NEXT GENERATION

PMOsEnabling profitable growth in Asia

Despite slowing economies in a number of markets, expansion in Asia remains the number one priority for a significant number of multi-national companies. These organisations are actively trying to enter multiple locations, often against very aggressive timelines, as they seek to capture a rapidly expanding middle-class demographic before their competitors. However, the key challenge is not just about getting set up, but around delivering the right product, in the right location, quickly and cost effectively. With margins under greater scrutiny than before, success will not be defined by traditional parameters of time, cost and quality alone, but through the creation of a delivery infrastructure and associated capability, that provides sustainable competitive advantage to the business.

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The Next Generation Programme Management Office

In the past many organisations have found that trying to deliver a multi-site or multi-country expansion programme as a series of individual projects has resulted in higher costs, project overruns, resource constraints, and significant variances in the quality and consistency of the final product in each location.

To address this challenge, many firms have appointed advisors to establish a Programme Management Office (PMO) to oversee the development of their portfolio in a more controlled and cost-efficient manner. This approach remains valid however evidence within the market indicates that most PMOs are failing to deliver on their strategic intent. The capability of a PMO must evolve if it is to deliver real value to companies seeking further growth in Asia.

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Programme Steering Group

PMO Leader

Multi-disciplinary

Regional PMO

Regional or Global Business / Board

Local Business Units / End Users

Local contractors & suppliers

Country 1

Country Leader &

local delivery teams

Country 2

Country Leader &

local delivery teams

Country 3

Country Leader &

local delivery teams

Country 4

Country Leader &

local delivery teams

Country 5

Country Leader &

local delivery teams

Country 6

Country Leader &

local delivery teams

Country 7

Country Leader &

local delivery teams

WhAT Is A PMO ANd hOW shOuld IT bE sTRucTuREd?

A PMO comprises of a core team that defines the vision, direction, governance and performance management of a programme, and then works with local delivery teams to steer them through the complexity of project delivery in each individual market.

Fig 1. Sample structure of a typical Programme Management Office in Asia

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hOW ARE bEsT-IN-clAss PROGRAMME MANAGEMENT OffIcEs EvOlvING?

NEXT GENERATION

PMO

Stakeholder Management

Financial Planning/ P&L

Modelling

Benefits Management

Design Standards

Supply Chain Management

Benchmarking & Value

Engineering

MI & Real TimeReporting

Whole LifeCosting &

Sustainability

Project Controls & Risk Management

The next generation PMO will continue to provide core services however it should also serve as a genuine business partner rather than just a delivery vehicle. Today, best-in-class PMOs are operating across a much wider spectrum and engaging with a larger number of stakeholders than ever before. As a result, they are able to provide advice on business related issues that extend beyond just real estate.To deliver this level of service, PMO teams require a broader range of skills including project finance expertise, governance, risk management, knowledge of the supply chain, and access to a wealth of benchmark data. The PMO team must also have the ability to see macro trends and market changes, helping organisations to define their plans to respond to these and realise future business benefits.At Arcadis we see the next generation PMO delivering better value by integrating capability in these key areas:

Fig 2. Areas of enhanced capability in the next generation PMO

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VALUE ADDED OUTCOMES:If the next generation PMO is fully integrated and acting as a business partner within a client’s organisation, it will deliver the following value added outcomes:

1 stronger integration between finance and real estate The influence PMOs can have within an organisation allows them to balance the need to secure short-term fiscal improvements and drive long-term shareholder value. With an understanding of both finance and real estate, next generation PMOs will be better placed to optimise revenue generation by managing capital and operating costs.

2 Greater visibility on how decisions impact the bottom line Built around clear, consistent processes and a more streamlined management reporting approach, the PMO can provide the real estate and corporate finance teams with data on all of the variables that ultimately influence financial performance. If interpreted correctly, this information can enable them to better understand how decisions will impact their P&L. This will allow them to make more informed choices about the size, scope, specification, sequence and timing of projects and their associated capital allocation.

