A Lead-Pipe Cinch
- 15 March, 1999 11:34
With smart software, Turner Industries can estimate down to the last weld. And that's the sweet spot where good IT and good business intersect.
By reading this story, you'll learn
How IT can enhance customer service so much that clients no longer care what your competitors bid How combining proprietary and off-the-shelf software can pay big dividends in profitability and competitive advantage How technology can improve workers' morale and productivityThe year was 1994, and Turner Industries Ltd. was about to embark on a routine maintenance project for its largest client. The job, which involved pipe fabrication and plant maintenance for part of an Exxon Corp. oil refinery, had been scheduled and budgeted nearly two years in advance. Turner, a $US 600 million organization that specializes in large-scale construction and repairs at petrochemical plants, had estimated that the project would take 12 weeks and millions of dollars to complete. A little more than 10 weeks later, however, Turner's job was done. That time saved - almost 10 days - translated into more than $US 8 million in unexpected earnings for Exxon, according to Turner. The result? One very happy customer.
Indeed, in an arena where competition is tough, margins are slim and missing a deadline means losing money on a multimillion-dollar job, Turner has developed such a rock-ribbed reputation that some enormous jobs aren't even put up for bid. They're just handed to Turner. The Baton Rouge, La.-based company has set new standards in efficiency, accuracy, profitability and customer satisfaction. The key? A homemade software application that integrates two proprietary programs with two industry-standard stovepipe applications.
Called Interplan, Turner's application combines proprietary estimating and project control programs with J.D. Edwards & Co.'s World ERP software and Primavera Systems Inc.'s P3 scheduling package. Turner uses its estimating program, called WinTake, to bid a job, then uses the J.D. Edwards software to manage costs and the Primavera package to sequence tasks. Once a job has begun, Turner uses its own project control program, called WinPCS, to manage and gauge progress every day. With such careful monitoring, Turner avoids cost overruns that would otherwise come out of the company's pocket.
Experts describe the system as a fully integrated process that is broader and more efficient than most of the other systems currently used in the construction and petrochemical industries. "Turner's system is about as deep as they come," says Jim Tudrick, director of the vertical support group in service industries for Denver-based J.D. Edwards. "Almost every construction and petrochemical company uses our software, but Turner is one that has added to our software and leveraged it to get ahead." In five short years, returns on Interplan have impressed clients and developers alike. Using Interplan, Turner can accurately estimate a project's time and costs right down to the last nail. It can also show customers benchmarks of how much time and money it should take to fit a certain piece of pipe.
Internally, Turner's business and IT executives are enjoying record profits - at the end of 1998 the company had doubled in size and sales volume since Interplan. Its profit margins run significantly higher than industry averages, and satisfied customers and record-setting growth have brought Turner national recognition as an industry leader. Last year Turner was named one of Forbes' "500 Top Private Companies." The company ranks third on Engineering News-Record's 1997 list of top refinery and petrochemical plant contractors.
And in January it was awarded its fourth "Excellence in Construction Award" in five years from Associated Builders and Contractors Inc. Interplan has received some awards too. After the Exxon job in 1994, WinPCS was awarded the U.S.
Senate Productivity and Quality Award.
Such attention could cause some IT organizations to get a swelled head and lose focus. Not Turner's. G. Patrick Thompson, the company's vice president and CIO, says his organization remains focused on using technology to meet three goals that apply to IT in every company: providing good customer service, establishing a serious competitive advantage and earning a solid return on the company's initial investment.
A Complicated Business
Turner's system was designed with simplicity in mind, but the company itself specializes in some of the most complicated businesses imaginable. Composed of 14 diversified subsidiaries, Turner provides all services necessary to complete industrial projects. Perhaps the most lucrative of Turner's tasks are "turnarounds" - scheduled maintenance projects for large petrochemical facilities, like the one at Exxon.
