1660319391169 Earlyorderingbenefitsconcernssm

Processing Equipment: Does Early Ordering Make Sense?

Aug. 24, 2016
Consider the option for long-lead-time equipment but also its risks.

[pullquote] Long delivery times easily can imperil plant projects and maintenance. Specialized equipment may have relatively few reliable manufacturers — and, thus, involve lengthy lead times. Meanwhile, industry consolidation has reduced the number of capable suppliers for some types of commonplace equipment (pumps, for example), again impacting the speed of delivery. So, ordering equipment before a plant knows exactly what’s needed may offer advantages. However, early ordering comes with tradeoffs. Table 1 lists some of the benefits and concerns.

The Tradeoffs

Table 1. Early ordering poses a number of important benefits and concerns.

Early ordering has the greatest value and, thus, is most compelling when it’s the only way to adhere to the project’s schedule. If multiple procurement, shipping, manufacturing and assembly steps are required in sequence, as they often are, schedules may be impossible to compress beyond some point. Many projects recognize this by identifying specific items with long-lead-time delivery. Major machinery — e.g., large compressors, solids handling and other equipment requiring precision moving parts — frequently falls into this category. Delivery of these items may stretch to 24 months or longer after order.

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If you must order equipment early, take steps to minimize risk. Have contingency plans in place. Plans should cover three areas:
• capital exposure;
• process changes; and
• manufacturing and shipping reliability.

The company has committed funds to buy a major equipment item. This capital is at risk if the project gets canceled or unforeseen events arise, such as weather, seismic, business or political upsets. The purchasing plan must include explicit cancellation dates and charges. The potential cost of these charges then can be weighed directly against the expected benefits of early ordering.

Effective process change management is critical for major equipment. After all, early ordering requires the fixing of the equipment design well before the rest of the process is defined. So, you and the supplier should agree to a schedule of dates when it needs specific information. That schedule must be met. After the schedule dates, no changes should occur except in dire situations. In general, you only should make changes when a safety, environmental or regulatory mandate forces them. The exception is if something is discovered that makes the equipment completely unsuitable. In that case, expect to pay for significant change orders.

Early ordering creates constraints that impact the rest of the project. These constraints may include:
• pressure and temperature ratings that everything else has to work around;
• safety procedures and requirements;
• plot plan for locations; and
• efficiency and capacity.

Process, equipment, piping, and structural design must attempt to work around the constraints. You must minimize changes to the ordered equipment.

If equipment merits early ordering, it also merits careful inspection during manufacturing and shipping. After all, the reason for early ordering was that the equipment is both vital and impossible to get any other way. If something goes wrong, what is the backup plan? Should you select a vendor that has two manufacturing sites instead of one? Will shipment require ocean transport during a hurricane or typhoon season? Equipment ordered early must have well-thought-out inspection, expediting and transport plans.

Wise engineers also involve the plant operators in early ordering decisions. These people are on the front lines of making the plant work. Get the benefit of their experience and opinion.

Early ordering may be necessary. If so, do it right. Take all the relevant factors into account and ensure adequate planning for contingencies.

ANDREW SLOLEY is a Chemical Processing Contributing Editor. You can email him at [email protected]

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