Don’t Let Your Project Sink

1. 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, RufaidahAlMaianUniversity of Arkansas Gene Nikstad, CH2M HILL Jim Peters, Bechtel Corp. Tricia Thibodeaux, Fluor Ken Walsh, Thais Alves, Shamail Ahmad, YoshuaNeuman, DucHuy 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. Qualitative Analysis – Supplier Quality Process Map 7 SQ Process Map. Adapted from Alves et al. (2013).

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 Who is responsible for creating the Inspection and Test Plan? • Owner • Contractor • Supplier

10. Qualitative Analysis – Literature ReviewSupplier Quality Process Map Aerospace(SQS) Shipbuilding (Product life cycle management) Healthcare (partnership) 10

11. Qualitative Analysis – Literature ReviewFindings • 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. 11

12. Qualitative Analysis – InterviewsDemographics • 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 – InterviewsFindings • 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 GroupsDemographics • 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 GroupsQuestions • How is QA/QC currently performed in your organization and your suppliers? • What are the best practices related to QA/QC you commonly find in the industry? • 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 • Yes • 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 • Providing the exact specifications to suppliers. • Improving and updating specifications to be standardized. • Partnership with supplier and involvement of fewer suppliers. • Careful selection of suppliers. • High involvement form top management. • Development and usage of Supplier Quality System database. • Improvement of joint quality planning with suppliers 18

19. Implementation Resource • Introduction • Supplier Quality Processes Map • 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 20 Responsible, Accountable, Consult, Inform

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 22 Responsible, Accountable, Consult, Inform

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 Developed vs. Emerging Nations 24

25. Quantitative Analysis – PO Data Collection Instrument – Demographics 100K-1M 1M-10M 10M-100M 100M-1B 1B-10B 10B-100B 1M-10M 10K-100K 100K-1M 10M-100M 25

26. Quantitative Analysis – PO Data Collection Instrument – Demographics 26

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

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

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

31. Quantitative Analysis – Impacts 31

32. Highly Effective Companies 32

33. Cross Analysis and Conclusions Findings from Quantitative Analysis Findings from Qualitative Analysis Careful supplier selection Detailed planning and tracking for inspection effort • Improvement of feedback process with suppliers 33

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

35. Simplified Map Latent NC Prec Pmc 1.execution 2.Release 3.Receive 4.MC Process Capability (Pfab) Inspection Capability (Pinsp)

36. Quantitative Analysis – Modeling 36

37. Cost of Rework Model - Validation 1.0 0.9 Simulation result Love et al 1999 0.8 Josephson 1999 PA 2014 RT 308 Data 0.7 0.6 Percentile 0.5 0.4 0.3 0.2 0.1 0 0.02 0.06 0.12 0.16 0.2 0 0.04 0.08 0.1 0.14 0.18 Rework Fraction 37

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

39. Example • Total Landed Cost: • Pfab= 75% • PO cost = $5,000,000 • Pinsp= 70% at a cost of $100,000 • TLC = $5,000,000 + $100,000 = $5,100,000 39

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

41. Example 41

42. Example 42

43. Example 43

44. Conclusions and Recommendations • 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 • 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 • 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