Where did it all go? Part 2: Ruskin’s Law May Know
(See Part 1 at http://www.maitech.com/where-did-it-all-go-part-1/)
Let’s recap Part 1: The high profile capital project did not work out as planned: purchased equipment was missing, the outage lasted longer, production was lost, capital budget over spent, mini-outage now required and vacation lost. How did this happen?
John Ruskin’s Law of Business simply states:
‘It’s unwise to pay too much, but it’s worse to pay too little.…when you spend less you sometimes lose [more]’
How does this apply?
Far too often, a project’s ‘Construction Support Management (CSM)’ budget allocation is the first slashed. These potential ‘savings’ could range from 6-20% of the projected total cost: average ~10-12%.
Why does it get cut?
It’s justified from the perspective that it’s just shuffling paper, wearing a hard hat, walking around, reading a print and pointing, etc. Anybody can do that, right?
What gets forgot?
The umpteen hours a day keeping the plant running, meeting stretch production goals, managing customer’s needs, meeting with vendors and planning the outage.
And here is where Ruskin steps in. To save money, less money was spent. And spending less, can lead to losing more.
Here are noted losses for this Capital project.
• Repurchase of missing equipment.
• Expediting/overnight shipping fees. (Remember that special Inconel filter was sitting somewhere.)
• Contract labor: extra cost of outage delays/upcoming, unplanned mini – outage
• Cost of all lost production time from the delay and upcoming, unplanned mini outage
• Plant staff’s time handling the above
• Cancelling the other upcoming project due to budget over spending
• Pallet of aspirin
Let’s stop there. Now, ask yourself, would the extra 10-12% of the budget been worth spending on CSM?
CSM managers step in to the project with your team; they represent you. Managing all the key aspects knowing what details can easily slip into gaps just to rear their ugly heads later, keeping you informed and letting you and your folks concentrate on your core responsibilities. Their job is to prevent the spending of extra monies. They may ultimately save you some money that can be proactively spent elsewhere.
CSM, when done well, does indeed look like shuffling paper, maybe wearing a hard hat, walking around, reading a print and pointing…
Do you have an upcoming project? Contact MAI and we can walk you through how we can bring value as a CSM team member.
Email us at MAI@maitech.com or call 812.838.4000.