1. INTRODUCTION
1.2. LITERATURE SURVEY ON THE SUBJECT
The literature survey had two target topics: procurement in project environments and procurement software designed for project environments. Because these topics overlapped significantly, I decided to make a combined survey for the both areas. In this combined literature survey, I searched articles from the selected publications for the both topics simultaneously.
I selected six renowned publications which I expected most likely to report advancements in procurement and in procurement software. Although both target topics were sought through at the same time, the literature related to procurement and project management was expected to be found most likely in: the (1) Project Management Journal, (2) International Journal of Project Management, and (3) Journal of Supply Management: A Global Review of Purchasing & Supply (called International Journal of Purchasing and Materials Management in 1993–1998 and Journal of Purchasing &
Materials Management in 1989–1990). Correspondingly, three IT publications were studied to find any matching procurement software: (1) Byte, (2) Software Magazine, and (3) Information and Software Technology. To cover the whole research period, I decided to study the years 1988–2005.
16 Hevner, March, Park and Ram: Design Science in Information Systems Research (2004) MIS Quarterly, Vol. 28, No. 1, pp. 79-80
Industrial Plant Project Procurement
Follow-Up
Total Control of Procurement
Major Control of Investment
I also tried to find some additional material to support the positioning of my research. I tried to found overall articles of the target topics, i.e. articles of project management, procurement in project environments, project management software and procurement software. Finally, I made a market study to verify the novelty of the procurement software.
Literature Survey of Procurement in Project Environments
Although there are a lot of articles describing project management from various angles, the articles of procurement with concurrent engineering in industrial plant projects are rare. Three of the selected publications (Byte, Software Magazine and Information and Software Technology) did not publish any articles on procurement in project environments. They had various articles on IT projects, project management software and e-procurement, but nothing of procurement in industrial projects. The results are summarised in Table 1.
Table 1. Literature Survey of Procurement in Project Environments
Source Procurement in Project Environments
(with Concurrent Engineering Approach) Project Management Journal (ISSN: 8756-9728)
Contains advanced state-of-the-art project management techniques, research, theories & applications.
Publisher:
Frequency: Project Management Institute, Inc.
4 (03/1997–04/2005)
A series of project management articles; some articles treat also procurement in various project types. One article on concurrent engineering and iterative project implementation in R&D projects17. No articles on procurement in industrial plant projects.
International Journal of Project Management (ISSN:
0263-7863)
Offers a wide and comprehensive coverage of all facets of project management; worldwide expertise in the required techniques, practices and research.
Publisher:
Frequency: Elsevier Science Publishers B.V.
8 (01/2001–08/2005) 6 (01/1995–06/2000) 4 (01/1988–04/1994)
Another project management article series; some articles discuss concurrent engineering in construction projects (buildings, roads, etc.).
Three noteworthy articles of EPC -projects18, 19, 20
(engineering, procurement and construction). The Yeo and Ning’s article21 is the closest to my research. The article suggests a framework to procurement in projects integrating supply chain and critical chain, but does not cover procurement tasks or follow-up of procurement in projects.
Journal of Supply Chain Management: A Global Review of Purchasing & Supply (ISSN: 1523-2409)
Original articles dealing with concepts from business, economics, operations management, information systems, the behavioural sciences contributing knowledge in purchasing and materials management.
Publisher:
Frequency: Blackwell Publishing Ltd.
4 (01/1988–04/2005)
A lot of articles on procurement, some articles on procurement supporting R&D projects, but only two noteworthy articles on concurrent
engineering22, 23.
No articles on procurement in industrial plant projects.
17 Denker, Steward and Browning: Planning Concurrency and Managing Iteration in Projects (2001) Project Management Journal, Vol. 32, No. 3, pp. 31-38
18 Mahmoud-Jouini, Midler and Garel: Time-to-market vs. time-to-delivery: Managing speed in Engineering, Procurement and Construction projects (2004)
International Journal of Project Management, Vol. 22, No. 5, pp. 359-367
19 Lampel: The core competencies of effective project execution: the challenge of diversity (2001) International Journal of Project Management, Vol. 19, No. 8, pp. 471-483
20 Love, Gunasekaran and Li: Concurrent engineering: a strategy for procuring construction projects (1998) International Journal of Project Management, Vol. 16, No. 6, pp. 375-383
21 Yeo and Ning: Integrating supply chain and critical chain concepts in engineer-procure-construct (EPC) projects (2002) International Journal of Project Management, Vol. 20, No. 4, pp. 253-262
22 Dowlatshahi: Purchasing's Role in a Concurrent Engineering Environment (1992) International Journal of Purchasing & Materials Management, Vol. 28, No. 1, pp. 21-25
23 O‘Neal: Concurrent Engineering with Early Supplier Involvement: A Cross-Functional Challenge (1993) International Journal of Purchasing and Materials Management, Vol. 29, No. 2, pp. 3-9
Artto and Wikström24 have made an interesting literature study to clarify the meaning and importance of project business. Their study concludes that projects belong to general business practices, but they do not report any articles of delivery projects, i.e. having an operation management content.
