First, what is Long Lead Equipment?
The term long lead equipment refers to the equipment, products, or systems that have a delivery time lengthy enough to affect the overall project lead time directly. More specifically, long lead equipment has the potential to delay a project if it isn't purchased according to the project schedule. There isn’t a specific amount of procurement time needed for equipment to fall under this category, it just has to be a setback in terms of installation time. That can be weeks, months, and sometimes years.
What are some examples of common Long Lead Equipment?
Any construction project, despite its size, involves long lead equipment. There are indicators you can use to determine if an item may be Long Lead Equipment:
- Specialty equipment that is difficult to obtain due to demand. This can include items such as compressors, turbines, generators, and control systems.
- Custom items such as stainless steel building components, guardrails, etc.
- Uncommon materials not often used in construction. For instance a process that is extremely hot or corrosive may need pipes and valves made of a material such as Inconel or Hastelloy.
- Specialty contractors that need to be scheduled weeks or even months in advance. If you are installing a bespoke control system, the installation team may be heavily specialized, highly in demand, and very busy.
It’s important to note that long lead equipment can be part of any stage of the construction process. It doesn’t belong to a specific stage due to two reasons:
- Every stage involves different actors and materials, and
- Despite the stage of the project they are needed, they have a direct impact on the project’s outcome.
What Causes Long Lead Times?
There are different reasons why a line item may be considered Long Lead Equipment. These can include:
- Shortages of Skilled Labor: There are industries that are operating with a limited number of skilled workers. With this in mind, holidays, retirement, and other work-related situations that take away a resource from a company, can translate into delays in different stages of the supply chain.
- Demand exceeding supply: Sudden increases in demand can affect the market’s possibilities of supplying material in specific segments. Even though demand and supply eventually balance, these periods test a company’s ability to adapt.
- Increased demand for raw materials: The development of new products and trends in the market can lead to a higher demand for raw materials. For instance, if the demand of modular structures increases, there might be difficulties in obtaining wood, steel, and concrete. This demand doesn’t necessarily balance with supply over time.
- Shipping disruptions: Unforeseen events or poorly planned distribution methodologies can affect the supply of goods and services in different ways. There might be entire orders lost in the distribution stage, or a company might experience delays in raw material obtention or product distribution to retailers.
Why is Long Lead Equipment so important to your project's success?
The definition of Long Lead Equipment implies risk to overall project delivery if an item is not ordered in time or experiences delay. At the end of the day, it all comes down to money. If your project has a delay in going operational, it isn't producing. That directly translates to a loss for the owner or operator.
How can you ensure that Long Lead Equipment purchases won't impact your project schedule?
Planning and Diligence. Long Lead Equipment is usually identified during the bidding process for a project. Once a project is awarded to a contractor, it is imperative to begin the procurement process. Often this timeline will dictate the Path of Construction and require project members to mobilize and demobilize several times. Project members must identify need to procure by dates, conduct any necessary measurements or site work, place necessary deposits, then demobilize until the materials arrive.
In the interim, procurement, expeditors, and logistics professionals must diligently work to ensure that the order is on track and if any delays are encountered escalate and assist in risk mitigation as needed. Often, complex multi-tiered spreadsheets are used to manage this process in conjunction with other ERP tools such as SAP.
This is just one of the challenges that led us to build our Supply Chain Mapping and Management tool: KatalystDI. KDI is a collaborative platform built to digitally transform and integrate the construction supply chain. It connects owners, engineers, contractors, off-site integrators, and suppliers to automate data exchange and collaboration for supply chain-specific packages, and links the PLM, design, MRP, ERP, and logistics platforms that touch each package.
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