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Being Bob McFarland or. (How to Apply Someone Else’s Work) Part 1. Setting the Stage. Duties prior to September 2009: Manager of Asset Management. Organization included: Property Management Inventory Management Warehousing Surplus IT Support Archives MMAS Lead IUID Lead
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Being Bob McFarlandor (How to Apply Someone Else’s Work) Part 1
Setting the Stage • Duties prior to September 2009: • Manager of Asset Management. Organization included: • Property Management • Inventory Management • Warehousing • Surplus • IT Support • Archives • MMAS Lead • IUID Lead • Duty assigned in September 2009: • Full-time Property Representative on an EXCEL Lean Team. • Other duties TBD
Project Initiation • Lean Project Began in September 2001 • Title: Fixed Asset Lean Team • Purpose: • Provide Better Control for Acquisition, Life Cycle and Disposition of Company-owned Fixed Assets. • Activities included, but were not limited to: • Value Stream Mapping • Brain Storming • Employee Interviews • Data Collection • Statistical Analysis • Etc, etc, etc.
Project Initiation Current Value Stream Map
Project Initiation Future State Value Stream Map Disposition
Project Initiation • Outcome: Reduce the fixed assets in the General Ledger by identifying and eliminating excess items. • Where do you start? • Should target assets be based on acquisition value, net book value, placement or other criteria? • What data do you collect? • Cost data? Quantitative information? Cycle times? • What metrics do you need to generate? • What is important? • What disciplines need to participate? • Everybody? • Who performs the work? • Dedicated or fill-in work?
Project Initiation • Property Management and Metrics that Add Value by Bob McFarland • Key Elements • Alignment with Organizational Mission • Quality of Product • Timely Delivery • Cost Reduction/Avoidance • Cycle Time Reduction • Backlog Reduction • Valuable Information • Provided baseline for proposed metrics • Focused thought processes • Provided guidance on the target audience for development and implementation of various metrics
Project Initiation • The Lean Team created the Equipment Management System (EMS)Team. • Concept “sold” to the company Leadership Team • Members assigned based on recommendations • Only a few of the Fixed Assets Lean Team project members became part of the EMS Team. • Baseline procedures developed • EMS Team operations • New roles and responsibilities • Division of work • Use of new documentation and control boards • The Lean Project ended at Christmas break, three months after it began. • EMS Team scheduled to begin its function following break.
Resetting the Stage • I was assigned as EMS Team Lead. • The EMS Team consisted of representatives from: • Property Management • Environmental Health and Safety • Inert Operations • Test Operations • Accounting • Team was given authority to make disposition decisions. • No independent funding. • Occasional visits from the EXCEL Lean Team members.
Working in the Real World • Aerojet Leadership set a goal of 20% reduction in fixed assets over a 5 year period. • E.g., 10,000 GL Line Items*.20 = 2000 / 5 = 400 Line Items per Year • “One Call Does It All” philosophy implemented. • “War” room and status boards set up. • Router cards created and implemented. • Good for tracking progress, but not for producing metrics • Insufficient data collected • Unable to answer all the questions presented by Leadership • What little data we had did not represent the level of effort or accomplishment produced by the EMS Team. • What would Bob do??? • Implement change? Create new data sources? Demand answers?
Router Cards Router EMS Router Card Log No. Initiate Date: E Eval Start Date: Item ID: Item Description: Action Plan Start Date: Item POC: Item Location: Disposal Start Date: Completion Date: EMS Assignee Records Update: ______ PMSC ______ FAS ______ MPAC Sub-process: PCB______ MWO_____ E-waste_____ Other ____________ EMS Router Form Rev 12012009
Deciding on Metrics • Cost of Ownership was one of the metrics that Leadership thought would be beneficial. • Formula: Acquisition Cost + Utilization Cost +/- Disposition Cost = Cost of Ownership • Many data sources and organizations involved. • Requires detailed information. • Too many hurtles • Systems did not communicate with each other • Incomplete records • Lack of historical data • Insufficient detail • Etc., etc., etc. • Was incomplete data better than none? Is a partial metric acceptable?
Deciding on Metrics • What would Bob do? • Create the data collection processes he needed to continue with the project. • What did Larry do? • Determined that the data required to obtain an accurate Cost of Ownership was unavailable using our current systems and abandoned the effort to create the metric. • Is that an acceptable resolution? • Yes. Incomplete or bad data gives the wrong signal to Leadership. Metrics must be complete and accurate in order to provide reliable data that represents the team’s accomplishments. • The team initiated metrics that were based only on the data collected. These included: Line item reduction, cost reductions, distribution of disposition methods and various cycle times.