They emphasise that discussion and theoretical views on delivery projects are scarce. Last, they suggest that the management of delivery projects is not an extensive application area in industry.
In conclusion, I claim that procurement in the context of the large-scale industrial plant projects is not a widely studied area and the scientific articles are scarce. The published articles on the procurement function have different focus and viewpoints and do not cover all the aspects of my research.
Literature Survey on Procurement Software
In the late 1980s, the project professionals at Pöyry Oyj were not aware of any procurement software for industrial plant projects. It seemed that the business niche was too small and demanding to attract software companies. I believed my colleagues (justifiably as their insight was accurate), and I carried out only non-systematic literature survey collecting articles related to the topic. Besides, the literature survey on the subject was not necessary for the programming of procurement software. The lack of literature study was well-compensated by available practical knowledge inside the company.
Later, Järvinen25 proposed that I verify the novelty of the procurement software by performing a literature study afterwards. I followed his advice and studied the issues of the selected publications from the years 1988-2005. The scant results are summarised in Table 2.
Table 2. Results of Literature Survey on Procurement Software
Source Issues 1988 – 2005
Byte (ISSN: 0360-5280)
For knowledgeable PC users of business and personal applications. Emphasis on new technology and previews of major new hardware and software products.
Publisher:
Frequency: CMP Media LLC 52 (01/1999–29/2005) 12 (01/1988–07/1998)
Advertisements and software assessments of project management programs with features for scheduling, resource and cost allocations. Two articles covering project management software choices, in 198826 and in 199227.
No matching software for procurement in industrial plant projects.
Software Magazine (ISSN: 0897-8085)
Aimed at managers of corporate software resources.
Publisher:
Frequency: Wiesner Publishing Inc.
6 (01/1996–02/2002)
Several software assessments of project management programs with diverse features for scheduling, resource and cost allocations.
No matching software for procurement in industrial plant projects.
Information and Software Technology (ISSN: 0950-5849) International archival journal focusing on research and experience that contributes to the improvement of software development practices.
Publisher:
Frequency: Elsevier Science Publishers B.V.
15 (01/97–98–15/2005) 12 (01/1991–12/1996) 10 (01/1988–10/1991)
No articles of procurement software in industrial plant projects.
24 Artto and Wikström: What is project business? (2005)
International Journal of Project Management, Vol. 23, No. 5, pp. 343-353
25 Järvinen: Written instructions to enhance this doctoral dissertation (2006)
26 Wood: The Promise of Project Management (1988) Byte, Issue 11/1988, pp. 180-192
27 Yahdav: Tracking the Elusive Project (1992) Byte, Issue 11/1992, pp. 119-126
I studied the articles in these journals using article databases (EBSCO Research Database and ScienceDirect). Moreover, I studied the volumes of Byte for advertisements of procurement software.
This was possible, because Lappeenranta University of Technology has been subscribing the magazine since the early 1980s and the university library has archived the issues of the magazine. The magazine had a lot of advertisements of diverse project management software, but none of them were intended for procurement in project environments.
Four of the selected publications (Information & Software Technology, Project Management Journal, International Journal of Project Management and Journal of Supply Management: A Global Review of Purchasing & Supply), have not published any articles on procurement software in project environments. Outside the scope of the literature survey, I noticed two interesting articles of the use of the project management software in the Project Management Journal.
The first article reported a survey28 which gathered some historical and baseline information about project management software and the use of modelling techniques. Pollack-Johnson and Liberatore revealed in their study that the percentage of those not using any software had dropped to less than 10% in 1998, while the percentage of professionals using some software for all of their projects had grown to over 50%.
Fox and Spence’s survey in the Project Management Journal confirms that there are literally dozens of project management tools on the market29. Although each project management tool is marketed and advertised as providing various features that other tools may not have, they focus on the basic project management tasks of planning, scheduling, tracking and controlling. Despite the large number of the project management tools, a majority of project managers tend to use only a few of these tools, the most widely used being Microsoft Project. Project managers also tend to rely on ordinary office programs, such as Microsoft Excel.
