1 © Life Cycle Engineering 2011 Business Excellence powered by Rx R. Keith Mobley Principal, SME Life Cycle Engineering, Inc.

2 © Life Cycle Engineering 2011 R. Keith Mobley, CMRP, MBB Principal Consultant and Reliability Engineering SME 45 Years of combined business, engineering and consulting experience 25 Years in corporate positions that include: V.P. Engineering and Manufacturing V.P. Finance V.P. Marketing and Sales Executive V.P. and COO 20 Years International Consulting President and CEO of $50M international business transformation consulting, engineering services and training company 20 Years of direct Lean-Six Sigma application. Motorola-Juran trained, he is a Master Black Belt with hundreds of successful projects Mr. Mobley has earned an international reputation as a leader in corporate transformations, reliability engineering and process optimization. He is on the advisory boards of ANSI and ISO; a Distinguished Lecturer for ASME; and winner of Smarro Award for outstanding contribution in engineering and reliability. Author of 22 textbooks including: – Total Plant Performance Management – Plant Engineer’s Handbook – Maintenance Engineering Handbook – An Introduction to Predictive Maintenance

3 © Life Cycle Engineering 2011 Reliability Myths Reliability only applies to physical assets Reliability is a maintenance-only problem Asset reliability is dominate reason for poor business performance Asset reliability is dominate reason for low asset utilization Excessive maintenance cost limits competitive ability

4 © Life Cycle Engineering 2011 Asset Reliability Losses Source: The Plant Performance Group

5 © Life Cycle Engineering 2011 Asset Utilization Source: The Plant Performance Group Maintenance 7%

6 © Life Cycle Engineering 2011 Reliability The probability that a business process, work procedure, capital asset and employee will – without exception – perform its required function in both normal an abnormal day-to-day operations It is a holistic issue and must be resolved with a holistic solution

7 © Life Cycle Engineering 2011 World-Class Business Marketing drives backlog and determines current and future production requirements Production must respond to market demands and effectively use installed capacity Maintenance must respond to both market demands and production needs, as well as provide sustaining maintenance that prolongs asset useful life Excellence in and Integration of:: ProductionAsset Care Marketing

8 © Life Cycle Engineering 2011 The Focus of Reliability Excellence Production Reliability Maintenance EH&S Supply Chain Standard procedures Waste and loss elimination Quick changeovers Stable, consistent processes Risk management Asset management Loss, waste elimination Performance management Asset care Useful life management Supply chain management MRO materials management Materials handling and JIT Inventory management Procurement Occupational Health & Safety Environmental Compliance

9 © Life Cycle Engineering 2011 Reliable Processes Visionary Leadership Marketing & SalesSupply Chain Logistics & Distribution Operational Reliability Human Resources Business Strategy Asset Management Voice of CustomerQuality EH&SCapital Assets FinancialRisk Management

10 © Life Cycle Engineering 2011 EFQM Model Leadership Processes Key Performance Results People Policies & Strategy Partnerships & Resources People Results Customer Results Society Results Innovation & Learning EnablersResults (European Foundation for Quality Management) Business Excellence Models Stress: Leadership Standard Processes KPI Models Assume: Asset Reliability Universal Best Practices Engaged Workforce Enabling Work Culture

11 © Life Cycle Engineering 2011 Reliability Excellence Model MATERIALS MANAGEMENT ASSET CARE WORK SCHEDULING WORK MANAGEMENT PROCESSES FACILITIES & EQUIPMENT WORK MEASUREMENT WORK PLANNING WORKFORCE DEVELOPMENT ORGANIZATIONAL STRUCTURE SUPERVISION INFORMATION MANAGEMENT OPTIMIZATION MANAGEMENT REPORTING BUDGETING & COST CONTROL MANAGEMENT OF CHANGE EQUIPMENT HISTORY AUDITS & ASSESSMENTS RELIABILITY ENGINEERING SUSTAINABILITY OPERATOR CARE PROCUREMENT EQUIPMENT & PROCESS DESIGN FUNCTIONAL PARTNERSHIPSMANAGEMENT COMMITMENT PRINCIPLES ORGANIZATIONAL BEHAVIOR EMPLOYEE INVOLVEMENT GOALS & OBJECTIVES GOVERNING PRINCIPLES OCCUPATIONAL HEALTH & SAFETY CULTURE PERFORMANCE MANAGEMENT LOSS ELIMINATION

12 © Life Cycle Engineering 2011 Aluminum Wheels Problem Statement Average Production: 5,600 wheels per day Profit: -$2.31 per wheel Downtime: 1% (unscheduled) Perception Obsolete foundry technology Asset reliability Reality Failure to adhere to standard procedures Results Average Production: 12,000 wheels per day Profit: $40.63 per wheel Downtime: 1% (unscheduled)

13 © Life Cycle Engineering 2011 Standard Work Is Essential To Excellence Mission Policies Standard Processes Standard Procedures Actual Practices Actual practices define effectiveness and are created by standards and change management. Why would standard work be met with resistance?