The Stage Resets Once Again • In May 2010 I took an extended vacation – 30 days. • EMS Team was working without leadership guidance. • Very little was accomplished. • Normal work assignments took precedence over EMS assignment. • Pressure was applied from the new company president to increase the reduction of assets reflected in the General Ledger. • Multiple subtasks were happening in other organizations • Planning demolition of buildings • Review of inventory lists by department managers • Pressure on department managers from the VP of Operations to eliminate excess assets. • Consolidation of the facility to a smaller footprint. • Reconfiguration of buildings • Upon my return, the EMS Team was in turmoil.
Change in Scope • Leadership change resulted in escalated expectations. Instead of a 20% reduction over a 5 year period, new goal was established for 50% reduction over a 3 year period. • Formula: 10,000 Line Items * .5 = 5000 /3 = 1,167 Line Items per year • A new team lead was assigned. • Specialist in “lean” concepts. • New vision. • Note: Just because you know a lot of “stuff” doesn’t mean you know the right “stuff”! • Charter expanded to include administrative removal of assets based on physical verification. • New set of rules applied and reconciliation codes established • Router cards eliminated – Excel implemented. • Team expanded to include maintenance crew.
Comparing Bob McFarland’s Key Elements • Alignment with Organizational Mission • Team in-place and dedicated to reducing the population of the General Ledger • Metrics included: • Acquisition Cost Reduction in dollars and percent • Net Book Value Reduction in dollars and percent • GL Line item reduction in quantity and percent • Quality of Product • Product was the removal of excess fixed assets. • Work expanded to include excess assets whether fixed or otherwise. • Decision tree used to determine the most economical path of disposal. • Metrics included: • Monthly Disposition Quantity • Disposition Distribution Method • Record Closure Distribution
Comparing Bob McFarland’s Key Elements • Timely Delivery • Needed to average 40 items per week • Size, location, contamination, remediation, rigging, sale, scrapping, waste stream coordination and other factors were hurtles • Metrics included: • Weekly progress against goal • Total reduction in assets • Cost Reduction/Avoidance • Cost reductions involved reducing the content of the GL and cost effective disposition decisions • Cost avoidance dealt with equipment footprints and potential maintenance savings • Metrics included: • Reduction in tax • Reduction in Maintenance Costs • Reduction in Storage Costs
Comparing Bob McFarland’s Key Elements • Cycle Time Reduction • No baseline for comparative data relative to dispositioning assets • In many cases items were left in place and remained idle for years • Metrics included: • Records posting cycle times • Property, Finance and Maintenance • Disposition Cycle Times • Sale, Scrap, E-Waste, Waste Stream, and Administrative • Backlog Reduction • Backlog dated back to the 1960’s • Many assets had zero book value, were in a state of disrepair, abandoned or incorrectly stored. • All fixed assets were taxed if they still existed on site or in the GL
Comparing Bob McFarland’s Plan Criteria • Identify Critical Work Process and Customer Requirements • Critical work processes involved not violating any environmental, health or safety requirements. • Establishing processes for initiating PCB and other contaminant testing. • Customer requirements were simple – get rid of it. • Impacted by maintenance schedules, production schedules, funding issues, availability of brokers, lab capacity, waste operations restrictions, legal hurtles and mind changes. • Each customer “requirement” was individualized and prioritized. • Identify Critical Results Desired and Align Them to Customer Requirements • Critical results were tied to reconfiguration of the manufacturing and test areas • Later, results were tied to the demolition of buildings
Comparing Bob McFarland’s Plan Criteria • Develop Measurements for the Critical Work Processes or Critical Result • We failed • EMS was not notified of a need to clear an area until the work was underway. • Lack of clear communication between contributing organizations • Communication was fixed, but it took almost a year to prove that the EMS Team was essential to maintaining schedule. • Establish Performance Goals, Standards or Benchmarks • Goals and standards were established early in the process. • Goals changed, but standards did not • Some benchmarking was established along the way
Plan Summary • Being Bob McFarland isn’t easy (It made me tired.) • Decisions and techniques are only a small part of the plan • Get the right group of people together • If they are reluctant to participate or too busy, find someone who isn’t. • Personnel selected should have a vested interest in the success of the project. • Communicate internally and externally on a very regular basis. • Daily communication on events is necessary. • Weekly team meetings keep the flow going and maintain interest • Listening is equally important to talking • Stay visible to the upper echelon. • Produce and publish metrics weekly and monthly • Endear the team to the local population
Revisiting the Principles of Metrics • Metrics are Important to Management • Not all metrics are important to management • Many metrics were important to maintain the team’s goals and provide feedback on their performance. • Some managerial personnel thought we spent too much time on metrics • Metrics Provide an Easy Way to Market Your Service • Most employees did not believe that the EMS Team could accomplish what we did. • Metrics made true believers out of doubters • When you start accumulating data that applies to a 13,000 acre facility, it becomes pretty impressive
Revisiting the Principles of Metrics • Metrics Can Clearly Demonstrate Value • Some members of the team would have been laid off if we couldn’t demonstrate the value of their participation. • Metrics demonstrated that the retention of these individuals was critical to meeting the company’s goals • Cumulative impact of accomplishments showed that without a dedicated team we could not make sufficient progress to ultimately affect share holder value. • Metrics Can Be Derived from What You are Already Doing • Most of the EMS metrics were new and derived from data we collected as an element of our new processes • We contributed significantly to metrics presented by Finance and Property Management in the areas of cost, taxes, inventory accuracy and depreciation expense.
