Classical vs Industrial
The classical setting
We'll use an interstate highway for an example, which we are going to greatly simplify for discussion.
Generally a public need is identified, maybe a lot of people travel from point A to point B. A cost is identified, probably by historical cost per mile of highway, a cost of maintenance is estimated again from history, and any cost offsets are identified. Then a benefit study is conducted which is this case may center on the increased speed of commerce, commercial development, maybe an increase in tourist traffic and revenue generated, maybe an increase in the tax base, and enhanced highway safety. Then if the cost:benefit ratio reaches some criteria, whoever is backing the project campaigns for funding until funding is approved.
The classical way of managing this type of project consists of some responsible administrator calling for qualifications from interested engineering companies. After determining the most qualified engineer, the administrator goes through the task of negotiating rate. Once that is out of the way the administrator tell the engineering company to designate the project manager and to rough out a road from point A to point B, which he does.
Now one has to determine and resolve all land issues which can be quite complex, get the engineer to prepare a detailed estimate to do the work, and receive suitable funding from the administrator. Next the administrator tells the project manager to section the road into project phases and start the engineering for phase one. After phase one is designed, the engineer moves on to phase two. The project manager get bids from and awards contracts to contractors to build phase one. And so the project goes under the project manager's direction with the engineer proceeding the contractors down the road.
There are really good reasons to use this project management method on this type of project.
- The road has to be designed "right" and it has to be built "right. It is just not acceptable to risk public safety because of unforeseen problems.
- If the money runs out with 80% of the road built, 100% of what is built is useable. The public might criticize the delay in completion, but it is not acceptable to build 100% of a road with 80% of the required materials, or 100% of a bridge with 70% of the required reinforcing steel.
- There is no real loss associated with a late finish for a project like this although delay may cause further cost over-runs and cause delay seeing the full benefit predicted.
Stepping back a bit, the majority of all money spent on projects today is spent on projects that need to be defect free. We can see that very large engineering or design/build firms are in business today doing this kind of work. We can cite projects for roads, bridges, stadiums, high-rise buildings, hospitals, railways, and emergency shelters just to name a few. We also note that major civil projects have been performed (and managed) for centuries. Traditional project management on major civil projects does work, and has stood the test of time.
The industrial setting
In this setting the task is to design and build a facility that makes a product that we plan to sell. Some of the differences between the classical civil works setting and the industrial setting should be obvious already.
- Design/build is not the objective. Designing and building a safe facility is one of the steps we take to get to the objective, delivering a product or class of products to market.
- Time is as important if not more important than cost.
- If there is market there is competition or there will be competition.
- We want our product to satisfy the market for a long time. Perhaps a sugar producer could argue that people will consume sugar until the end of time, but a cosmetic producer might argue that the market will last only until the next generation of cosmetics is developed.
- Flexibility is expected. When the next generation of cosmetics technology is available, every factory wants to be the one to convert and deliver to market first.
- Even when the market does hold out the product will undergo continual improvement, and the plant will undergo continual manufacturing cost reduction, safety improvement, and emission reduction.
Although there are magnificent and challenging projects to manage in the classical setting, we have our expertise here, in industrial. In the following project management pages, the section on chemical engineering, the section about us, and in the linked information, we will try to explain and justify how we would approach developing a product, bringing that product to market, and sustaining operation.