Email Jim at jthompson@taii.com
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The quiz at the end of last week's column, "Lawyers and Capital Projects" was one simple yes or no question: "Have you ever seen a capital project end up in court?" When I checked the results before starting to write this column, close to 70% of the respondents had answered "Yes." And that quiz got overwhelmingly more responses than we usually receive.
I was not surprised.
In addition to the fantasyland I referenced last week, there are other issues in capital projects that are landmines. A clue comes in from an interview I did recently for the Tech Center Show on Pulp & Paper Radio International with the legendary Ed Graf. We did a few minutes on Ed's background and he remarked on his early days with Beloit, when his company was selling a paper machine per month.
Well, Beloit is gone and the whole industry is not selling a paper machine per month in most grades (except tissue), so this leads to only one conclusion--the project leaders on both the supplier and owner sides of capital projects are less experienced than they were a few decades ago.
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Zeroing further in on the problem, owner's reps (engineering, operations, legal and so forth) have less experience as compared to owner's reps in days gone by, but even worse, they have less experience than the suppliers sitting across the negotiating table from them today.
It's like buying an automobile. You buy an automobile every 3 to 6 years. The person selling you an automobile, if he or she is a good salesperson, is selling between 3 and 10 autos per week. As a buyer, you don't stand a chance; you just don't have the experience of your opponent--although all the information available on line today about automobile prices has brought some leveling to this playing field.
Your mill team simply does not have the experience of the supplier and contractor teams you call upon to execute your next project. On top of that, some of you think you will get better results by conducting some sort of silly kumbaya exercise with all parties involved. News flash: the supplier reps in the room are just going through the motions with you on this drum-thumping shindig. It is not that they don't want to be a team player with you; it is that they must look out for the profitability of their company, just as you should watch your company's money.
What do you think is the first question lead supplier representatives are asked by their boss when they get back from your "let's all hold hands" exercise? Well, it might be, "did the customer have sweaty palms?" More likely it was: "did you figure out any way to raise our profit margin on this project?" I am not trying to run down suppliers here, but they will participate in any reasonable activity you dictate in order to curry favor with you. Just don't interpret those smiles on their faces as an indication of how much they are enjoying what you are having them do. Their smiles were plastered on them by their own in-house sales training. After all, they are probably missing a night at home and their kid's little league game, just to be out with you.
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Join Jim Thompson on the 2nd Annual Papermakers Mission Trip to Guatemala, 22 - 29 July 17. Build houses, talk about the pulp and paper industry. For more information, email jthompson@taii.com with "Guatemala" in the subject line.
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Don't feel that I am deprecating the suppliers. The suppliers are just doing their jobs as required by the people who sign their paychecks. And you know I will deal harshly with suppliers that are not being legal, ethical and moral in the conduct of their business. I just want you, as a mill representative, not to be overwhelmed by your own brilliance and think, even for a minute, that you have come up with something new and fresh that is going to make your project the greatest of all time. Suppliers have seen it all.
You may think you are lowering the overall cost of your capital project with antics such as I have described this week. You are not. But there are even worse things you can do that drive-up costs. Stay tuned--we have two more weeks of Capital Projects month left this year.
What do you think? Take our quiz on line here this week.
For safety this week, adopt an attitude about safety with your suppliers from the minute they meet with you. Open the meeting with a discussion of the egresses and mustering points for the room in which you are conducting business right now.
Be safe and we will talk next week.
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