14 © Life Cycle Engineering 2011 The Path To Standard Work In Production Standard Work is Central to the Continuous Improvement Process Standard Work Standard WIP Available time Customer demand Time Observation Form Total work content Load Chart Balance work Enable flow Required resources SW Combination Sheet Content Sequence Timing Outcome Safety Line Balance Work Content & Sequence Takt Time Location Amount Enable Flow

15 © Life Cycle Engineering 2011 Standard Work Should be Layered and Developed from the Bottom Up Executives Time on the floor to verify the chain of standard work is upheld and production process is stable and improving Value Stream Managers Monitor and support supervisors in their ability to carry out their standard work Supervisors Monitor and support team leaders in their ability to carry out their standard work Natural Work Team Leaders Maintain production and ensure standard work is followed Layers of Standard Work

16 © Life Cycle Engineering 2011 Who Should Have Standard Work? Role % of Work (time) that should be Standard Executives10-15% Value Stream Manager25% Support Department Managers 50% Supervisors50% Team Leaders80% Operators (Associates)95+% Maintenance Technicians85% - 90%

17 © Life Cycle Engineering 2011 Alumina Refinery Problem Statement Excessive failures of 700 Surry pumps (MTBF: 6 months) Maintenance cost $12M per year Perception Poor maintenance practices Reality Mode of operation (control range) Results Failures virtually eliminated (MTBF: 36 months) Maintenance cost less than $100K per year Energy use reduced by $11.3M per year Improved process performance

18 © Life Cycle Engineering 2011 Conduct Problem-solving EFFECT MAN MATERIALS METHODS MACHINES Pareto Losses Action Plan Perfection Seek Target Gap Identify Losses Standard Loss Elimination Process

19 © Life Cycle Engineering 2011 High-speed Manufacturing Problem Statement Loss production, missed deliveries High production costs Perception Maintenance deficiencies Operators not performing Reality Management decisions limited utilization to 50% Results Restructured operating plan Eliminated losses within OEE

20 © Life Cycle Engineering 2011 Asset Utilization Losses Installed Capacity = 58,867,200,000 5-Day Work Week = 16,128,000,000 3,225,600,000 Two 5-Day Outages = 2,520,000, Minute Cleaning/Shift = 29,615,040,000Total AU Losses = Available Capacity =29,252,160,000 50% PM (9 Shifts) x 2 = 7,741,440,000

21 © Life Cycle Engineering 2011 Operating Losses Possible Capacity =29,252,160,000 Uptime (Actual) (80%) =5,850,432,000 14,626,080,000Production Rate (50%) = 475,292,160Quality Rate (98%) = 20,951,804,160Total OEE Losses = Net Output =8,300,355,840 OEE Losses 14%

22 © Life Cycle Engineering or 8 Wastes of Lean 1. Defects 2. Overproduction 3. Transportation 4. Waiting 5. Inventory 6. Motion 7. Processing 8. Skills – Not utilizing people ’ s talents

23 © Life Cycle Engineering 2011 High-speed Manufacturing Problem Statement Chronic failure to meet production goals Losses in excess of 22 billion units per year Perception Reliability of the production modules Reality Modules starved for WIP materials Results Throughput increased by 20 billion plus units per year Production cost per unit reduced by $ Production (operating) hours per year reduced by 120 days

24 © Life Cycle Engineering 2011 A Representative Current State Map for a Family of Retainers at a Bearings Manufacturing Company ABC Steel Co. ABC Enterprises C/T = 3 seconds C/O = 2 hours Uptime = 75% 21,600 secs. avail. 1 shift C/T = 22 seconds C/O = 30 minutes Uptime = 100% 25,200 secs. avail. 1 shift C/T = 35 seconds C/O = 45 minutes Uptime = 75% 25,200 secs. avail. 1 shift Workbook pg. 67

25 © Life Cycle Engineering 2011 Refinery Problem Statement Excessive maintenance cost for repair of heat exchangers Low thermal efficiency in the slurry process Perception None—performance accepted as norm Reality Contracted maintenance services unacceptable Results Cleaning rather than replacing tubes Thermal efficiency improvement of 55% Reduced maintenance cost by $6.3M per year

26 © Life Cycle Engineering 2011 Asset Management Organizational Strategic Plan Other Organizational Requirements and Systems Legal and Stakeholder Requirements and Expectations (Customers, Shareholders, Employees, Vendors, Society Asset Management Policy Asset Management Strategy Asset Management Objectives Asset Management Plans Portfolio of Asset Systems and Asset (Diversity of Types, Criticalities, Condition and Performance Performance and Condition Monitoring Acquire, Create, Utilize Maintain, Review and Dispose Organizational Values, Functional Standards, Required Processes Asset Management Enablers and Controls Continuous Improvement

