Determination of How to Handle Contract Employees in the SAP Plant Maintenance
Module of ABC, Inc.’s Illinois Refinery ERP System
ETM 5121 Project Proposal Submitted By
Robert Pennington
1. Background
In 1996 an effort was put forth to implement an ERP system for ABC, Inc. in preparation for the
millennium change. The ERP system chosen, by executive directive, was SAP as this was the ERP
system currently in place by ABC, Inc.’s parent company. The implementation was corporate wide
with the exception of ABC, Inc.’s Illinois refinery as it was “up for sale” at the time of
implementation. The implementation went “live” in 1998. Two management changes later, by
executive directive, an SAP implementation effort was initiated for ABC, Inc.’s Illinois refinery.
The version that was initially implemented back in 1998 was version 3.0d with an immediate
upgrade to 3.1h planned due to functionality needs. The company is currently at version 4.6c. A
standard plant maintenance work process exists that is enforced locally at each refinery by a local
plant maintenance administrator who coordinates MRO activities at their respective refinery.
This work process is flexibly designed such that alterations can be made without the upset of the
core work process. The local PM administrators recognize this and have in many cases taken liberty
to make these alterations to the point that while the core work process is still intact it is somewhat
difficult to recognize the core work process by all but those with a trained eye. These alterations
where made to meet current management and organizational design requirements. It is these process
deviations that lead to the current problem associated with the Illinois Refinery’s implementation.
2. Problem Statement
The refining industry makes significant use of contract employees. These employees take the form
of clerical, professional, and craftsmen. It is the latter that poses the greatest problem and
opportunity of management. There can be hundreds of contract craftsmen in the refinery at any
given point of time as opposed to less than thirty under normal circumstances combined in the other
two groups. These numbers and fact that the contract craftsmen may work at times other than
normal business hours lends to a more complicated system management practice. The problem takes
the form of a question. What is the best way to manage my craftsmen contractors in SAP for the
Illinois refinery?
3. Project Objectives
A cost effective method of “handling” maintenance craftsmen contractors in SAP should be chosen
that will not hinder the operations of the refinery and will provide adequate information capabilities
so as to provide the measurement of the refinery’s critical success factors associated with contract
employees.
To further refine the objectives of the project the following must be achievable in order for the
project to be considered successful:
3a.
The chosen method must be able to be implemented within the SAP system architecture.
This does not preclude the use of other data collection systems external to the core SAP
system.
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3b.
The chosen method must be able to be maintained within the existing staffing levels of
the maintenance, purchasing, and accounting departments at the refinery.
3c.
The maintenance department must be able to report at current or improved levels the
following:
3c-i.
Hours worked by contract employees.
3c-ii. Contractor labor costs by equipment number.
3d.
The maintenance department must be able to manage contractors on both time & material
and fixed bid methods.
4. Measures of the Problem
The implementation of SAP at the Illinois refinery was initiated by CEO executive directive and
therefore no financial payback is required. This being said there will be a great deal of change
management in effect throughout the implementation process. A complex measurement system
could be initiated to measure a level of satisfaction of the refinery but in reality our executive
mandate was to replace existing systems with SAP and the Illinois refinery will have to conform.
Success will measured as getting the system, as designed, implemented on time and in budget. This
unto itself is a “go / no-go” measurement. The refinery might not be satisfied unless their existing
systems were duplicated. Failure or success as determined by the refinery on the other hand will be
recognized as the system is utilized and maintenance management recognizes several years from
now the vast capabilities of the system or the shortcomings of the system due to those design
specifications within their sphere of influence.
The above being said the method chosen to manage craftsmen contractors within the SAP system
should provide the following:
4a.
The SAP ERP system must be capable of having the chosen solution implemented either
within SAP itself or in association with another external system.
The preferred method would be to have a wholly SAP implemented solution but a
combination solution in which an external system, defined as being outside of SAP, being
paired with an SAP module would be acceptable.
4b.
No Increase in the staffing levels of the maintenance, purchasing, and accounting
departments.
This is a measurement that is very meaningful to refinery management. Labor utilization
is an important metric in the refinery.
