When we talk about project-based services, we think about very complex equipment, long lead times, services to install the products, a global network of suppliers, and the management of aftermarket parts and maintenance. Evaluating and scoping these types of projects can take months, if not longer. Upon committing to a project, it can take a year or more to complete them.
Complicating project work further is today’s uncertain environment. Raw material pricing is volatile. Transportation capacity is down, and costs are up. Constrained supply and global shortages impact all tiers of the supply chain. Furthermore, new service offerings and high expectations are changing the nature of project-based businesses.
The planning process for projects of this nature is extensive. Forecasting demand is difficult. It is often tender-based, with the potential for a single win to significantly impact material requirements and financials. Accordingly, planning supply, especially for long lead-time and critical components, is also tricky and full of risk. A single item, if constrained, can delay a project beyond its due date, leading to high penalties. Beyond that, service agreements extend for ten or more years.
Vestas, the self-described “energy industry’s global partner on sustainable energy solutions,” understands this environment exceptionally well. For example, on June 30th, 2022, they announced the receipt of an order to power the “Goodnight I wind project, owned by Omega Energia, in Texas, USA.” Turbines will begin to arrive nearly a year later, in Q2, and commissioning in Q4 of 2023. The order includes “a 30-year Active Output Management (AOM 5000) service agreement, designed to ensure optimized performance of the asset.”
Digital operating models are critical to managing these complex requirements over extended periods in configured (CTO) or engineered (ETO) to order projects. Required planning capabilities now include the ability to visualize the state of their business, anticipate disruptions, and respond with agility across multiple time horizons, all in near real-time.
As Henrik Andersen, Vestas’ President and CEO, says, “A key aspect of increasing renewables’ share of the global energy system is a strong digital foundation and solutions that help ensure a resilient, efficient, and secure renewable energy system.” Vestas is not alone, as its peers in the energy industry and those throughout capital goods manufacturing are switching to the new ways of working enabled by digital operating models. While the transition is still new to many, there are already great lessons from those pioneering digital transformations.
The aim10x webinar Digital transformation in project-based capital goods industries further explored just how technology enables project-based capital goods supply chains to thrive under pressure during complicated circumstances, with insights directly from Christophe Mugnier-Pollier, VP of Global Supply Chain at Vestas, and Pierre Liautaud, former EVP and board member at KONE, along with Koen Jacobs of o9 Solutions.
In particular, the panelists described how many factors complicate the planning process for large capital projects, one of which is the divided nature of siloed supply chains. Liataud said, “almost all the characteristics we described before are making our sector vulnerable to such dramatic changes as the ones we saw over the past three years.”
The panel agreed that technology is critical in addressing the challenges with flexibility and connectivity. Pierre Liataud said, “technology, especially with the latest innovation, plays a key role in breaking the silos between the various islands of our legacy system.” Christophe Mugnier-Pollier added, “the point is to find the right technology that can support all the requirements, so it’s flexible enough that you can use it for different purposes or in different environments.”