27 © Life Cycle Engineering 2011 Food (Bakery Products) Problem Statement 50% Scrap rate on baked cookie line Missed deliveries and loss of market share Constant jams and miss-feeds Perception Poor maintenance practices Reality Low bid system (inherent design deficiencies) Poor changeover procedures Results Scrap rate 3% On-time delivery

28 © Life Cycle Engineering 2011 Asset Management Encompasses Operations Activities (Operator Care) Maintenance Activities Upgrades, Replacements Rebuilds, Overhauls Periodic Replacements Preventive Maintenance Inspections Calibrations, Adjustments Cleaning, Care, 5S

29 © Life Cycle Engineering 2011 Key Process CategoriesPrinciples and Culture Processes Optimization Sustainment Themes Build Alignment and Partnerships Definition and Discipline Key Business Processes Proactive Management and Planning Enhancing Systems and Processes LevelsKey Process Areas (KPA) Class World Class Excellence Proactive Emerging Reactive No vision of the future Highly siloed organization Adversarial functional relationships Coordination poor or non-existent Motivation and morale low Absenteeism and turnover high No goals and objectives Ad hoc processes and procedures High variability in work execution Workforce skills lacking Ineffective performance measures Errors and failures are norm No leadership Autocratic management Budget compliance management Limited or ad hoc planning No continuous improvement effort Reacting to events is the norm None Initial vision statement exists Communication plan between silos Early signs of coordination Motivation and morale variable Absenteeism and turnover high Initial Strategic business plan exists Cascading goals and objectives Moderate to high variability in work Skills training program evolving Minimal performance measures Senior leadership missing Traditional hierarchical management Planning is minimal and isolated Limited efforts at problem-solving Reactive events decreasing Focus shifting from survive the day Need for change acknowledged Leadership becoming involved Some employee involvement Workers accept Vision statement Partnership agreements established Moderate inter-function coordination Motivation and morale improving Absenteeism and turnover moderate Effective strategic plan used well Cascading KPIs established & used Work variability decreasing Workforce skills improving Effective performance measures Executive sponsor committed to Rx Management team resistance First attempts using natural teams Growing mutual trust at all levels Reactive events becoming exception Focus shifting from now to future Leadership committed to change Workforce involved in change First signs of workforce ownership Vision statement provides focus Seamless functional coordination Full employee involved in operations Motivation and morale high Absenteeism and turnover minimum Open, honest communication Standard processes & procedures Non-value activities eliminated Loss and waste minimized Variability tightly controlled Performance trends at or near goals Workforce skills enable success Executive team leads plant team Management team committed to Rx Increasing use of work teams Mutual trust firmly established Reactive events are rare Performance management in place Leadership empower workforce Workforce embraces change Strong, active leadership Clear, concise vision and mission Universally shared values Effective, cascading goals Full integration of business functions Empowered, motivated workforce Reliance on natural work teams Proven, standard processes Roles & responsibilities known by all Negligible variation in work practices Accountability is accepted part of job Employees’ contribution rewarded Natural work teams self-directed Full integration of functional groups Strategic business plan governs Detailed tactical operating plan Effective universal communications Cascading KPIs effectively measure Asset utilization is optimum Risks are known and well managed Budgets are activity-based Culture of continuous improvement All decisions are data-driven Stretch model in-place for workforce Executives leads CI and example Real-time performance feedback Loss elimination institutionalized Seek perfection is workforce’s mantra Maturity Matrix

30 © Life Cycle Engineering 2011 Educate Involve Employees Stabilize Standardize Eliminate Waste Operations Excellence Reliability Excellence Integrate Value Stream Operational Excellence Organize First Contact Observe Unaware Prepare for Change Business Excellence Assess Seek Perfection Best-in-Class Integrate Supply Chain

31 © Life Cycle Engineering 2011 First Steps A journey to Business Excellence starts with: –A holistic, truthful assessment of your current state –Take nothing for granted, question everything –Develop a roadmap for the future – start with the basics and build upon them –Have a real sense of urgency – but do not be in a hurry Do not forget the workforce – your real asset –Effective change management and employee involvement is crucial to success –Remember that change cannot be mandated

32 © Life Cycle Engineering 2011 Conclusion Reliability is a fundamental requirements of business excellence – its not optional –Business policies and practices –Work processes, procedures and practices – Workforce development and empowerment –Physical assets Reliability is holistic. It cannot be limited to select functions or its focus limited to a few variables Business Excellence powered by ReliabilityBusiness Excellence powered by Reliability

33 © Life Cycle Engineering 2011 Thank you for your attention Questions?