The current staffing level of the maintenance department’s non-craftsmen is 34,
purchasing department is 8, and the accounting department is 12. It is generally expected
that the system integrity and reporting will improve with the overall SAP
implementation. It should be recognized that a PM administrator will be added as a result
of the implementation. It is generally felt that the maintenance department has
historically neglected its responsibility of system maintenance over time and this fact has
warranted a full time assignment. It is understood that this position will be a full time
assignment that will evolve with additional assigned responsibilities as the assigned
person grows professionally.
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4c.
No decrease in the reporting capabilities related to the refinery critical success factors
that are a direct effect of the decision pertaining to the decision regarding contractors.
This is a “go / no-go” measurement. The system should be able to provide the capability
to extract an accurate accounting of the number of hours worked by contract employees.
This is an important part of a plant metric related to the number of man-hours required to
maintain the refinery. Furthermore the contractor component of this metric is used to
identify extraneous labor in the plant.
4d.
The system must be capable of accepting fixed bid contracts as well as time & material
contracts.
This is a “go / no-go” measurement that is a significant requirement of the system.
Specific Deliverables
The deliverables of this project are related to the design of the system including planned
implementation services. Following is a list of the specific deliverables:
5a.
A design document that identifies the deployment of the system functionality.
5a-i.
A narrative of the system capabilities.
5a-ii. A process design flow chart.
5b.
An assessment of the newly designed system that includes the following:
5b-i.
The system capabilities.
5b-ii. The details of the system interaction with plant personnel.
5b-iii. The limitations of the system design. This will be a very important. What the system
will not be capable of is of paramount importance for future growth of the system’s
use.
5c.
A plan for system implementation.
5c-i.
Plant information requirements.
5c-ii. System configuration / master data entry.
5c-iii. External system development, as required.
5c-iv. Training of related employees.
5d.
A plan for post implementation services.
6. Alternatives to be Considered
Within the guidelines of our PM work process there are five methods of handling contractors inside
of the SAP system. The first method which unto itself is more a business process than a system
change would be not to have contractors at all. The second method is as an external contractor. All
contractors would be managed through the use of purchase orders identifying scopes of work. The
third method is as an internal contractor. All contractors would be assigned to work centers and
managed as though they were ABC, Inc. employees. The fourth method would involve a blend of
the first two methods. This combination method would entail determining which set of contractors
would be managed as internal contractors and which set would be managed as external contractors.
The last method would entail the programming of an interface that would allow the use of either type
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of contractor without being able to distinguish between the two types. The evaluation of these five
alternatives will be the basis of the to be completed project summary report.
7. Approach and Criteria of Evaluating Alternatives
This project is a component of a larger Plant Maintenance (PM) module implementation which in
turn is a component of a complete refinery SAP ERP system implementation. This being said the
organization chart related to my project is identified in figure 1 located in section 11 Appendices. I
am responsible for the system design, as well as, managing the PM portion of the implementation. I
am doing so in conjunction with a representative from the refinery, the PM Administrator. This is a
newly created position that will be responsible for the ongoing use of the system with regards to
plant maintenance activities.
It should be noted that the final system design must be approved by the maintenance manager and
the refinery leadership team. The initial system requirements that have been outlined in section 3
above have been approved the maintenance manager. Additional requirements may be levied upon
the system design as the refinery personnel are further acquainted with the system.
The following is a description of the approach and criteria that will be used for the project:
7a.
Pre-Planning
The objective of this phase is to establish the requirements of the project and establish the
alternatives. During this phase not only will the requirements be set forth by the maintenance
manager but the expectations of the system are level set at this time as well. Additionally, the
project team and reporting structures will be developed for the purpose of establishing the design
and seeking said approval. The pre-planning phase of the project is covered as a part of this
document.
7a-i.
Identification of requirements / objectives and high level scope.
7a-ii. Identification of project organization.
7a-iii. Identification of alternatives.
7b.
Planning
The objective of the planning phase is to establish and communicate the dates of the project
deliverables. The development of a maintainable plan using a credible project tool is important
so as to provide reliable project management tool. The initial detailed project plan will be
established using Microsoft Project. This is the least time consuming phase of the project. The
planning portion of the project is covered within the scope of this document.