Each turnaround involves thousands of diverse tasks such as welding segments of pipe and cleaning and replacing huge storage tanks. In the 1980s, when software companies started manufacturing programs to automate job control capabilities, such programs weren't up to the job of estimating and tracking large turnarounds, says Bob Higdon, then Turner's director of planning (he's now manager of research and development). Instead of purchasing a stovepipe application, Higdon developed the Pipe Budget Report, or PBR. (At first PBR covered only piping jobs, but it was later expanded to cover every kind of work Turner did.) Originally written in Cobol for an IBM Corp. mainframe, the system was rewritten in Clipper around 1990 to run on DOS-based PCs, which made it more convenient to use. Meanwhile, Turner's estimating process was separate and largely a manual procedure carried out with hash marks on printed spreadsheets.
Some estimates took weeks.
Over the next few years, Higdon continued to improve the program, but when Thompson came aboard as CIO in June 1993, he changed everything. Thompson's top priority was to get Turner's operating system on par with the new industry standard, and that meant switching to Windows. Because PBR then ran on DOS, the program needed to be rewritten to work in a Windows environment. Thompson says he also saw this as an opportunity to upgrade the program to make it quicker, easier to use and generally more functional. "The whole thing was a strategic decision to get the company to a more current state of technology," he says.
"Even though things worked just fine [before], transforming IT into a state-of-the-art environment just made sense." Thompson invested in an IBM AS/400 system, then set out to transform Turner's IT infrastructure. Thompson organized a team of 14 end users, project managers, executives and developers to see how they could best upgrade the PBR into a Windows-based application. The team decided that the crux of the new system would be a completely new version of the PBR - one that included two separate components for estimating and project control. Team members also realized that to build a competitive system, they had to enhance the PBR, not just rewrite it. Because customers would be using the new system with Turner's onsite work crews, team members decided to incorporate programs that were popular across the construction and petrochemical industries - World and P3.
Executive Vice President Thomas Turner, who ultimately signed off on a $US 700,000 investment in the new system, says that in the end, radical change was the only choice.
"If there was [one basic] product on the market that met our needs, I would have rather stayed in the construction business than dabble in software development," says Turner, whose father, Bert S. Turner, founded the company in 1961. "But we took a long, hard look at what was available, and we realized that to get [a tailored solution], we had to improvise." Anatomy of an Interplan Programmers worked with Higdon and his coworkers to rewrite the components of PBR into Windows-based applications. Using Microsoft's Visual FoxPro, the team finished WinPCS by summer 1994; they rolled out WinTake's four industry-specific components between March 1997 and January 1999. These proprietary programs, together with the World software and P3, comprise Turner's entire Interplan process.
The process begins with WinTake. Turner's estimators receive blueprints and a list of primary materials for a job, and they enter dimensions and other specifics into the WinTake interface. Estimators can use a digitizer board to obtain information directly from job blueprints. When all requisite information has been entered, the program automatically calculates the tasks that need to be performed, the number of hours the project will take, the materials that need to be purchased and all associated costs. Thompson says the program has made Turner's estimators more than twice as fast, translating into hundreds of thousands of dollars of savings for both clients and Turner itself.
Once a client approves an estimate, WinTake automatically transfers data into Interplan's three other components. Costing data is sent to the ERP software, which interprets data from the job site every day and tracks cost as it relates to budget, eliminating surprises and unplanned expenditures at the end of the project. Scheduling data goes straight to the Primavera program, which is constantly updated so that planning managers can have an accurate idea of when a job will end. Lastly, data regarding labor and the tasks involved in a job are sent to WinPCS.
Once WinPCS receives this information from WinTake, the program generates a "punch list" of every task involved in the job. Sometimes the list can contain more than 40,000 tasks - such as tightening a bolt or welding a small section of pipe. The list is usually generated and maintained by staff on the job site and is customized to best inform and meet the needs of the foremen of the job's work crews. At the end of every day, foremen are instructed to estimate how much of each task they've finished. Foremen hand the completed list to onsite planners and cost engineers, who enter the information into WinPCS, then hook up a T1 connection and transmit the information to planning managers at company headquarters. Field personnel also use the data to schedule and manage work from the job site.
