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)

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• 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)?

15

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

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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

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SQ Process Map. Adapted from Alves et al. (2013).

Qualitative Analysis – Supplier Quality Process Map

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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

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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.

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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.

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Q&A – Don’t Let Your Project Sink

• Did you survive?

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