shopping list My previous article "Discovering Cost and Time in P&ID universe" explains how adding cost and lead time categories transforms P&ID into universal costing and scheduling platform. 

This article discusses nuts and bolts of grouping P&ID items into purchase order packages.

Purchase ordering is a critical milestone of the project schedule and the biggest component in the project risks – above 70%. Risks are extensively discussed by me in "Handling megaprojects risks".   

Apparent triviality of the task is deceptive as a solution (approach and algorithms) shall work across many P&IDs and many projects. The road to the task solution is blocked by a simple question.

How to identify similarities in two different P&IDs?

Crenger introduces a new abstraction - generic item (GI); any P&ID item is just its clone.

GI belongs to neither specific P&ID nor a process; it stores links to and the non-process parameters and attributes of P&ID items.

GI is a mediator between P&IDs, projects, and products in the market. GI may be considered a common denominator of constantly evolving off-the-shelf products A, B, C in the market. On the process side, unlike P&ID item, it is tied to a range of process conditions.

GI and P&ID item interact in two ways. GI may be auto-generated from newly added P&ID item if this item cannot be cloned from existing GI. All clones may be updated simultaneously if GI is updated.

As GI exists before P&ID creation, it may be used as a "bookmark" for any information related to the plant engineering: standards, practices, rules of thumb, calculators, etc. GI is a keystone concept of P&ID validation algorithms.

By Crenger, grouping P&ID items is a 3-step process.
As similar items now have the same GI parent, first step is just mechanically peek those not on purchase orders.

The next step requires knowledge of Original Equipment Manufacturer (OEM) product families. The same OEM may produce, for example, different valve types or be a manufacturer or/and distributor of other similar products at the same time.

In other words, some design attributes of the P&ID item are not essential for grouping. By dropping these attributes we may merge groups into bigger one. The latter is always preferable – the same warranty and terms of purchase may be applied to more items.

Dropped attributes are an excellent indicator of the OEM business versatility and potential growth.

"Merge-on-attribute" step may be automated; by merging packages manually, we train Crenger how to do this.

The third step addresses the manufacturing complexity; bespoke items with longer manufacturing cycle shall not be grouped with off-the-shelf items having shorter lead times. We can say that lead time implicitly characterizes the product complexity.

In step 3 we split groups on lead time into smaller ones containing items of similar complexity.

The "merge-on-attribute" and "split-on-lead" steps are rooted deep into SRM – Supplier Relationship Management. My articles "CRM starts from supplier relationships management" and "5 Steps to enrich client - vendor experience" outline the principles of the SRM platform operation. It will grind to a halt if the bidders count is low. So the last step cannot be executed if the number of bidder below 3.

This video illustrates the implementation of P&ID items grouping.

Having grouped the items, are we ready to place the purchase orders? Not yet. We need to make our purchase safe as long lead times and staged manufacturing introduce sensible risks.

It is done by selecting and attaching to each item group the progressive payment scheme. Unlike schedule, it ties interim payment to the work done or progressive value increase. It is critical in building the equipment price indexation equations for the purchaser and cancellation charges curve for OEM.

Progress payments reduce the OEM's working capital needs and risks in rare cases when the purchaser revoked the order.

This video illustrates how Crenger automates the said process.

Once progressive payments schemes are added to the groups of P&ID items, they may be "wrapped" into Request For Quotation (RFQ).
Typical RFQ bundle includes a number of documents in PDF, XLS or DOC formats.

  1. Order summary
  2. Item datasheets
  3. Spare parts list
  4. General requirements specification
  5. Purchase terms and conditions
  6. Non-disclosure agreement
  7. Supplier quality survey

Crenger automates creation of RFQ bundles in ZIP format together with a cover letter.

How does OEM get the RFQ bundle?

Crenger implements two scenarios – "push" and "pull". In the former, the purchaser selectively emails the RFQ bundles to pre-qualified vendors or "pushes" bundle to the vendor. In the "pull" scenario, RFQ bundles creation is chained to notification of the vendors; they get an email with the RFQ download link and "pull" bundles.

Both scenarios are for Closed Tender. Open Tender (OT) provides better results as it attracts more suppliers; this point together with the bidding transparency further lowers the prices. Any eligible supplier is allowed to view the OT documents and submit a response. OT transparency ensures that purchase decisions are unbiased.

CREPT application is an OT web interface extending the "pull" scenario. CREPT will eventually supplant the email-based closed tendering system Crenger started with.

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