How to Achieve Capital Efficiency Utilizing Modularization Strategies?

 In Modularization

DyCat Solutions recently presented this topic in May of 2019 at the Modular and Offsite Construction Summit 2019. Over the last several decades, capital projects have significantly increased in final total installed cost resulting in a negative impact on return. Operators are now evaluating their future programs based on their “capital efficiency”.

Defined, capital efficiency is the ratio of facility to the amount of capital expenditure involved in constructing and maintaining a facility. The comparison serves as a method of determining whether a facility should be funded, funded with adjustments, or abandoned and the resources diverted to other projects.

Modularization is a proven strategy that will provide capital efficiency for your project. DyCat Solutions employ five (5) key modularization steps that will improve the capital efficiency of your project. They are as follows:

1. Establish modularization as an effective strategy

2. Establish most effective module transportation for maximum size and weight

3. Establish acceptable modular design methods

4. Develop optimum modular layout

5. Ensure optimum amount of modularization vs. pre-assemblies

These above steps have been proven to provide an optimum amount of modularization.

How to Achieve Capital Efficiency Utilizing Modularization Strategies

1. Establish Modularization as an Effective Strategy

Modularization for a project involves developing pre-assemblies that are fabricated and installed on a module off-site in a controlled environment. Removing less productive labor offsite to a more controlled environment improves safety and quality. Over the last decade, maximizing the application of modularization has been proven to reduce cost and provide cost and schedule certainty. Modularization is an extensively used strategy in Canada in heavy industrial applications. In some countries, the strategy to modularize is not being applied and the benefits are not being realized. This is due to lack of experience with this strategy. Figure 1 identifies the cost benefit varies per location on a global basis.

Figure 1 – Modularization Cost Benefit per Location

The decision should be based on the cost of site labor vs shop labor plus the cost of additional steel, transportation and engineering costs. DyCat Solutions applies a Class 5 estimating tool to determine whether modularization will be effective on your project.

Modularization should be considered in the early stages of the project, as modularization is more difficult to execute and requires disciplined planning in the engineering phase. The decision to modularize if often not made at the correct phase of the project. Refer to Figure 2 which refers to the CII RT-283 Optimal Timing Points for Modularization Decisions.

Figure 2 – CII RT-283 Optimal Timing Points for Modularization Decisions

2. Establish Effective Module Transportation Maximum Size and Weight

A key factor for maximizing modular designs is to assure that the module envelop size and weight is established as soon as possible. Often projects can delay the logistics study required to determine these parameters until later phases in project execution.  Initial logistic studies may identify constraints which limit these parameters. These “pinch points” can often be eliminated increasing the transportation envelop with minimal cost.

Access to waterways, roads and railways becomes a huge factor in determining module sizes. Plants that are land-locked will have road restrictions that will limit size-based jurisdiction restrictions. Consideration for the development of high load corridors and module offloading facilities could reduce the impacts of the constraints.

Effective collaboration between the logistics group (supply chain), engineering and construction is required in order to fully understand the logistics required for modularization. Challenging the status quo and looking at alternative options will be required. After the logistics study, your project can determine the module type that can be used on your project. Below are some examples of module types that should be considered:

  • Very Large Modules (VLM) is a module that weighs over 600 tons and can weigh up to 6000 plus tons.  The mode of transportation is by Heavy Transport Vessel (HTV) and / or barge. Figure 3 illustrates a VLM.
  • Large Modules (LM) is a module that weighs more than 100 tons, but less than 600 tons. The maximum weight of a module which can be lifted using conventional rigging methods is 600 to 800 tons. The mode of transportation is by ship or barge.
  • Truckable Modules is a module that weighs from 60 to 160 tons and are smaller modules that can be transported by road. Maximum allowable load size will depend on which country the load is being road hauled and will also vary from state to state within that country.
  • Rail Modules are smaller modules that can be transported by rail. They are similar to truckable modules but have different transportation forces.