Revisiting the Principles of Metrics • Metrics are Easy to Understand • Metric charts with too much information look impressive, but confuse the reader. • Simple charts do a better job of focusing on the message • Not all metrics are designed to be understood by everyone • Metrics charts are not a way to manipulate data, but a means to present data in visual manner. • Orient your charts properly so that the message is immediately evident without the need to read the detail. • Last, but not least, apply the KISS principle whenever possible.
Summary of Part 1 • Being Bob McFarland is hard work. Don’t attempt it unless you are willing to: • Achieve your own goals • Assist with achieving the goals of those around you • The Use of Metrics is Essential for Establishing and Maintaining the Value of Your Project • Compete understanding of the journey’s end isn’t always known. Be flexible. • Good guidance (a plan) and hard work will eliminate a majority of false starts and wrong turns.
Looking Ahead • Part 2 discusses the trials and tribulations of dispositioning a multitude of assets while coordinating, tracking and reporting progress. • Defining excess • Analyzing assets for disposal • Using analysis to determine the best bang for the buck • Selecting the best disposition method • Coordinating events • Means of communication
Special Thanks Thank You! Bob McFarland For Paving the Way to a Successful Project And Your Willingness to Share Your Experience Aerojet’s EMS Team
Being Bob McFarlandor (How to Apply Someone Else’s Work) Part 2
The Lean Project • Assigned to the Lean Fixed Asset Project in September 2009 • Company’s first transactional lean project. • Wasn’t purely transactional • Caused confusion • 3 core members, 5 ad hoc members, yours truly as project lead • Initial diagramming, brain storming and analysis • Fixated on various problem areas • Focused on what should be “leaned” • Provided some significant information regarding the age and condition of our fixed assets
The Catalyst • One statement during a brain storming session drove our end game. • “Once I decide I don’t need something, why can’t I just call someone and have them get rid of it?” • Statement born of frustration • Each organization responsible for getting rid of excess property • Redundant learning curve • What is it? • How was it used? • What was it exposed to? • Condition? Location? Ownership? Size? Weight? Impact on Surroundings? Special Considerations? • Who do you contact for each operation? • Outside Contractor Required? • Transportation Required? • Etc.
Declaring Excess • Anything that could be used should be used. Therefore it isn’t excess. So say the employees! • Be advised - a company’s definition of excess may not be the same as the Government’s definition. • Realities differ. • Employees believed: • Fixed asset retention is not only based on contract activity. It’s based on retaining capability. • If the asset is operational it is used to support the current capability. • It’s already bought and paid for so it’s free to use. • Leadership directed: • If you’re not using it and you don’t have a concrete plan to use it in the future, get rid of it! • If it’s inoperable, broken or in the way, get rid of it! • Storage is not an option. • Redeployment does not get an asset off the books. Redeploy only as a replacement or for critical operations.
The Team Goes to Work • Team consisted of representatives from: Property Management, Manufacturing Operations, Test Operations, EH&S, Site Services, Quality Laboratory, Finance and Salvage. • Set up phone, fax, mail drop and website. • Set up a “war” room and established operating procedures. • Received training on all the various aspects of dispositioning fixed assets so we could all become experts. • We announced to the facility that we were ready to do business. We were not!!!
Little Things Cause Headaches • Setting up communications. • Obtaining a share drive and gaining permissions takes time. • Setting up the website took weeks. Information Technology has rules that needed to be followed. • We found we needed work stations set up for team members to use. • Working through the learning curve. • It turned out that there were too many variables for all of us to become experts. • Some of the knowledge required was based on years of experience and awareness of historical events. • Dedicating Time • Most team members were assigned to work EMS as a part time activity. • The people you need are the ones that are always the busiest.