7b-i.
Identification / refinement of project scope.
7b-ii. Establish the initial project plan.
7c.
Execution
It will be during the execution phase that the alternatives will be evaluated and a choice will be
made. The new design will be incorporated into the refinery work processes and further
communicated to maintenance and general refinery management. Scope will be managed
throughout this phase of the project through routine project supervision. It will also be during
this phase that a significant change management effort will need to be put forth as maintenance
and refinery management will be presented with their new work processes.
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7c-i.
Evaluation of alternatives.
7c-ii. Selection of alternative.
7c-iii. Integrate selected alternative in with refinery work processes.

Incorporate the chosen alternative with work process documentation.

Communicate statement of impact.
7c-iv. Scope review and project supervision.
7d.
Evaluation & Future State Planning
This is the phase that evaluates success or failure of the project. Lessons learned are documented
and communicated to management for review and dissemination to other implementation teams.
As a part of this phase of the project new directions, if any, will be established and prioritized for
future implementation.
7d-i.
Review deliverables with refinery project manager and maintenance manager.
7d-ii. Establish future state directives, if any, in conjunction with refinery project manager,
maintenance manager, and IT management.
8. Project Plan
The project is broken down into four major stages as shown in figure 2 in section 11 Appendices.
These stages, pre-planning, planning, execution, and evaluation & future state planning have
relationships with each other and encompass a timeline that is approximately 2 ½ months long
comprised of 41 days of duration and 24 days of lag. The purpose of this lag is two-fold. The
primary reason is that this project is being worked concurrently with other projects slated for
different refineries that also require part of my time. In this particular case the lag acts as a place
holder of time that I spend working other projects. The secondary reason is that it allows for a
period of reflection between phases of the project. During this time individuals involved with the
project can raise questions, ask for clarification, or just refine the deliverables before starting the
next phase of the project.
9. Planned Use of ETM Materials
9a.
Project Management
Dr. Pratt’s Strategic Project Management course was instrumental in refining my existing project
management skill set. Likewise this “tools” course was one that presented some best practices in
project management.
9b.
Management of Change
Three courses come immediately to mind here; Planning and Managing Technology
Implementation, as well as, Management of Technology, and Developing Management Skills.
The big issue here was effecting change throughout the organization. We have spent months
“pushing commas” and one thing comes to mind that I remember reading from Kanter’s “The
Change Master” on page 144, that she borrowed from Hage & Aiken, “’Low formalization’ is
associated with more innovativeness.” From the outside this might lead one to believe that since
we like to “push commas” (structured) we might have an uphill battle on our hands. That being
said, this will play an important role during the execution phase of the project.
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9c.
Work Process Design
I believe that my Performance Management & Improvement and Performance Measurement
Systems classes come into play in this area.
A couple of things from these classes helped. Here, innovation was pressed forward. Like with
effecting change, fostering innovation can be somewhat difficult to do if not prepared. Related
to this were the concepts on situational leadership and stealing from Kanter again, not everyone
will like the method in which change is effected. Additionally, concepts from Hamel &
Prahalad’s “Competing for the Future” will assist with the organizational makeup of the resultant
design regardless of the ultimate outcome.
10. Going Forward
Over the next several weeks I will be continuing on with the project in the execution phase. I will be
evaluating the alternatives and presenting my evaluations for general discussion and subsequent
selection. Based on the project plan I will at that time incorporate the approved selection into the
work process. Completion of the project, slated for 1 ½ months from now, will culminate with the
project evaluation and the identification future state directives.
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11. Appendices
ABC, Inc
Chief Operating Officer
Illinois Refinery Vice
President
Chief Information Officer
Refinery
Leadership Team
IT ERP Project
Implementation
Manager
Refinery ERP
Project Manager
Maintenance
Manager
Refinery Systems
Manager
PM Systems
Analyst
PM Systems Lead
Analyst
Design Information
Plant Maintenance
Administrator
Plant Maintenance Design Team
Project Reporting Structure
Figure 1
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Figure 2
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