2014 CII Annual Conference July 21–23 • Indianapolis, Indiana
Don’t Let Your Project Sink
RT308 – Achieving Zero Rework through Effective Supplier Quality Practices
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, Shell2
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 Constructors3
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
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
MethodsQualitative 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 process6
SQ Process Map. Adapted from Alves et al. (2013).
Qualitative Analysis – Supplier Quality Process Map
7
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
Test Your Knowledge – Boarding Pass
A. Owner
B. Contractor
C. Supplier
Owner
Contracto
r
Supplie
r
0% 0%0%
Who is responsible for creating the Inspection and Test Plan?
Qualitative Analysis – Literature ReviewSupplier Quality Process Map
Healthcare (partnership)
Aerospace (SQS)
Shipbuilding (Product life cycle
management)
10
• 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 ReviewFindings
11
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
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
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
Qualitative Analysis – Supplier Focus GroupsQuestions1. 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)?
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Test Your Knowledge – Boarding Pass
A. Yes
B. No
Yes No
0%0%
For critical equipment or materials, do you conduct an upfront joint quality planning meeting with your suppliers?
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 reviews17
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
suppliers18
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 Members19
Implementation Resource – RACI
Responsible, Accountable, Consult, Inform
Task Owner Contractor Supplier
2. Execution
Supplier Quality Plan I A,R R
Inspection & Test Plan C,I A,C R
Non-conformance C,I A,R R
Responsible, Accountable, Consult, Inform20
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
Implementation Resource – RACI
Responsible, Accountable, Consult, Inform
Task Owner Contractor Supplier
2. Execution
Supplier Quality Plan I A,R R
Inspection & Test Plan C,I A,C R
Non-conformance C,I A,R R
Responsible, Accountable, Consult, Inform22
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
Quantitative Analysis – PO Data Collection Instrument – Demographics
24
Developed vs. Emerging Nations
Quantitative Analysis – PO Data Collection Instrument – Demographics
25
10K-100K 100K-1M 1M-10M 10M-100M100K-1M 1M-10M 10M-100M 100M-1B 1B-10B 10B-100B
Quantitative Analysis – PO Data Collection Instrument – Demographics
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Quantitative Analysis – Practices
1. Conducting surveillance in the supplier’s facility2. Tracking of surveillance effort3. Using a quality control plan / inspection and testing plan 4. Having meetings with suppliers to discuss quality5. Performance rating of the supplier after execution6. Projecting the cost of surveillance effort7. Using suppliers with registered/certified quality
management system
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Test Your Knowledge – Boarding Pass
A. Yes
B. No
Yes No
0%0%
Does more in-process inspection reduce the number of non-conformances identified at a job site?
Test Your Knowledge – Boarding Pass
A. Yes
B. No
Yes No
0%0%
Does the use of industry-certified suppliers reduce the number of non-conformances identified at a job site?
Test Your Knowledge – Boarding Pass
A. Yes
B. No
Yes No
0%0%
Do more meetings with suppliers reduce the number of non-conformances identified at a job site?
Quantitative Analysis – Impacts
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Practices Does it make a difference?
How?, Why?, or When?
Conducting surveillance in the supplier’s facility
Yes A greater number of NCs are found when more surveillance is conducted
Tracking of surveillance effort Yes Companies 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
Yes Improves 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
Yes Pro-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
Yes But, 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
Yes A greater number of NCs are found when the cost of the surveillance effort is projected
Using suppliers with registered/certified quality management system
No No statistical difference was found in the amount or location of NCs
Highly Effective Companies
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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
SQ Process Map. Adapted from Alves et al. (2013).
Qualitative Analysis – Supplier Quality Process Map
34
Simplified Map
1.execution 2.Release 3.Receive 4.MC
Process Capability (Pfab) Inspection Capability (Pinsp)
Prec PmcLatent NC
Quantitative Analysis – Modeling
36
Cost of Rework Model - Validation
1.0
Rework Fraction
Per
cen
tile
00
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
0.02 0.04 0.06 0.08 0.1 0.12 0.14 0.16 0.18 0.2
Simulation resultLove et al 1999Josephson 1999PA 2014RT 308 Data
37
Test Your Knowledge – Boarding Pass
A. 10%
B. 50%
C. 100%
10% 50%100
%
0% 0%0%
If in-process inspection is eliminated to save costs, how much is the expected rework cost increased?
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 = $5,100,00039
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CostNQ = (0.4) * 5,000,000 = $2,000,000.
TLC+NQ = $5,100,000+ $2,000,000 = $7,100,000
fNQ = 0.4
Example
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Example
42
Example
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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).
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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
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
Q&A – Don’t Let Your Project Sink
• Did you survive?
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