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The Engineer Crisis

By [email protected] - 15th March 2007 - 13:13

Process & Power Owner/Operators & EPCs Struggle to Find New Work ProcessesAmid Worker Shortage
Weâve been hearing that the #1 hot-button issue for people in the process and power vertical is too much work and not enough people. Itâs not just companies caught by surprise by an unanticipated surge; a glance at any newspaper shows that demand for electricity is so high that the U.S. is once again considering expansion of its nuclear power generation facilities (something that would have been unthinkable just a few years ago). High oil prices and unprecedented demand lead refiners to seek expanded capacity. Shipbuilding is rebounding, as oil merchants need to move oil and gas from the source to the consumer. In general, the oil- and energy-based economies are so good, they are placing unprecedented stresses on the companies that design and build these assets. In fact, Daratechâs research shows that engineering workloads in North America have at least tripled in the last 18 months; in Europe and Japan, theyâve doubled while growth in China is off the charts by Western standards.Hereâs one example: one global owner/operator has seen an explosion from five $1 billion dollar projects underway concurrently five years ago to more than twenty today, with an additional thirty projects with budgets over $500 million. In addition to the sheer growth in volume, the projects themselves are becoming more complex, tying together global work teams working on very intricate projects.But this rapid, massive workload expansion comes at a very difficult time for the companies in this space: baby boomers are retiring, new workers are not entering the industry quickly enough to replace those leaving, and the infinitely flexible pool of talent in high-skill/low-cost work centers turns out to not be as large (or low-cost or flexible) as previously thought. The net result: a hugely stressed system, with too much work, too few skilled workers, not enough time to do the workâand no time to ponder work process improvements that arenât strictly tied to getting the current job done.While weâve written about the worker shortage before (and in regards to other verticals, too), it was always in the context of shifting work from the U.S. or Europe to other parts of the world, or from physical testing to digital methods. But the shortage today is everywhere, in all geographies and in all skill sets. Aside from giving a perceived cost, offshoring was one solution to the problem of localized skills shortages; EPCs and O/Os could use engineering resources wherever they could be found. But ironically, regions that had been low-cost are becoming more expensive as qualified engineers become scarcer (as they move to higher-wage regions) and the problem perpetuates. Then too, the attractive mix of low cost and high skill that initially made offshoring a popular practice has evolved to the reality where managing such a dispersed workforce often proves difficult, with quality issues, language and culture barriers and communication lags erasing much of the savings.Daratech believes that the industry is ripe for massive change; a very fragmented industry may finally come to grips with its inefficiencies and it will result in a greater lifecycle management focus.

Author: Vicki Blake


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