The general notion is that most of the project management software is capable of managing the scheduling of projects, calendars, activities and resources. They have diverse features for scheduling, such as GANTT, Project Evaluation and Review Technique (PERT) and Critical Path Method (CPM) and they typically manage resource and cost allocations with levelling. Also, they might master some additional functionality, e.g. for project meetings, depending on the market niche of the software, but there were no project management software targeted to procurement tasks.
Altogether, the results of the literature survey for procurement software were negligible; no matching software was found. None of the project management software presented in Byte or the Software Magazine come close to the created procurement software. The surveys of the Project Management Journal imply that project managers prefer flexible, understandable and reliable software even with limited project features.
Market Study
After the fruitless literature study of the procurement software, I decided to investigate the procurement software situation also from the business point of view. The market study was aimed at verifying the novelty of the software. Proha Oyj helped in the market study and I am deeply grateful of their invaluable assistance. Proha Oyj has also reviewed and approved this subsection.
28 Pollack-Johnson and Liberatore: Project Management Software Usage Patterns and Suggested Research Directions for Future Developments (1998)
Project Management Journal, Vol. 29, No. 2, pp. 19-28
29 Fox and Spence: Tools of the Trade: A Survey of Project Management Tools (1998) Project Management Journal, Vol. 29, No. 3, pp. 20-27
Proha Oyj30 is the leading global provider of portfolio and project management solutions. The company supports several major project management packages. The strategy of Proha Oyj is to operate globally, but in a narrow market where it can realistically act as a market leader. Proha Oyj31 develops and maintains cost-effective packaged software and services to meet the needs of large and medium-sized organisations. The software solutions help the customers carry out their strategies, allocate their resources productively, and control their project operations as profitably as possible. In 2004, the net sales of Proha Oyj were 65.7 million Euros, approximately 90 % of which came from outside Finland. The Proha Group employs over 500 people, 80 of them in Finland. In 2006, Proha Oyj decided to sell out its entire share capital (53.3 %) of its subsidiary Artemis to US based software company Trilogy, Inc32.
The business of Proha Oyj covers the applicability area of the research construct; the use of procurement software in project environments. Therefore, I assumed that Proha Oyj would support, or at least, would know the software competing with the construct of this research. I contacted Proha Oyj and they decided to help in my market study. They introduced their project management solutions and provided material of their software packages.
We noticed easily that ProcuMent was the closest software of Proha Oyj compared with the construct of this research. Proha Oyj even held a presentation of ProcuMent to help me point out similarities and differences with the construct of this research. After the presentation we discussed project management software and my research. Understandably, they were careful not to claim to know every project management tool in the world. They confirmed that they did not know any procurement software resembling the construct of this research. Specially, the use of a fixed process seems to differentiate the construct from the other software. They agreed that a fixed process as a specific solution for a limited area provides a neat solution, but with limited applicability33.
I decided to test the similarities between the construct of this research and the project software packages of Proha Oyj. I placed four criteria to identify the similarities of the procurement software:
(1) the software takes care of procurement, (2) fixed work flow, (3) procurement status estimation, and (4) hierarchical tender structures. I excluded requirements of the supplier correspondence layouts, because they could be arranged, for example, using MS Word and batch scripting. I did not include document flow management or data warehousing, because they are supporting processes of procurement function.
First, it was imperative that the software was able to support the procurement flow before the point of purchase. Second, the software had to have the fixed WBS (work break-down structure) for the procurement process. The fixed WBS guides inexperienced project workers in procurement tasks and forces undisciplined ones to follow standardised procurement processes. Third, the similar software had to have automated procurement status follow-up. No extra work was accepted for estimating the progress of procurement. Fourth, tenders had to be recorded as hierarchical priced item structures.
Similarity tests were made with ProcuMent, CMPro 5, ValuePoint, Artemis 7 and Safran, all well-known project management solutions. The tests were carried out on the material that Proha Oyj delivered for the market study. The results are summarised in Table 3 on the next page.
30 Proha
http://www.proha.com (28.03.2006)
31 Proha > Investor Relations > Annual Reports > Annual report -2004 > Business Review 2004 (.pdf) http://www.proha.com/sijoittajap/2004Eng_Business%20Review.pdf (07.09.2006)
32 Proha > Proha accepted offer to purchase shares of its subsidiary Artemis (March 13, 2006 at 9.15) http://www.proha.com/tiedotteet/tiedote256.htm (28.03.2006)
33 Aatola, Proha Oyj: Discussions of procurement software in project environments (2006)
Table 3. Competing Project Management Programs ProcuMent, a procurement solution for construction projects, is designed
for the planning and execution of purchasing. Report templates support reporting. The software is integrated to Planet (scheduling program), email, MS Word and PDF Writer.