3 Increased speed to market Having a common approach can optimise the efficiency of project delivery, enabling businesses to trade earlier and increase sales revenues. Next generation PMOs will create a more industrialised method of project delivery. This extends beyond just standard processes and documentation; it comprises a fully integrated end-to-end process with greater levels of pre-fabrication and proven pre-assembled supply chains aligned to common objectives.

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4 Greater consistency and predictability By standardising the programme delivery approach, a PMO can reduce risk and provide greater certainty around the final product. In emerging markets in Asia where the understanding of health and safety, global standards and sustainability may be less mature, having established processes in place not only drives a more efficient solution, but also helps to reduce potential reputational risks facing organisations.

5 better supply chain management Organisations who can leverage their local knowledge and long standing relationships with the supply chain will be better placed to extract the best performance and value for money from multi-project roll outs.

6 Reduced operating costs Next generation PMO’s will, through capital projects, influence the design and selection of materials, components and equipment to drive down operating costs. This will include maintenance and energy costs, all of which will ultimately result in better operating margins.

7 cost effective fees PMO’s are starting to outsource various back office activities to lower cost centres resulting in improved cost efficiency and the potential for round the clock working.

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A TrACk rECOrD Of OPErATING SUCCESSfUL PMOs IN ASIA:

2. lEAdING sPORTs RETAIlER:Over the past decade, rapid economic growth in markets across Asia has created a larger middle-class demographic. This has led a number of global retailers to expand their store networks within the region. One of the world’s leading sport companies set a vision to transform from a distributor of sports equipment and apparel into a true retailer. To achieve this they set a goal of increasing their presence in Asia by opening thousands of stores in multiple locations in a short period.

1. GlObAl fINANcIAl INsTITuTION:In a volatile global economy, leading financial institutions are looking for effective solutions to help transform their business operations and drive cost savings, deliver performance improvements and reduce risks. Our client was looking for a new approach to transform their fragmented capital projects delivery model into a lean and efficient solution, that could drive greater competitive advantage from their real estate portfolio.

Over the last 12 years Arcadis has supported the client in helping to deliver their store roll-out programme. We created a regional PMO which provided an end-to-end solution from store planning, design, sourcing of fixtures and components, procurement, off-site fabrication, through to construction commissioning and handover of a fully-fitted store. Our established processes helped to deliver an efficient roll out, driving cost and time savings and maintaining consistent brand standards in every location.

Key outcomes:• Successfully delivered 18,000

stores comprising 12 different concepts for three of the major brands

• 55% reduction in overall costs compared with European baseline figures provided at the outset of the programme

• 30% reduction in the time to deliver projects (from initial planning to store opening)

• Exceptionally high quality finish with 99.6% of interior fixtures and components without defects

Arcadis was appointed on a five-year contract to establish a Global Programme Management Office and to manage the regional delivery of their CapEx Programmes. The remit of the PMO is to provide strategic direction, consistent policies, and ultimately greater control over the delivery of capital projects within the client’s global property portfolio.In Asia our regional hub in Hong Kong is creating and implementing Standard Operating Procedures and establishing an environment for more robust performance management and continuous improvement. Our local teams in region manage the supply chain

working on client projects including other consultants and contractors. The scope of our role covers 70+ countries globally, including 13 in Asia. Key outcomes include:• Developed transparent rate card

for client that provides greater visibility of their projects.

• Standardised, real time and rolled up project reporting across the region to facilitate timely decision making.

• Centralised and dynamic capital planning process enabling optimised deployment of capital resulting in improved return on investment.

