Navigating Supply Chain Challenges: Reducing Risk and Increasing Decision-Making Certainty in These Very Uncertain Times
August 24, 2021
Investment uncertainty, inflation, rising material costs, shipping delays and ongoing Covid-19 concerns have come together to form the perfect storm, leading to numerous disruptions throughout the North American supply chain. Supply chain challenges have had an especially acute impact on infrastructure projects, leading to numerous delays. According to various economist and logistics analysts, this current state of marketplace volatility is forecasted to last through 2022 and into 2023.
According to a recent article published by the New York Times, “Firms are building out shipping capacity by more than 20 percent, but much of that will take effect only in 2023 or later, based on new fleet orders tracked by Ocean Shipping Consultants. The White House wants to improve port capacity — which might lower shipping costs and thus prices in the long term — but that, too, is no quick fix.”
When supply chain issues cross paths with evolving technology within the energy and infrastructure industries, the headaches simply compound for renewables developers and power utilities.
“Solar and BESS equipment roadmaps are heavily relied upon in the industry to support renewable project investment decisions. The supply chain volatility is creating uncertainty for clients around what equipment is available and when,” explained Kyle Smith, a Senior Program Manager with Ulteig’s Renewables team. “Ulteig works with major equipment suppliers, and clients to identify solutions among the volatility to keep projects on track and mitigate cost and schedule overruns.”
With price escalation and inflation throughout the economy and industry, the impact is not only hitting big ticket items. Projects are dealing with cost and schedule constraints at the consumable level too. The availability of steel, resin, cable, PVC, Unistrut and general building materials continue to constrain project budgets and schedules. “Over the past decade, the industry has been able to plan capital projects around a somewhat predictable forecast of inflation. However, inflation figures are rising faster than we’ve seen in the past. As a result, developers and project owners are looking for ways to mitigate cost increases while keeping projects on schedule.”
“Shipping delays on materials are so common, they are now expected,” explained Mike Crawford, a Principal with Ulteig’s Program Management team. “At a minimum, raw materials are in the three-to-six week range. Manufactured parts are experiencing even longer delays and if an item is being imported, you can compound the delay.”
Overcoming Challenges with Expertise and Ingenuity
With more than 75 years of experience in the power and renewables industries, Ulteig has seen its fair share of disruptions, including slowdowns and interruptions to the North American supply chain. Understanding the value of resiliency, Ulteig engineers have developed a competency in helping clients navigate supply chain challenges that could pose a risk to the timely completion of infrastructure projects.
The process of reducing risk begins with clearly understanding a client’s goals and anticipating potential supply chain risks and challenges that may jeopardize the completion of a project – in the early stages of planning a project.
“For example, because of the growing number of delays, we invite our clients to make equipment selection at the onset of a project,” said Beth Copanas, a Technical Manager in Ulteig’s Solar group. “We are able to do this thanks to our deep relationships with top-tier vendors and OEMs – including module manufacturers, inverters, trackers, MET station and turbine manufacturers. We can anticipate alternative scenarios for successful outcomes despite supply chain disruptions.”
On the development side, Ulteig helps clients manage costs and schedules and the associated risk mitigations to keep projects on schedule and aligned with their commercial commitments. The company can secure project financing to overcome the challenges of ever-increasing EPC contractor costs.
“When designing projects – specifically early development projects – that might not get put in the ground for another four years, the modules that they are using or the power bin class or factor that they are designing with are essentially pie in the sky right now,” noted Crawford. “It’s on the manufacturer’s roadmap, but when designing with something that is not commercially ready yet, it’s hard to forecast exactly, or even ballpark, deliverables dates.”
“Equipment selection impacts the size of system that is projected to be built in a given year that has implications for continued development, project economics and feasibility,” added Copanas. “Depending on the commercial operation date, the equipment selected for the analysis will likely not be the installed project equipment. The analysis should consider projected equipment roadmaps, manufacturer experience, market share and reliability to ensure that there will be an equivalent or better product available during the project detailed design and construction phases”.
As part of the designing process on the contracting side, Ulteig can do the onsite work by looking at the building and installation of the project and how to manage the materials delays and quality issues firsthand. “It is our full-service, comprehensive planning and implementation approach that is necessary in successfully managing projects today,” Crawford said.
“Ulteig’s ability to support alternative project delivery is key when all these challenges are in play,” explained Smith. “Whether that’s providing front-end engineering support to enable subsequent procurement and construction decisions as a function of design, or utilizing Ulteig’s Project Delivery Services (PDS) as a function of the labor increases, Ulteig provides solutions to developers to manage EPC cost escalation and how projects are built and delivered.”
More Than a Services Provider: A Strategic Partner and Trusted Advisor
With boots-on-the-ground experience in development and EPC, Ulteig has an unparalleled understanding of the project lifecycle. “We pride ourselves on being a strategic partner and trusted advisor who can anticipate the unexpected and then navigate the most complicated challenges of any project to meet multi-faceted deadlines and goals,” Crawford explained.
Ulteig’s depth and breadth of experience consistently helps clients successfully navigate through significant challenges and uncertain times. “We work hard to increase certainty and decrease risk throughout the entire process and the project timeline,” Smith added. “With our thoughtful, comprehensive approach combined with our depth of expertise, Ulteig helps clients recognize and mitigate challenges to deliver successful projects – whatever the challenge may be.”