The procurement process is defined to comprise:
1) Planning purchasing, tasks and events 2) Invitations to bid
3) Bid comparison 4) Orders and contracts
So far, this software resembles the created construct most.
The main difference to the construct of the research is that there are no individual tenders, only two-level invitations to bid, to which the tenders should be referred.
No No No Yes CMPro 5, a product family for project cost control, has two-dimensional
hierarchical breakdowns: work packages describing purchases/supplies for internal control and cost accounts for external reporting describing positions.
General features include:
x Cost estimating of upcoming projects with various options and tender creation for contractors
x Cost control using work breakdown structure (WBS), cost breakdown structure (CBS) and organisational breakdown structure (OBS) and organising budget based on cost estimate and breakdown structures x Income control
x Unit price contract management x Project portfolio management
Cost control software, not procurement software.
Pöyry Oyj uses CMPro 5 for cost control in projects.
No No No No ValuePoint, a project management tool for distributed organisations, is a
groupware designed for internal use. It is planned for budgeting and calculating actual and forecast cashflows. It includes work and travel cost reporting. Cashflow graphs are presented on one screen, making it easier for users to compare and create reliable forecasts.
General features include that the program begins from the user’s home page, user transactions, project cost control and cost centre cost control.
Cost control and cashflow control software, not procurement software.
No No No No Artemis 7, an investment planning and control software package,
supports the key business processes and roles associated with industry focused solutions, and enables deployment of multiple solutions on a common platform, ensuring seamless integration, consolidation and analysis of all investments.
Artemis 7 is programmed on role based processes. The features include several management areas: investment portfolios, demand and initiatives, financial planning and budgeting, programs and projects, resources, work, and collaboration and documents.
Investment software, not procurement software.
No No No No Safran, a scheduling and resource management tool, consists of Safran
Planner (interactive bar charts integrated with resource histograms and a spreadsheet-like table for data entry), Safran Project (earned value based project management tool), and Safran for MS Project (integration tools with Microsoft Project)
Earned value based project management tool, not procurement software.
All scheduling and cost control programs were excluded of the market study, because they do not fulfil the first criteria in the similarity tests. For example, Microsoft Project does not have any procurement features. The market study confirmed that there was no software which would compete directly with the construct of the research, the procurement software. Even the closest software, ProcuMent, differs in many ways. ProcuMent does not have hierarchical tender structures, nor does it use workload calculation to estimate the procurement status. ProcuMent does not have cyclical procurement flow either, but it can be replaced by repeating the procurement process as many times as necessary by copying and typing the needed information.
Conclusions from the Literature Survey
The conducted literature study confirms that the results of the research (project instructions and procurement software) are unique. Even the procurement literature is scarce in project environments and nearly non-existent in the specified context. The literature study (particularly the market study) confirms that there is no matching commercial procurement software available. This points out that the novelty aspects of the design science research will be achieved.
Most of the novelty is a consequence of the research context. Although projects are common practice in management, large-scale industrial plant projects are relatively rare. Particularly, projects resulting in unique plants with concurrent engineering efforts from both the client and the supplier side are rare. In this environment, suppliers are encouraged to do engineering to achieve the best possible plant. These engineering efforts have a heavy impact on the success of the project, and consequently, the mill. This engineering contribution from the suppliers distinguishes industrial plant projects from other resembling business branches, such as construction and shipbuilding industry.
For example, in construction business the suppliers deliver the goods according to item specifications, which the architect or the construction planning office has designed.
According to my literature study, the closest articles describe EPC projects. Naturally, these articles contain valid knowledge for industrial projects. Due to the different background, they miss some crucial features of industrial projects, for example the supplier’s engineering efforts and their impact on projects. Consequently, there is no matching article on the procurement process or the follow-up of the procurement function in industrial plant projects. Therefore, I claim that this work includes enhanced knowledge of procurement in implementing large industrial plant projects.
According to my literature study, the closest articles describe EPC projects. Naturally, these articles contain valid knowledge for industrial projects. Due to the different background, they miss some crucial features of industrial projects, for example the supplier’s engineering efforts and their impact on projects. Consequently, there is no matching article on the procurement process or the follow-up of the procurement function in industrial plant projects. Therefore, I claim that this work includes enhanced knowledge of procurement in implementing large industrial plant projects.