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Looxent provides clients with practical and implementable solutions, driving fundamental change that leads to significant improvements in business value. Through this approach, Looxent positions itself as the most trusted partner for clients, consistently proving its reliability and commitment.

Engineering & MachineryCost Reduction Strategies in the Plant EPC Industry

The plant EPC (Engineering, Procurement, Construction) industry operates as a typical project-based business where cost reduction efforts must be carefully balanced against tight project deadlines. Delays can lead to penalties, and excessive cost-cutting measures may result in adverse cost impacts during execution. Successfully optimizing costs in this environment requires meticulous analysis of improvement opportunities without compromising schedule or quality.

Project Scope and Initial Conditions

The client sourced three main categories of raw materials—steel materials, vendor-specified components, and outsourced fabricated items. The project focused on reducing costs across these categories for items scheduled for procurement during the project timeframe.

The first key to maximizing cost-reduction outcomes in the EPC industry is strategically initiating cost-cutting efforts before major projects, ensuring resources are focused when they will yield the greatest impact.

Given that EPC projects require close collaboration across sales, engineering, procurement, and manufacturing teams, the cost-reduction initiative required broad organizational engagement. Moreover, we ensured that function-specific efficiencies did not result in inefficiencies for the overall project cost.

Integrated Functional Collaboration for Cost Optimization

  1. Sales Organization
    Comprehensive cost reviews of ITBs (Invitation to Bid) and contract requirements were crucial. Sales teams meticulously assessed client requirements from a cost perspective to identify early savings opportunities.

  2. Engineering Organization
    Design optimization through DFME (Design for Manufacturing and Engineering) was a key priority. Engineers focused on optimizing specifications to reduce both procurement and manufacturing costs while maintaining required performance and quality standards.

  3. Procurement Organization
    To enhance supplier competition, vendor lists were updated early, enabling access to new suppliers. Procurement worked closely with engineering to secure optimal costs without compromising technical and quality standards. Proactive supplier engagement and scheduled planning helped maintain negotiating power, which diminishes as project deadlines approach.

Key Project Outcomes

Through collaborative cost-reduction initiatives, Looxent helped the client achieve a 12% reduction in the execution budget. The project encompassed both short-term cost-reduction activities and strategic problem-solving under “Big Themes.”

  1. Collaborative Cost Reduction

    • Detailed review of estimates and budgets.
    • Development of goals based on initial hypotheses and current procurement strategies.
    • Execution through supplier workshops, new supplier pool sourcing, RFP processes, technical evaluations, and negotiations.
  2. Big Theme Problem-Solving
    Tackling long-standing issues to unlock cost-reduction opportunities from a Total Cost perspective:

    • Systematized review of contractual specifications to minimize loss costs.
    • Development of a process for managing surplus pipe material across in-house and supplier networks.
    • Logistics cost reduction across in-house facilities, factories, and suppliers.
    • Optimized design of coil tube lengths and radii for thermal power projects, reducing procurement and manufacturing costs.

Sustaining Results and Organizational Impact

Looxent emphasized that long-term cost-reduction success depends on embedding the methodology within the client organization. Close collaboration with operational staff during the project ensured knowledge transfer, culminating in a final workshop to share key learnings and best practices.

The client expressed high satisfaction with both the project outcomes and its execution. TFT members gained valuable expertise, positioning them as core talent within the organization and enabling them to drive continuous improvement efforts moving forward.

This project demonstrated the power of systematic cost-reduction strategies tailored to the unique challenges of the EPC industry, fostering both immediate and sustainable operational efficiencies.



LOOXENT

A  21F. Parc.1 Tower2, 108, Yeoui-daero, Yeongdeungpo-gu, Seoul, Korea 07335

T  02-546-8222      F  02-546-8226      E  service@looxent.com 

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© 2024 LOOXENT. ALL RIGHTS RESERVED.


LOOXENT

A  21F. Parc.1 Tower2, 108, Yeoui-daero, Yeongdeungpo-gu, Seoul, Korea 07335

T  02-546-8222      F  02-546-8226

E  service@looxent.com 

© 2024 LOOXENT. ALL RIGHTS RESERVED.