Empower SCM in the Construction Industry

Thu 10 Aug 2023 posted by Project Partners


Welcome to the Project Partners’ on-demand webinar series on Oracle Cloud ERP’s benefits for the Engineering and Construction industry.

This industry is no stranger to challenges, whether it’s complex project management needs or stringent budget controls. Amidst these challenges lies an opportunity to revolutionize how projects are planned, executed, and managed. Oracle’s Cloud ERP empowers organizations to unlock efficiency and achieve unprecedented levels of success.

In this interview, our in-house experts, Bruce Maghan, VP of ERP/Project Solutions, and Neeraj Garg, Executive Consultant of Industry Solutions, explore enabling Supply Chain Management in Oracle Fusion Cloud ERP.

Oracle Cloud ERP for Engineering & Construction | Enabling Supply Chain Management – On-Demand Video

How does Oracle Cloud ERP enable materials purchasing for a particular project in construction, and what specific features and functions are available?

Neeraj: From an Oracle Cloud ERP perspective, when you’re procuring materials for your project, it all comes down to the volume, both in terms of the number of items that need to be procured and or the volume of each item that needs to be procured along with the timing for the procurement. Organizations will just use the standard procurement function if it is relatively small in terms of the number of items that need to be procured.

The project managers will file requisitions for the material they need to buy based on the schedule needed by dates and use a standard procurement process which would then feed the data commitments into Oracle into their project and then the material would get shipped to their project site.

Now, when you get into larger scale construction projects, which require tons of material and many different items to be procured, Oracle then provides the supply chain extension, called PDSC or project-driven supply chain. The PDSC then enables utilizing all of these supply chain functions, allowing you to manage the procurement process, automate a lot of the procurement process, and manage it so you don’t have to create requisitions for thousands of items manually.

It’ll automatically do all that stuff based on predefined BOMs, or bill of materials, that you have for the different materials you need. These are two major ways in which Oracle Cloud ERP supports the procurement function for projects.

What are the top benefits for E&C companies using Oracle Cloud ERP for purchasing materials?

Bruce: Two of the major challenges that E&C companies face are ensuring that the correct material is purchased and the material is on site in time for their labor crews to install it. Oracle Cloud ERP provides solutions for these challenges by supporting the proper sequencing of design specifications and engineering activities before purchasing materials and driving this functionality through their project-driven supply chain offering.

How does integrating Oracle Cloud ERP and a PMIS system enhance the overall efficiency and effectiveness of purchasing project materials in SCM?

Bruce: The integration of Oracle Cloud ERP and a PMIS system allows for the dynamics of a project’s lifecycle to be taken into account. Projects ebb and flow, so procurement activities must adjust based on schedule changes. By eliminating the potential for schedule changes to impact purchasing adversely, you reduce the risk associated with the project. Risks like material not being delivered on time, crews standing around waiting for material to be installed, or improper materials showing up on the site.

Does Oracle Cloud ERP handle inventory management for purchased materials? Can you explain the process of tracking and optimizing storage capacity?

Bruce: Oracle Cloud ERP handles inventory management like EBS did with project manufacturing. Oracle Cloud ERP project-driven supply chain supports using project and/or task-level indicators to support inventory purchasing, tracking, and issuance. This functionality allows project material to be purchased into a project inventory to support stored materials charging. In addition, for bulk materials purchased for project consumption, min-max controls can be leveraged for the purposes of maintaining adequate quantities of these materials throughout the project lifecycle.

How does Oracle Cloud ERP help construction companies charge for the storage of materials upfront?

Neeraj: The American Institute of Architects, or the AIA, has a standard format by which you can share invoices for the completion of work and get payments from a given customer.

There are two elements when submitting an invoice and receiving an application for payment. One is the percentage of work completed, and the other is reimbursement for material stored for future work. Construction projects are obviously very resource-heavy in terms of requiring a large cash outlay from contractors and customers. And a contractor cannot afford to pay for all the materials without getting reimbursed by the customer; otherwise, they lose the slim margins they have.

Now with the PDSC solution and with inventory in place, when you procure the material, it automatically goes into project inventory, and that project inventory is visible through standard reporting on your project.

Now, once the inventory is issued for work, it gets removed from the inventory. The inventory reflects the amount of material that has already been bought and stored. This reporting function easily allows you to include stored material on your invoices for reimbursement by the customer for material that has been procured in advance. Oracle can easily enable this with the PDSC applications.

What reporting capabilities does Oracle Cloud ERP offer for construction companies regarding purchasing of materials? Can it generate comprehensive financial reports related to material storage charges?

Neeraj: Oh, 100%. Regarding reporting capabilities in the Cloud for purchasing material for projects, the project-driven supply chain functionalities are top-notch. The key is the ability to report the out-of-the-box standard commitments, and any purchase orders logged by the PDSC process will automatically show up as commitments against the project.

Once the purchased material is received, it goes off as a commitment and becomes an actual. This is standard functionality with the integration between PDSC or with the supply chain and projects via PDSC. The second piece is standard inventory reporting that comes out of the PDSC module or supply chain module where you can say show me all the materials stored for a given project locator or for a given project and task locator. With this view, you can automatically see all the material that is stored in your inventory for a given project.

You can then easily enhance standard out-of-the-box functionality with OTBI to tweak to your requirements from that perspective.

Stay tuned for our next episode in this series, where we’ll dive into enabling finance with financial management modules.

To view the first episode on Contract Management, click here.