At periodic intervals throughout the job - daily for turnarounds, weekly for larger construction jobs - job site staff use the information to print productivity curves for each crew. The curves are used to compare the performance of individual work crews with a progress average calculated by WinPCS. If one particular crew shows below-average performance for any given week, project managers approach the foreman of that crew to find out what went wrong. John Richmond, planning manager for Harmony Corp., a construction outfit based in Baton Rouge that is Turner's largest subsidiary, says the productivity data is used to monitor the overall progress of a job. "This data isn't a Big Brother kind of thing but really a way for us to see how much of each job falls into the original scope of work," says Richmond. "Sometimes we'll find out a crew never got necessary material from our client. Other times, we'll see that a crew is working way ahead of schedule." Richmond is quick to point out, too, that all field data is subjective - foremen dictate the progress they report. While there are no incentives for foremen to overestimate productivity, he says, the presence of onsite auditors discourages underreporting. Turner's experience is that, largely, its people are honest. Richmond remembers a turnaround during which project managers publicly posted productivity curves to inspire healthy competition among work crews. Foremen with extraordinary productivity offered help to those crews that came in below average. Laborers posted congratulatory notes for their colleagues in other crews, and Turner managed to finish the job ahead of schedule.
The ultimate measures of success for this productivity curve system - as well as Interplan as a whole - are in customer satisfaction, return on investment and dramatic growth of the company's bottom line. Thompson says that perhaps the most rewarding effects of the new process have come in the area of customer service. Onsite, Turner's goal is no longer to finish jobs on time but to try to finish them ahead of schedule. Back at headquarters, estimators are learning from their successes and mistakes, constantly changing the way they bid jobs.
For customers, this one-two punch means that Turner's Interplan system becomes more efficient with every job. Rarely does Turner finish a job behind schedule, and testimonials about turnarounds like the 1994 job at Exxon are becoming more commonplace.
Some companies call on Turner for what they consider an "honest estimate." In these cases, prospective clients send architectural blueprints to Turner for a forecast of how much money they should budget for their projects. Turner sometimes does these estimates for free as a way to create goodwill with potential customers, Thompson says. In perhaps the strongest showing of customer confidence, Turner also has renewal contracts with a number of Fortune 500 companies in the petrochemical industry, allowing it to skip the bidding process on some projects, he says.
Exxon became one of Turner's repeat clients in 1994, after the now-famous turnaround at the company's largest refinery in Baton Rouge. Lynn Leek, a senior engineer at Exxon Chemical Co., headquartered in Houston, says that when Turner bid the job, he and his colleagues - who had long used Primavera - were amazed at how Interplan could handle detail and saw it could work in ways Primavera couldn't. Although Exxon occasionally still uses other contractors for some jobs, Leek says, "we've calculated that [going with Turner] translates into an advantage [for us]." The more frequently Turner satisfies its customers, the more frequently customers will come back. The cycle has resulted in a remarkable return on the initial $US 700,000 investment in the Interplan process. Since 1994, the company's revenues have climbed from $US 361 million to approximately $US 600 million. While the IT budget has never exceeded more than 1 per cent of total revenues, Thompson estimates that as a result of increases in revenues, project profits and productivity, Interplan - along with Turner's growing reputation - has accounted for some $US 200 million of that sum.
Thomas Turner cites another figure as evidence of Interplan's success.
Margins at Turner Industries have always averaged slightly higher than those across the construction and petrochemical industries - around 2 per cent or 3 per cent above industry average - and Turner says that because the system is so comprehensive and accurate in estimating and planning jobs, his company experiences an additional 3 per cent increase in profit margin on projects for which it uses Interplan.