Figure 3 – Very Large Module (VLM) at Module Yard

3. Establish Acceptable Modular Design Methods

Once the module envelope, weight and types are determined the project can determine which module configurations would be the most efficient to be used and must be considered at the beginning of the project. Different module configurations are discussed below:

  • Pre-Assembled Racks (PAR’s) – A Pre-Assembled Rack (PAR) typically support pipes, power cables and instrument cable trays in plants. They generally contain piping and electrical that transfers material between equipment and storage or utility areas.
  • Pre-Assembled Units (PAU’s) – A Pre-Assembled Unit (PAU) contains multiple pieces of equipment, piping, electrical and instrumentation for a partially or fully complete unit. Piperacks can be incorporated into PAU’s depending on the module type and size chosen. Local electrical rooms can be located within the PAU.
  • Vendor Assembled Units (VAU’s) – A Vendor Assembled Unit (VAU) or Skid Mounted Module that contains separate pieces of common equipment on a common base frame or skid and is packaged as an item by a manufacturer. These are usually built by the equipment vendor or his subcontractor.

Technical constraints need to be established; which may limit the percentage of modularization. Modular designs can apply the following methods which may require deviations from owners’ current design specifications. These methods include:

  • Pumps on modules (blue sky)
  • Pumps within modules
  • Distributed electrical and controls
    • Local electrical rooms on modules
    • Local electrical rooms declassified within classified areas

These design methods have been proven be successfully applied in a safe and operable situation. The Table 1 below shows the level of modularization per module configuration and can be used as a guideline. The percent modularization is defined as percentage of labour moved offsite.

Module ConfigurationOverall % of Modularization – Truckable ModulesOverall % of Modularization – LM’sOverall % of Modularization – VLM’s
PAR’s only – no distributed electrical12-15%12-15%N/A
PAR’s and PAU’s – no distributed electrical or no pumps on module20-25%25-35%30-45%
PAR’s and PAU’s – pumps on module25-30%30-35%35-50%
PAR’s and PAU’s –distributed electrical and pumps on module43-55%60-65%75-80%
Table 1 – Module Configurations and % Overall Modularization

Cost saving increases as the percentage of modularization increases. The TIC savings can be from 1% to 20% depending on the percentage of modularization.

4. Develop Optimum Modular Plot Plan

Well-designed modular plot plans can reduce overall quantities and maximize removal of labour offsite. Traditionally projects would use a stick-built plot plans and allow the plot plan to drive modular design.  To have the most effective modular plot plan, modularization must drive the plot plan. In order to develop a modular plot plan, a collaborative effort between all disciplines to drive a system-based layout using module envelope sizes is required.

Another component is developing a comprehensive module index that contains the module configuration, dimensions and weights per discipline. This index is used to ensure that the modules have the appropriate weight densities, follow transportation requirements and allow construction sequencing.

The optimum plot will intuitively produce a smaller footprint and generate less quantities then a traditionally stick-built layout.

5. Ensure Optimum Amount of Modularization vs Pre-Assemblies

The objective of modularization is to move as much labour offsite as possible, but some modules that have lower amounts of labour density may not be practical to modularize. In these cases, they would be converted from modules to pre-assemblies. Labor density is number of hours required per volume of module. The ideal module would have a high labor density. The most optimum module would require the module labor density to be above the location minimum labor density. This will vary depending on the location in the world the project is located. Figure 4 below demonstrates that there is an optimum level of modularization.

Figure 4 – Optimum Modularization Point

The green line in Figure 4 will move based on a calculation used to determine if the site labour cost is greater than the shop labour plus the additional cost for steel, engineering and transportation to modularize. This sensitivity cost analysis should be performed to determine if the amount of modularization chosen will add value to the project. Schedule saving should also be taken into consideration.

Another rule of thumb would be if there is 60% or more structural steel than any other commodity, the module would not be practical and pre-assembly would be a preferred option.

Step changes to the traditional execution methods currently employed are needed for a project /program be successful and achieve the maximum capital efficiency. The key modularization strategies discussed in this blog need be developed, aligned, implemented and governed to ensure success and in turn reduce the overall TIC by 1% to 25%.  If implemented appropriately throughout the life cycle of the project/program, the results will support the business objective which is critical to the stakeholders and owners of facilities. Not only is modularization a key strategy to achieve capital efficiently, but other strategies can be implemented such as Facility Standardization, Lean Design and Execution to achieve the maximum capital efficiency.

If you want to know more about how to effectively incorporate these critical requirements in your project, please contact Dycat Solutions at