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3. luXuRy cAR MANufAcTuRERurbanisation and the emergence of a rapidly growing middle-class population has created an increasing demand for new cars across Asia. The world’s top selling luxury car manufacturer approached Arcadis for help in expanding its production and sales within the region to respond to this opportunity. Over the last three years we have helped the client to roll out a number of projects including factories, assembly plants and distribution centres in several different locations across the region. We have delivered a range of services including project management, design management, cost management, construction management and permitting. To ensure a greater degree of consistency, we set up and now manage dedicated PMOs in Shanghai and Malaysia. Our PMO’s provide the client with a single point of contact and a greater level of governance and certainty of outcome. They do this

by implementing global standard operating procedures, developed with the client, and modified to suit local industry practices. Project performance against pre-agreed targets is monitored and reported on a regular basis together with the corrective actions required to keep the projects on track.Key outcomes:• Streamlined and integrated

reporting of project performance with single point interface to client in Germany

• Achieved two million working hours without health & safety incidents in China

• Completed a new 800,000ft2 distribution centre in Korea 3 months ahead of schedule

“ Our PMO’s provide the

client with a single point of

contact and a greater level of

governance and certainty of

outcome ”

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The cost of designing and operating a best-in-class PMO is not a ‘quick win’ but it can be easily recovered. We typically find that setting up a PMO may cost between 1-2% of the total capital spend, however it will typically deliver a 10-15% reduction in capital costs over the duration of the programme, as well as on-going reductions in operating costs.

DELIVErING LONG-TErM VALUE & bETTEr OUTCOMES

Increased speed to market, improved consistency, and a better end product all add up to provide an excellent return on that investment. Those organisations who partner with firms that have the necessary geographic coverage, a best in class delivery model, and appropriately skilled resources, will enjoy a significant competitive advantage over the next decade as they seek to secure greater market share in Asia and improve profitability.

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Changsha

Foshan

Guangzhou

Hangzhou

Haikou

Shenyang

Wuhan

Xi’an

Bangalore

Delhi

Jakarta

Bali

Kuala LumpurPetaling Jaya

Johor

PenangSabahBandar Seri Bagawan

Kuala Belait

Sarawak

Manila

Cebu

Singapore

Seoul

Bangkok

Hanoi

Ho Chi Minh City

Taipei

Nanjing

Hong Kong

Beijing

Chengdu

Chongqing

Dalian

HengqinMacau

Qingdao

Shanghai

Shenzhen

Suzhou

Tianjin

Chennai

Hyderabad

MumbaiPune

Kolkata

Dongguan

• Over 80 years of local knowledge • Unrivalled cost benchmark data• Established supply chains• Integrated, end to end capability• Regional Centres of Excellence in Manila & Bangalore

AbOUT ArCADISArcadis is the leading global design & consultancy firm for natural and built assets. Applying our deep market sector insights and collective design, consultancy, engineering, project and cost management services, we work in partnership with our clients to deliver exceptional and sustainable outcomes throughout the lifecycle of their natural and built assets.We are 27,000 people active in over 70 countries that generate €3.4 billion in revenues. Within Asia we can call upon the skills and experience of over 5000 colleagues based in almost 50 offices across the region. Over the last decade our dedicated team of PMO experts have helped clients in Asia, across a broad range of markets sectors, to drive improved business outcomes through technical knowledge, local insight and international expertise.

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www.arcadis.com

Arcadis_Asia

Arcadis

CONTACT USIf you would like to discuss any of the points raised in this paper in further detail then please get in touch:

Andrew MacphersonHead of Project & Programme Management, AsiaM +852 9301 5362E andrew.macpherson@arcadis.com

William QuekHead of Project & Programme Management, ThailandM +66 86788 9818E william.quek@arcadis.com

frank KwokHead of Financial Institutions, AsiaM +852 9881 8788E frank.kwok@arcadis.com

Peter hurstHead of Retail, AsiaM +852 9887 6995E peter.hurst@arcadis.com

Jack XuProject & Programme Management, China M +86 135 64233071E jack.xu@arcadis.com

Matt fletcherGlobal Head of Retail M +852 9633 6055E matt.fletcher@arcadis.com

biju AKHead of Project & Programme Management, IndiaM +91 96633 55560E biju.ak@arcadis.com

ben McGeachie Project & Programme Management, SingaporeM +65 8506 7233E ben.mcgeachie@arcadis.com