Those percentage points add up. "Our competitors are so screwed up with trying to get their systems to run that they don't have time to worry about enhancing their money-making tools," Turner says. "We've had [these] terrific applications up and running for [almost six] years, and they're still worried about getting their bean-counting straight." J.D. Edwards' Tudrick, the ERP vendor, says that while few of Turner's competitors have systems as comprehensive, most of them have also developed proprietary software to supplement off-the-shelf packages. One engineering construction company - Kansas City, Mo.-based Black & Veatch Corp. - uses an online process control system that, according to Ken Hammond, the company's commercial process architect, offers clients more flexibility than Interplan.
Because the system works off the Internet, says Hammond, project managers don't have to "fuss with" a T1 connection to access the database. All they need is a modem and a dial-up account.
Thompson says moving Interplan to the Web is on his list of future goals.
In the meantime, Turner has upgraded its AS/400 hardware from a CISC to a RISC platform and plans eventually to move to an industry-standard client/server environment. Like the initial move to Windows, this is a complicated improvement that will take time. In the end, however, Thompson says the switch will further enhance the services Turner has to offer, bettering the system by making it quicker and easier for customers to use onsite. "This market is increasingly demanding, and when our clients say they want information, we have to give it to them in a way that makes sense immediately," Thompson says. "Just because our industry is complex doesn't mean we can't keep it simple." Turner Industries at a Glance Location: Baton Rouge, La.
Employees: 1,000 permanent staff; 10,000 to 12,000 contract laborers Revenues: Approximately $US 600 million System hardware: Compaq Computer Corp. servers, desktops, laptops; Toshiba America Inc. handhelds; IBM Corp. AS/400 System software: Microsoft Corp. Windows 95, Visual FoxPro, Office 97; Micromega Systems Inc.'s Foxfire; J.D. Edwards & Co. World software; Primavera Systems Inc.'s P3 Network: Microsoft Windows NT; Novell Inc. NetWare Telecommunications: Cisco Systems Inc. routers running TCP/IP; dial-up and dedicated links Great Minds Think Alike By combining proprietary and off-the-shelf systems, Bechtel Corp. has developed a competitive advantage of its own.
Turner Industries Ltd. isn't the only company in the construction industry to leverage its own software for a competitive advantage and better customer service. Ask Tim Horst, manager of construction resources and technologies at Bechtel Corp.'s Gaithersburg, Md.-based Bechtel Construction Operations Inc. division, and he'll tell you Bechtel has done the exact same thing.
Bechtel, an engineering and construction company based in San Francisco, uses a suite of software applications that Horst calls ProjectWorks. The system incorporates proprietary programs with a Primavera P3 scheduling package, much like Turner's Interplan. Though the companies aren't direct competitors, both of their IT systems simplify specifics. The main difference between the two is in functionality. While Turner's homespun software helps estimate and track a job, Bechtel's proprietary programs help facilitate the exchange of information between different software programs, improving the efficiency of project execution.
"We've taken major applications and plugged them into this information exchange to move data from one layer to another," Horst says. "It enables one software program to communicate with another and enables us to eliminate a number of layers between our workers and the design product." Bechtel makes extensive use of three-dimensional computer-aided design applications in much of its work, and uses ProjectWorks to transfer extra design information and import construction status into the three-dimensional project models. ProjectWorks has permitted Bechtel to significantly reduce cycle times, increase work collaboration and reduce costs on the work it performs, Horst says.
Like Turner, the company has healthy profit margins and a number of regular clients who keep business coming in. Horst says repeat customers are especially happy with the way Bechtel delivers information and adds that they'll pay extra just to know what they can expect. This, he adds, is perhaps the area in which the two companies have the most in common. "[Both companies use] technology to simplify larger construction projects, give back to the consumer and, ultimately, get ahead," he says. "This has been the drive for 25 years or more.
Whether [Turner is] doing it or we're doing it, it's good to know it's being done."Matt Villano is a freelance writer based in New York City. He can be reached at firstname.lastname@example.org.