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2014 CII Annual Conference July 21–23 Indianapolis, Indiana Don’t Let Your Project Sink RT308 – Achieving Zero Rework through Effective Supplier Quality.

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Presentation on theme: "2014 CII Annual Conference July 21–23 Indianapolis, Indiana Don’t Let Your Project Sink RT308 – Achieving Zero Rework through Effective Supplier Quality."— Presentation transcript:

1 2014 CII Annual Conference July 21–23 Indianapolis, Indiana Don’t Let Your Project Sink RT308 – Achieving Zero Rework through Effective Supplier Quality Practices

2 Meet your Captain and Crew Captain Buck Blum, CB&I Crew Members Kim LaScola Needy, University of Arkansas Brad Monroe, Dresser-Rand Don Ellis, DuPont Ken Walsh, San Diego State University Randy Moreland, Shell 2

3 RT308 – Achieving Zero Rework through Effective Supplier Quality Practices Buck Blum, CB&I Vince Carney, Southern Co. Don Ellis, DuPont Don Holte, Procter & Gamble Phil Klefas, Aramco Services Terry McMillan, Alstom Power Brad Monroe, Dresser-Rand Randy Moreland, Shell Kim Needy, Rufaidah AlMaian University of Arkansas Gene Nikstad, CH2M HILL Jim Peters, Bechtel Corp. Tricia Thibodeaux, Fluor Ken Walsh, Thais Alves, Shamail Ahmad, Yoshua Neuman, Duc Huy Nguyen San Diego State Univ. Gary Weiler, Leidos Constructors 3

4 Essential Question What are the most effective processes and practices for ensuring that project materials and equipment are produced, manufactured, or fabricated in strict accordance with all applicable specifications, and that they are delivered to the project site without any need for rework? 4

5 Implementation Session Learning Objectives Explain the methods used Explain the supplier quality process map Demonstrate the impact of identifying non-conformances across several stages of the supply process Utilize the cost-tradeoff curves to incorporate resource decisions into supplier selection processes 5

6 Methods Qualitative Analysis Literature review regarding construction and other industries Documentation from contractors and owners Interviews at contractor and supplier facilities Supplier focus groups Quantitative Analysis Hard data from POs using a data collection instrument Simulation modeling of the supplier quality work process 6

7 SQ Process Map. Adapted from Alves et al. (2013). Qualitative Analysis – Supplier Quality Process Map 7

8 Qualitative Analysis – Literature and Documentation Review Inside the construction industry –CII Literature –General Capital Facilities Literature –Documents currently used by CII members Outside the construction industry –Healthcare –Manufacturing –Food and Restaurant –Aerospace –Shipbuilding 8

9 Test Your Knowledge – Boarding Pass A.Owner B.Contractor C.Supplier Who is responsible for creating the Inspection and Test Plan?

10 Qualitative Analysis – Literature Review Supplier Quality Process Map 10

11 Supplier partnerships. Involvement of fewer, dependable suppliers. Feedback system between the buyer and supplier with supplier improvement opportunities based on measurable objectives. Careful supplier selection process focusing on quality aspects. Top management involvement and commitment for continuous improvement. Qualitative Analysis – Literature Review Findings 11

12 Qualitative Analysis – Interviews Demographics Six interviews with contractors Interviewees represent the following functions –Procurement; Project Services and Inspection; Supplier Quality and Material Planning; and Operations and Quality Management Categories of questions –Supplier quality organization, Supplier quality system, Metrics, Data, Assessment, Supporting documents, and Suppliers 12

13 Qualitative Analysis – Interviews Findings Companies with highly effective Supplier Quality system have high involvement from top management (leadership) to improve the Supplier Quality system. Companies with internal databases have better Supplier Quality system. Information is visible and can be pulled in several formats by any department to use them for analysis and future decisions. 13

14 Qualitative Analysis – Supplier Focus Groups Demographics 3 supplier focus groups with 11 participants (9 companies) –Average company size = 2,392 employees –Average annual volume of sales = $928M –Average number of years supplying the industry = 49 years Suppliers represented four commodity categories –Tagged/engineered equipment –Fabricated structural steel –Fabricated pipe spools –Manufactured/bulk goods (non-engineered/bulk valves) 14

15 Qualitative Analysis – Supplier Focus Groups Questions 1.How is QA/QC currently performed in your organization and your suppliers? 2.What are the best practices related to QA/QC you commonly find in the industry? 3.What would it take for you to meet all applicable requirements contained in an order without rework (Supplier Wish List)? 15

16 Test Your Knowledge – Boarding Pass A.Yes B.No For critical equipment or materials, do you conduct an upfront joint quality planning meeting with your suppliers?

17 Qualitative Analysis – Supplier Focus Groups Wish List Findings Provide relevant specifications for each project Provide updated specifications Standardize specifications and applications Match the PO to the RFQ Provide positive feedback Participate in up-front joint quality planning Hold early stakeholder meetings and periodic reviews 17

18 Qualitative Analysis - Summary Partnership with supplier and involvement of fewer suppliers. Careful selection of suppliers. Providing the exact specifications to suppliers. Improving and updating specifications to be standardized. High involvement form top management. Development and usage of Supplier Quality System database. Improvement of joint quality planning with suppliers 18

19 Implementation Resource 1.Introduction 2.Supplier Quality Processes Map 3.Estimating the Impact of the Cost of Non-Quality – Appendix I: Glossary of Terms and Acronyms – Appendix II: Total Landed Cost Discussion – Appendix III: Detailed Supplier Quality Process Map – Appendix IV: Research Team 308 Members 19

