

Conclusion

The global economic recovery has caused a boom in the construction market, particularly the infrastructure, horizontal and vertical structures, subways, railways and real estate sectors, and an increase in cement production is required to support this rapid growth, especially in countries such as Africa, Brazil, Russia, India and Venezuela.

A number of countries (China, Thailand, Vietnam, Philippines, etc.) are attempting to tackle the issue of overcapacity in sluggish markets. To reduce the risk of new projects and operations, cement manufacturers are increasingly looking towards professional EPC contractors, which provide a low cost one-stop solution, and to joint partnership opportunities to avoid price wars. Every country offers its own advantages and disadvantages. With ongoing cement projects, or related environmental projects, and work that will have to be executed by an international team in the future, it is very important to have mutual respect from both parties to avoid conflicts, misunderstandings and miscommunications.

Western quality standards combined with Eastern comprehension and value for money is arguably a successful business culture combination, which will provide more value for both owners and clients. Companies must move forward together and make further efforts to merge business cultures in order to ensure better performance and value for owners and shareholders, which in turn will benefit the global cement industry as a whole.

Written by Shixiang (Danny) Chen, AVIC International, China. This is an abridged version of the full article, which appeared in the October 2014 issue of World Cement. Subscribers can view the full article by logging in.

Read the article online at: https://www.worldcement.com/asia-pacific-rim/26092014/merging-business-ideas-part-2-545/