Part of the trend towards investing in a modular system is single-source responsibility, meaning a source that is selected among others due to specific reasons, e.g. price advantage, quality, support, delivery, etc. Consequently, single-source advantages are realized by a customer when a manufacturer accepts the responsibilities that go with building a modular system. What are the benefits that the customer or end-user realizes when a modular system manufacturer accepts single-source responsibility of a system vs. having the system being ‘stick-built’ at the customer’s facility? In this column, I will discuss seven important advantages of an investment in modular systems.
1. SINGULAR RESPONSIBILITY
One of the biggest advantages of buying a modular system is one company can be held accountable for all aspects of a project. This turnkey approach assumes that the manufacturer also has the ability to design, engineer, fabricate, and properly manage all aspects of a project. Some examples may include working directly with an end-user to provide clean in place (CIP), UF, HTST, decontamination, batch, blending, and other types of processing or utility systems. A recent instance of this was the provision of 14 lab-scale fermenters for a client in North Carolina. In these cases, the supplier must have not only the engineering and design acumen to ask the appropriate questions, but also the expertise to provide solutions to the answers.
2. LOWER ADMINISTRATIVE COSTS
A significant amount of time and effort is spent administrating projects, including soliciting/reviewing bids, placing purchase orders with multiple suppliers, expediting/receiving components, entering invoices, and finally paying for equipment. By placing a single purchase order with one supplier, all of these associated costs and headaches go away. The client now interfaces with one company, concentrating their efforts on the project — rather than managing disparate contracts.
3. MANAGE CASH FLOW
It becomes much easier for a client to manage cash flow if they place an order with one supplier. Most modular system manufacturers are paid per a defined payment schedule, based on a predetermined set of deliverables as defined in a contract. This information, in conjunction with the overall schedule that is developed for the project, will define pay-out dates by the customer. A payment term may include:
▪ Percent upon receipt of purchase order
▪ Percent upon submittal of drawings for approval
▪ Percent upon completion of fabrication
▪ Percent upon submittal of turnover package (TOP)
The overall size or dollar value of the project typically determines the quantity and schedule of payments over the life of the project.
4. REDUCE RISK
Risk reduction is also one of the goals any customer has when implementing a project. These risks can come in the form of schedule delays, cost overruns, misapplication in the design, and many other factors. What can be done to minimize the factors you can’t control? You can decrease the number of people or companies involved in a project, which increases the likelihood that something will not be missed, forgotten, or misinterpreted. Involving one company, and making them the responsible party for the overall success of the project, allows the customer to communicate directly with one entity and apply pressure to ensure the project success — which becomes much more difficult when coordinating efforts with multiple firms.
5. MINIMIZE CONSTRUCTION AND DESIGN DISCREPANCIES
Most projects go through a certain amount of change during the life cycle of the project. Minimizing construction and design discrepancies is an advantage when building a modular system through a single design-build company because any requested changes are seamlessly and quickly transferred from the customer to the supplier — rather than disbursing the information among multiple design, management, and fabrication firms. Reducing the number of companies and individuals involved in the transfer of information will better ensure that changes made to the design are also captured in the construction phase of the project.
6. REDUCE THE DECISION CYCLE
The overall schedule for a project is greatly affected by the number of changes that occur during the life cycle of the project. This is typically due to design changes, which in turn affect material deliveries, etc. One factor that can be better controlled by sole sourcing a modular system is reducing the decision cycle, and consequently better controlling the overall project schedule. Working directly with a client on a recently completed project allowed IPEC to deliver multiple, complex, CE approved CIP Systems to a client in Europe in twenty weeks. In many cases, projects have multiple companies involved, which include engineering/design, construction management (CM), project management (PM), and the different trades working on the project. By reducing the companies involved, decisions can be made more quickly, which allows the overall schedule on a project to be maintained.
7. REDUCTION IN LITIGATION CLAIMS?
Finally, a reduction in litigation claims and overall insurance costs will be realized by fabricating equipment in a controlled shop environment. One reason is worker’s compensation claims due to injuries that occur at an open job site are greater than claims made from closed shops. In addition, requiring each design, engineering, management, and construction firm involved in a project to carry a certain level of insurance has been shown to increase the overall cost of a project. Warranty claims associated with damaged, defective, or lost equipment are also reduced when comparing the costs of building equipment in a controlled shop environment or on a job site.