Logistics News
By Cliff Holste
August 31, 2011
Logistics News: Understanding Vendor Provided Project Management
What Can A Company Do To Get The Best Project Results?
Whether you are implementing a material handling system in a new DC or upgrading and expanding an existing operation, project management is one of the most critical processes for going from the conceptual planning stage into reality. In that regard, a Project Manager (PM) is to a system implementation what a Maestro is to an orchestra.
Getting a material handling system in place, up and running on schedule, and at the price promised is critical to the project’s overall success. This doesn’t happen on its own; it takes the application of knowledge, skill, tools and techniques to a broad range of activities in order to insure that the requirements of a particular project are met. The Project Management Institute (www.pmi.org ) is a recognized organization for training and certifying PMs.
Who is in Charge of Managing Your Project?
In the material handling industry it is common practice for system vendors to provide some level of Project Management, especially for medium to large scope system projects. Because the services of a PM are considered to be mutually beneficial, the cost is included in the purchase price of the system and is therefore, not optional. While vendor provided Project Management can be beneficial to the buyer, it should be understood that the person you have been introduced to as your PM really doesn’t have much, if any, authority over the deployment of your project.
Holste Says: |
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| Getting a material handling system in place, up and running on schedule, and at the price promised is critical to the project's overall success. |
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What Do You Say?
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You may wonder then … how is that possible? It started a decade or so ago when system projects were led by engineering-oriented PMs who, more often than not, neglected the business/financial side of the project leading to results that may have been good for the buyer, but not necessarily good for the vendor’s bottom line.
As a result many vendors began refocusing the role of the PM to a more business-oriented perspective where the primary responsibility is to keep the project on a solid financial path for the vendor. While part of this interest intersects with the buyer’s interest, such as keeping the project on-schedule, in reality the vendor PM has little to no “decision-making” authority relative to design, implementation, and other key deployment related issues.
Of course, the scope of the PM’s responsibilities will vary from vendor to vendor, and project to project; however, for the most part it’s limited to scheduling, coordinating, monitoring, and liaison. The primary focus is maintaining up-to-date progress and financial reports relative to the project’s confidential P&L statement.
This is not necessarily unique to the material handling industry; still, very few companies have a full and accurate understanding of the vendor’s project management structure prior to signing the Sales Agreement. As the project progresses this miss conception may lead the company into a situation where management voids develop in the execution of the project. Once the vendor’s PM structure is fully understood, the company may choose to retain the services of an independent industry expert, perhaps one who is certified as a professional project manager, to insure that the project specifications are met, and that the company’s stated goals and objectives are satisfied.
PM Responsibilities Must be Defined Upfront
If the company decides to go with just the vendor provided PM, then defining the role and responsibilities of the PM upfront, as a part of the Sales Agreement, can help set and manage expectations. For instance, if the PM has no authority to approve miscellaneous field expenses, then note that upfront and establish an SOP for dealing with it. That way, if problems do arise later, a procedure for quick resolution is in place.
At the very least, establish upfront who on the vendor’s side has the authority to quickly approve minor equipment changes or modifications on-site; thereby, avoiding costly delays that can impact on the project schedule. If the PM doesn’t have that authority, who is it that REALLY is in control of the project? Someone familiar with your project that you have already met or, some bureaucrat tucked away at the vendor’s HQ? It’s a sure bet that the vendor knows who on the buyers side has authority for approving change orders.
Of course, as with any legal contract there can be issues related to Terms & Conditions. Therefore, another key function often related to project management, is Contract Administration: Ensuring that the project “design and built” is in accordance with the specifications and the commercial provisions of the sales agreement. While most companies have access to legal consul for managing the contracts “fine print”, resolution of the project’s technical issues are often left up to the PM. This is another reason why companies need to understand the function of the vendor provided PM.
A company can avoid many of the common project procurement and deployment pitfalls by using the leverage of the pre-contracting process to force the vendor to clearly identify who has responsibility and authority for actions that impact on the project, such as:
- Contract Administration.
- Documenting and providing minutes of project status meetings.
- Providing and maintaining the Project Gant Chart including coordination and interface with other major contractors (building, WMS, racking, etc).
Note: The material handling vendor’s Project Gant Chart may not include other contractors. If not, you need to insist that they do include them or hire an independent PM.
- Identifying, tracking, managing, and resolving project issues.
- Coordination and interface with vendor’s sub-contractors.
- Equipment/system design changes.
- Coordination of buyer requested changes/improvements.
- Change Order approval and execution.
- Implementation plan and schedule changes.
- On-going miscellaneous field expense approval.
- Who is the backup contact if your assigned PM is not available? If your assigned PM is not dedicated to your project, try to limit the number and scope of additional project assignments.
Clarity is KEY. Discussing the above tasks/issues will result in identifying and eliminating loose ends, thereby, providing a more structured project with fewer oversights and costly delays.
Get the PM of Your Choice
Typically, the buyer is not introduced to the vendor’s PM until after the contract is signed. Thus, the buyer doesn’t really get a chance to interview the candidates to ensure they get one who they can work with. A PM who does not mesh well with the buyer’s team, can turn a minor problem into a train wreck.
One way around this is to insist that the vendors intended PM participate in the proposal sales presentation. This will provide an opportunity to interact with the individual and get a sense of what it will be like working together. Further it will provide the following important benefits:
First – actively participating in the proposal sales presentation necessitates that the PM have an in-depth understanding “buy-in & ownership” of the project – or risk losing the sale.
Second - it allows the PM to identify and explain the specific project management procedures that he will follow in managing your project.
And finally, it provides an opportunity for the buyer to “interview” the intended PM. If there is a problem, or you’re not entirely comfortable, you can express your concerns.
Final Thoughts
By asking probing questions, and insisting that all of the required project management functions and procedures are in place upfront, you will greatly improve your chances of getting the best project results. Assuming that the PM has done a complete and thorough job, commissioning the system should be routine.
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