20 Implementation Resource – RACI Responsible, Accountable, Consult, Inform TaskOwnerContractorSupplier 2. Execution Supplier Quality PlanIA,RR Inspection & Test PlanC,IA,CR Non-conformanceC,IA,RR Responsible, Accountable, Consult, Inform 20

21 RACI Definitions Responsible: actually completes the task or activity Accountable: veto power for an activity. Consult: must be consulted prior to a final decision or action Inform: need to be informed after a decision or action is taken

22 Implementation Resource – RACI Responsible, Accountable, Consult, Inform TaskOwnerContractorSupplier 2. Execution Supplier Quality PlanIA,RR Inspection & Test PlanC,IA,CR Non-conformanceC,IA,RR Responsible, Accountable, Consult, Inform 22

23 Quantitative Analysis – PO Data Collection Instrument – Categories Material Categories –Tagged/Engineered Equipment –Fabricated Structural Steel –Fabricated Pipe Spools –Non-Engineered/Bulk Valves Categories of Questions –Project Data –PO Basic Data –Practices –Outcomes 23

24 Quantitative Analysis – PO Data Collection Instrument – Demographics 24 Developed vs. Emerging Nations

25 Quantitative Analysis – PO Data Collection Instrument – Demographics 25 10K-100K100K-1M 1M-10M 10M-100M 100K-1M1M-10M10M-100M100M-1B1B-10B 10B-100B

26 Quantitative Analysis – PO Data Collection Instrument – Demographics 26

27 Quantitative Analysis – Practices 1.Conducting surveillance in the supplier’s facility 2.Tracking of surveillance effort 3.Using a quality control plan / inspection and testing plan 4.Having meetings with suppliers to discuss quality 5.Performance rating of the supplier after execution 6.Projecting the cost of surveillance effort 7.Using suppliers with registered/certified quality management system 27

28 Test Your Knowledge – Boarding Pass A.Yes B.No Does more in-process inspection reduce the number of non- conformances identified at a job site?

29 Test Your Knowledge – Boarding Pass A.Yes B.No Does the use of industry-certified suppliers reduce the number of non- conformances identified at a job site?

30 Test Your Knowledge – Boarding Pass A.Yes B.No Do more meetings with suppliers reduce the number of non- conformances identified at a job site?

31 Quantitative Analysis – Impacts 31 PracticesDoes it make a difference? How?, Why?, or When? Conducting surveillance in the supplier’s facility YesA greater number of NCs are found when more surveillance is conducted Tracking of surveillance effortYesCompanies can learn how much is spent on their surveillance effort and identify potential causes for more/less inspection Using a Quality control plan / inspection and testing plan YesImproves supplier quality outcomes, by finding problems earlier in the process, resources and money utilized for the inspection effort will pay off in terms of the quality of the final products Having Meetings with suppliers to discuss quality YesPro-active meeting held before execution/fabrication help find NC earlier, at the supplier’s shop rather than on site Performance rating of the supplier after execution YesBut, only if the owner/contractor works together with the supplier and the performance rating is shared to proactively improve the supplier’s outcomes and prevent NCs from happening Projecting the cost of surveillance effort YesA greater number of NCs are found when the cost of the surveillance effort is projected Using suppliers with registered/certified quality management system NoNo statistical difference was found in the amount or location of NCs

32 Highly Effective Companies 32

33 Cross Analysis and Conclusions Observation and inspection of supplier work Early detection of quality problems Involvement from upper management Strategic partnership with suppliers Accuracy of project specifications (update & standardize) Careful supplier selection Detailed planning and tracking for inspection effort Improvement of feedback process with suppliers Findings from Quantitative Analysis Findings from Qualitative Analysis 33

34 SQ Process Map. Adapted from Alves et al. (2013). Qualitative Analysis – Supplier Quality Process Map 34

35 Simplified Map 1.execution2.Release3.Receive4.MC Process Capability (P fab ) Inspection Capability (P insp ) P rec P mc Latent NC

36 Quantitative Analysis – Modeling 36

37 Cost of Rework Model - Validation 1.0 Rework Fraction Percentile 0 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 0.02 0.04 0.06 0.080.1 0.12 0.14 0.16 0.18 0.2 Simulation result Love et al 1999 Josephson 1999 PA 2014 RT 308 Data 37

38 Test Your Knowledge – Boarding Pass A.10% B.50% C.100% If in-process inspection is eliminated to save costs, how much is the expected rework cost increased?

39 Example Total Landed Cost: –P fab = 75% –PO cost = $5,000,000 –P insp = 70% at a cost of $100,000 TLC = $5,000,000 + $100,000 = $5,100,000 39

40 40 Cost NQ = (0.4) * 5,000,000 = $2,000,000. TLC +NQ = $5,100,000+ $2,000,000 = $7,100,000 f NQ = 0.4

41 Example 41

42 Example 42

43 Example 43

44 Conclusions and Recommendations 1.Finding: The literature review did not find any new work processes. Recommendation: Utilize the existing work processes consistently (e.g. assigning criticality factors considering supplier performance and evaluation). 44

45 Conclusions and Recommendations 2.Finding: Inspection during the execution is an effective and cost efficient method to help ensure supplier quality. Recommendation: Early implementation of supplier quality work processes have the most impact on outcomes. 45

46 Conclusions and Recommendations 3.Finding: Companies need a tool to examine the tradeoff between a supplier’s fabrication capability and the level of inspection. Recommendation: Utilize the decision support tool described in the Implementation Resource to project the cost of non-quality and to assist in making decisions on supplier selection. 46

47 Q&A – Don’t Let Your Project Sink Did you survive? 47


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