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Project Based Manufacturing
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Chief Executive Officer (CEO)

One of the key characteristics of a project is uncertainty. Imagine be­ing responsible for the wellbeing of a company filled with uncertain­ties. That's the life of a CEO in a company operating on an ETO basis. A few of that person's critical business issues:

      reliability and predictability of business processes

      customer relations.

Reliability and predictability of business processes—Earlier in this discussion, we graphically depicted the lifecycle of a project and the key players (figure 2). The CEO is shown in a representation of an explosion. This situation occurs at point of contract agreement between the customer and the supplier. The explosion represents the reduction in the project reserve. This is frequently a reduction in both the cost and schedule reserves of the project. I'm not suggesting this always happens, but my research suggests it happens often. Combine this with the information infrastructure in the company (see figure 3), and it's reasonable to assume the anxiety level for the CEO increases.

I'm sure that the compromising of the project reserves was abso­lutely necessary and justified to get the business. When all this is brought into the discussion, it is easy to understand why the CEO wants more reliable and predictable business processes—there is no margin for error.

Customer relations—Throughout the project lifecycle, the cus­tomer and supplier closely collaborate together. There are many op­portunities for misunderstandings and friction between both compa­nies. The project represents significant risk to both parties.

From the customer's perspective, they have committed to a sup­plier, and quickly finding a replacement if things are not going well is difficult if not in practical terms impossible. The device being engi­neered and manufactured is either part of a major internal improve­ment project (capital project) or is a subproject for a larger, more com­plex and expensive project being managed by the customer. In bothcases, the economic impact of a late delivery or even a failure to de­liver at all is significant.

Combine this with the nature of ETO projects, the inevitable dis­covery of new requirements and design limitations, and the probability of resulting reschedules and cost increases, and you have the fuel for possible disagreements.

 

Also, the relationship will continue well beyond the shipment and installation of the device. When complex machinery is involved, there is the need for spares and onsite repair or maintenance services. The full life span of these devices is often decades. That is a long time to have a business relationship, and it needs to be a good one.

 

The CEO has to be the ultimate relationship manager with the cus­tomer. The dynamics of the situation demand it.

To Be Continued


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