Roles and Responsibilities • The team decided to work like our Capital Committee, only we picked up the action at the end of the life cycle. • EH&S was responsible for analyzing PCB reports and other related safety activities. • Operations led the team and prioritized work. • Administration maintained the control room, researched equipment histories and generated data. • The Quality Lab determined sample sizes and tested for contamination. • Site Services provided manpower for cleaning and removal of assets • The team met twice a week to ensure that all actions were addressed and that nothing went into a black hole.
EMS Tools Asset Evaluation Form
Early Issues • Status boards became saturated. • Each board held 20 line items • Projects piled up on the Action Plan Implementation board • Action Plan Implementation Issues • PCB Analysis Capability • Insufficient Internal Resources • 4-6 months to get results on PCB analysis • Projects placed in the maintenance queue. • Low Priority • Members distracted by their normal work duties • E-Waste and Scrapping were the primary disposition methods available. • I took an extended vacation.
Change of Scope and Leadership • New Executive Leadership • Changed target to 50% reduction over a two year period. • Target renegotiated to an achievable level. • Change in Team Leadership • Reported directly to the VP of Operations • Expertise in Lean disciplines • Quickly established the team’s tools were inadequate to manage a large volume • Agreed process was sound, but data collection was insufficient • Designed new tracking process and redesigned the “war” room. • Obtained dedicated personnel to perform the “touch” labor and modified team member assignments. • Changing the Team’s operation and personnel took about 30 days
Process Changes • Converted from router cards and boards to tracking on an Excel Spreadsheet. • Activated the EMS Website on the intranet for employee access to data and forms. • End users were assigned the responsibility to complete the evaluation form rather than team members. • The Evaluation Forms became the primary trigger for initiating disposition actions rather than phone calls or emails • Cost analysis was performed prior to initiating a specific disposition path to determine the most economical means of disposal • Waste stream, sale or scrap • Multiple factors involved including age, where used, how used and maintenance history
EMS Simplified Process Flow Figure 2 – EMS Simplified Process Flow
Analyzing Excess • Asbestos Contamination • Special contractor required for remediation of asbestos • Coordination through Site Services and Procurement • PCB Contamination • Determination of sample size needed to estimate cost • Lab Testing Required • Equipment cleaning usually required • Retesting required after cleaning if first sample fails • Propellant Contamination • Bake-out, flashing, power wash or waste stream path • Specialized equipment required for removal of large items • Lots of trucks and trailers
Waste Stream Versus Scrap or Sale • Know the costs for using the Waste Stream • Disposal cost (tonnage) • Equipment rental cost (depending upon the waste site) • Transportation costs • Labor costs • Know the costs for selling • Equipment preparation • Sampling, cleaning, re-sampling • Remediation if required • Disconnect and removal • Anticipated return on Investment • Know the value of scrap
Waste Steam Analysis Example • Asset housed in a room made with asbestos paneling. • Used to machine asbestos impregnated parts • Asset purchased prior to 1985 • Cost Analysis: • Cost for Asbestos Remediation - $25,000 • Cost for PCB Analysis and cleaning - $5,000 • Cost for disconnect and removal from building - $10,000 • Sales proceeds - $40,000 • Net result - $0.00 • Waste Steam costs would have been $39,000 because asbestos remediation and removal costs were not avoidable. Transportation and disposal costs would have been about $4,000.
Sample #2 • Asset acquired prior to 1985 • 13 PCB samples required - $1,300 • Cleaning costs - $150 • Re-sampling costs - $400 • Scrap value less than $100, Sale value zero • Waste Stream costs • $65 per ton for disposal • $130 equipment rental • $2,500 transportation costs (8-10 assets per load) • Result – put it in the Waste Stream with “like” assets • Average cost for disposal = $425 per asset
Additional Changes in Scope • Demolition of Buildings (30) • EMS Team assigned to removal all severable assets prior to demolition. • Perform detail inventory against records to establish equipment status • Research, research and more research. • Items left for demolition had to be compliant with EH&S requirements • Items not on record tracked through EMS as well • Controller issued lists of fixed assets by department and location for screening. • EMS responsible for processing the results of the screening • Research required to determine if equipment had been relocated or reassigned without records update. • Physical verifications performed by owner or EMS Team member • New code structure established for relieving the GL administratively
Administrative Reconciliation Codes • No record of support activity within the past year • Includes maintenance, transportation and IT Help Desk • Product line no longer manufactured • Building demolished • Building reconfigured • Removal of assets by outside contractors • Asset beyond useful life • Physical verification of removal at facility • Asset obsolete