How EPC 4.0 helps maximise return on capital

Posted: November 16, 2019

There is no doubt that the business world is changing, becoming more competitive in this new digital age. Industrial companies must innovate to move away from the manual, document-centric processes, and move towards a data-driven vision of project design, procurement, and execution. Doing so will increase safety, reduce costs, and minimise delays, helping them maximize return on capital.

98% of mega-projects incur cost overruns and delays

Over the last two decades most industries have seen significant productivity increases by adopting new digital technology, redefining their work processes and educating their people. In manufacturing this increase is almost two-fold. However, in capital projects and the construction industry productivity has remained at the same level since the 90’s. In today’s competitive market this is causing problems.

A recent study from McKinsey* found that 98 percent of mega-projects incur cost overruns or delays. The average cost increase is cited at 80 percent of the original value, and the average slippage being 20 months from the original schedule.

Much of this comes down to data and how data is handled and stored in the engineering and design phase where errors contribute to 14.2 percent* of the contract value alone.

The problem with document-centric systems

Today, most EPCs and Owners are dependent on document-centric systems for both their capital projects and operations, sharing information by passing hard copy or electronic documents between people, disciplines, departments and even organisations.

Learn more from Rashaad Sader, VP Digital Transformation at SNC-Lavalin on how data-centric approach can improve project execution.

Every exchange of information introduces a risk for error and inconsistencies that can propagate through engineering, procurement, construction and handover, resulting in engineering and scheduling errors, material waste, rework, cost overruns and ultimately delays in start-up and full-scale operation.

What is required now is one unified, integrated, data-centric system, that keeps your information in one place and helps you manage change automatically.

By leveraging Industry 4.0 technology and work processes, your workforce can collaborate and take control of the data reducing the risk for errors, delays and increased project cost throughout the asset life cycle.

This is what we call an EPC 4.0 strategy.

Take back control of your projects with EPC 4.0

EPC 4.0 allows collaboration on a global scale, digitally and on a unified platform, so the entire process can be traced, tracked, and linked -- from engineering and design, through procurement and construction, to handover and even to operations and maintenance as the foundation for a Digital Twin of your operating plant.

So, how does this work?

When an engineer has to make a change, instead of P&IDs needing to be updated and reissued manually, instead of equipment datasheets floating around on different systems, instead of out-of-date piping and equipment specs getting sent to suppliers, all lists and datasheets are aligned with 3D models and schematics on a Digital Twin – a digital version of the real-world, physical asset.

This ensures high-quality deliverables every time, streamlining the data handover process, avoiding procurement errors and delays, and reducing costs at every step of the journey.

This can have a significant impact on a project’s Total Installed Cost (TIC). The McKinsey study* estimates savings of up to 50% in capital projects based on the benefits seen in manufacturing.

What we have seen at AVEVA is a ball-park figure of 10% reduction in TIC for capital projects by executing and managing a capital project on a data-centric platform. This means that on a $1 billion project you could cut cost by a $100 million.

*These cost savings are realised by mitigating capital investment risks at the process design stage, cutting engineering man-hours by 30 percent in plant design, reducing material costs in procurement by 11 percent, reducing field labour costs in fabrication construction by 10 percent, and using simulation learning to improve enterprise safety in the commissioning and start-up phase.

Digital transformation is happening. Don’t get left behind.

EPC 4.0 means taking control of your data, it means empowering your workforce, and it means reduced costs, reduced delays, and a safer workplace. Learn more in our webinar - The Productivity Gap in Capital Projects - Reduce Error, Risk and Delay with an EPC 4.0 Strategy. Available to watch on demand now! 


*Reinventing Construction - a route to higher productivity
McKinsey, Rice Global E&C Forum Roundtable, September 8th 2017
T.G. Jayanth, Expert – Capital Projects & Infrastructure, McKinsey & Co

*Probabilistic Assessment of Design Error Costs

Love et al., 2014

*Source: Large US Energy Company


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