Strategy & Management

Radical Lead Time Reduction (RLTR)

Transferring Lean Management Principles into an EPC Environment Can Drastically Reduce Lead Time

27.06.2018 - Investments in large production facilities, like chemical plants, are risky and time-consuming. Pure construction times often take 2 to 4 years not even taking front-end loading and extensive permission procedures into account.

Nevertheless, if a large investment has been released, time to market is crucial and every month earlier in start of production can account for millions in additional income. RLTR developed by Maexpartners is a planning method transferring key principles of lean management from production into an EPC environment with astonishing results on lead time and quality in execution.

The Challenge

Long lead times in plant projects are driven by the high degree of complexity embedded in the processes, technologies, supply networks and above all interdependencies between the different components and parties involved. Components are typically engineered and made to order with partially very large sizes and sophisticated manufacturing requirements, resulting in long lead items influencing the critical path.

The tayloristic split in the key functions engineering, procurement, manufacturing, logistics, construction and commissioning (typically abbreviated with EPC) is still the dominating paradigm in project execution, causing problems at the handover points and preventing an optimized flow of deliverables.

Planning is often process-oriented, focusing on activity steps to be carried out instead of specific deliverables representing the result of an activity step.

The consequences are: highly complex schedules with parallel and overlapping activities; a large ambiguity in planning, resulting in instable project execution; a disconnect between planning and the real way of working; difficulties in transparency and steering of the project; lots of iterations and idle time in execution.

The Principle

Most plant projects are executed in a push paradigm (fig. 1, “EPC Industry Standard”). Why worrying to much about construction right away, when the pressure is with engineering and the construction phase is still a year or even more from project start away? This attitude results in a forward planning with engineering first, leaving construction concepts and related implications on sequences out of the initial planning not providing the optimum material and document supply for the construction site, causing inefficiencies and idle time.

To achieve significant lower lead times in plant projects, we need to apply a new planning paradigm (fig. 1, “New Paradigm with RLTR”). Parallelization is achieved by grouping and synchronizing activities across the complete EPC value chain towards the needs of the construction site, changing the former push paradigm to a pull paradigm. Now planning starts with the definition of installation kits, that are spatial units in construction with clear battery limits, clearly assigned equipment/material and documentation. The sequence of the installation kits defines the optimum erection sequence and is aligned with the commissioning sequence to achieve minimum lead time on site. Since installation kits are linked to materials and documents, they trigger the logistics and therewith the manufacturing, procurement and finally engineering work, providing the takt for the complete EPC execution process. Therewith, the different EPC functions are much more interlinked and even though parallelization is increased, clear sequences and clear handovers remain. The difficulty related to the definition of installations kits is their sizing. They should not be too large, because this will contradict an optimum flow of material and documents to site, creating idle time, and they should not be too small, since this will increase the planning complexity. In principle, the best lead time will be achieved in a one-piece flow manner, but keeping in mind, that level 3 schedules for a mid-size plant project can easily exceed 10,000 line items, complexity is of the essence and can cause more managerial problems than benefits in lead time.

The Method

In production lean management principles have been successfully applied for decades to shorten lead time and to improve quality. However, EPC companies find it difficult to transfer these principles into their business environment. For example, how can we transfer the idea of Heijunka into engineering? In practice there are four core elements borrowed from lean management, that make up the essence of RLTR.

  1. From Push to Pull: Significant improvements can only be achieved on a holistic basis. A push paradigm in plant construction tends to neglect essential information from the construction phase at project initiation. Hence an optimum flow through the EPC process is impossible to achieve. The RLTR method is enforcing a pull paradigm by application of installation kits. It ensures to have the final state in mind when doing the initial planning.
  2. Synchronization along EPC value chain: Providing takt and a consistent sequence is a major challenge in EPC project execution. All key functions have their own way of working. The engineer is thinking in technical structures and applies his processes (e.g. process design, basic engineering, detail engineering) along this technical structure. The sourcing manager in contrast is oriented along material groups and supply packages, carrying out his processes (e.g. RFQs, purchase orders) accordingly. The site manager is following an assembly structure, provided by installation kits applying his processes (e.g. steel structure works, erection, commissioning) along the installation kits and the equipment attached to them.

Providing a frame for the distinctive perspectives across the different EPC functions and linking the related work packages in an optimized sequence is the task of the planning structure (fig. 2, upper part). The instrument to do this is the work package matrix (WPM). The WPM is a simple matrix with the delivery structure (e.g. technical structure in engineering) as y-dimension and the process flow of the respective function as x-dimension. An area within the matrix represents a specific work package (e.g. basic engineering for station supply). Work packages are now defined to meet construction requirements (e.g. the erection of an installation kit) and linked accordingly following the pull paradigm. From the work package matrices, the master time schedule is deducted (fig. 2, middle part).

  1. Deliverables based execution: Planning should be around measurable results. The key to ensure this is a deliverable based project execution (fig. 2, lower part). Not processes or activity steps are planned for, but work packages that consist of specific deliverables. A deliverable in engineering, for example, can be a drawing, a 3D model or even pure data. In a deliverable based project execution WPM, schedule and deliverables are firmly linked making it easy to steer the project.
  2. Flow Optimization: Heijunka is a crucial element to optimize the flow in production. It ensures levelling of the production along a minimum lot size and is key to synchronization. The same is true in EPC execution. RLTR ensures the best flow along the EPC value chain with the right level of detail for the work packages defined. Poorly levelled work packages act like bottlenecks. For example, an engineer needs only dimensions and loads for a first arrangement drawing, but is waiting for machine drawings that contain much more specific data. In that case, a work package needs to be split up and if necessary new deliverables need to be defined, to allow earlier progressing of succeeding functions. Note that we are not talking about preliminary results. We still work with final results, but focus on the necessary information needed to progress the next step.

The Results

RLTR can be applied in all types of plant projects. The more complex the projects, the bigger the effect. In medium to large plant projects, lead time reduction of 35-45% is common. Besides the shorter lead time, the method is providing a much higher stability in project execution, decreasing non-conformance costs (NCCs) by 30%. This is mainly achieved by the firm link between planning structure and deliverables and the clear sequence in project execution.


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