Implementation Session Implementation Session

Capital ProjectsCapital ProjectsSupply Chain Supply Chain ManagementManagement

Project TeamProject TeamPaul BehnkePaul Behnke U. S. SteelU. S. Steel

J.C. BoyersJ.C. Boyers Butler ManufacturingButler Manufacturing

Buddy ClarkBuddy Clark KBRKBR

Mike DeMuro / Tom KepperMike DeMuro / Tom Kepper IntelIntel

Frank DombrowskyFrank Dombrowsky Parsons Energy & ChemicalsParsons Energy & Chemicals

Jim HershauerJim Hershauer Arizona State UniversityArizona State University

Mark Hodson / Allison LeerMark Hodson / Allison Leer Eli LillyEli Lilly

Jay JeanJay Jean JacobsJacobs

Skip LeeSkip Lee M. A.M. A. MortensonMortenson

Roger LongRoger Long Anheuser-Busch CompaniesAnheuser-Busch Companies

Mark Palmer, Project ManagerMark Palmer, Project Manager NISTNIST

Skip StuartSkip Stuart Black & VeatchBlack & Veatch

Iris TommeleinIris Tommelein University of CaliforniaUniversity of California––BerkeleyBerkeley

Ken WalshKen Walsh Arizona State UniversityArizona State University

Terry ZgabayTerry Zgabay ChevronTexacoChevronTexaco

1. Check Your SCM Readiness1. Check Your SCM Readiness Mark Hodson Mark Hodson

2. Identify Strategic Opportunities2. Identify Strategic Opportunities Buddy Clark Buddy Clark

3. Assess Organization and Practices 3. Assess Organization and Practices Frank DombrowskyFrank Dombrowsky

4. Map4. Map Paul Behnke Paul Behnke

5. Collect Data5. Collect Data Skip StuartSkip Stuart

6. Analyze and Select Alternatives6. Analyze and Select Alternatives Iris TommeleinIris Tommelein

7. Implement 7. Implement Terry ZgabayTerry Zgabay

8. Evaluate and Iterate8. Evaluate and Iterate J.C. BoyersJ.C. Boyers

Panel AgendaPanel Agenda

Mark Hodson

• What is it ?What is it ?

• What good is it ?What good is it ?

• How do I implement it ?How do I implement it ?

SCM QuestionsSCM Questions

Supply Chain ManagementSupply Chain Management

Supply Chain Management Supply Chain Management (SCM) is the practice of a group (SCM) is the practice of a group of companies of companies workingworking collaborativelycollaboratively in ain a linked chainlinked chain of interrelated processesof interrelated processes designed to best satisfy end-designed to best satisfy end-customer needs while rewarding customer needs while rewarding all members of the chain. all members of the chain.

Mark Hodson

BenefitsBenefits Case StudyCase Study

ImprovementsImprovements

Project time compression Project time compression 50%50%

Design & fabrication lead time reductionDesign & fabrication lead time reduction 25%25%

Inventory cost savingsInventory cost savings $30M/project$30M/project

Craft utilizationCraft utilization 20% - 50%20% - 50%

Personnel reduction Personnel reduction 25% - 60%25% - 60%

Loss reduction Loss reduction 80%+ 80%+

Materials lead time reductionMaterials lead time reduction 70%70%

Based on results from PT 172 case studiesBased on results from PT 172 case studiesMark Hodson

SCM BenefitsSCM Benefits

7 Steps7 Steps

CPs-Supply Chain ManagementCPs-Supply Chain Management

Mark Hodson

1. Decide To Act1. Decide To Act

2. Assess Existing SC Organization and Practices2. Assess Existing SC Organization and Practices

3. Identify Opportunities3. Identify Opportunities

4. Select, Map, Collect Data, and Analyze Current Supply Chain4. Select, Map, Collect Data, and Analyze Current Supply Chain

5. Investigate Alternatives5. Investigate Alternatives

7. Evaluate Execution and Iterate7. Evaluate Execution and Iterate

6. Select Alternatives and Implement Selected SC Tactics6. Select Alternatives and Implement Selected SC Tactics

Buddy Clark

1. Understand1. Understand::• Business objectivesBusiness objectives• Core competenciesCore competencies• Markets/CompetitorsMarkets/Competitors• Performance indicatorsPerformance indicators

2. Analyze Spend:2. Analyze Spend:• CategorizeCategorize• Classify categoriesClassify categories

Identify Strategic Identify Strategic OpportunitiesOpportunities

Identify Strategic Identify Strategic OpportunitiesOpportunities

Buddy Clark

1. Understand:1. Understand:• Business objectivesBusiness objectives• Core competenciesCore competencies• Markets/CompetitorsMarkets/Competitors• Performance indicatorsPerformance indicators

2. Analyze Spend:2. Analyze Spend:• CategorizeCategorize• Classify categoriesClassify categories

$ SpendS

uppl

y R

isk Critical Strategic

Buy it Leverage

Identify Strategic Identify Strategic OpportunitiesOpportunities

Buddy Clark

1. Understand:1. Understand:• Business objectivesBusiness objectives• Core competenciesCore competencies• Markets/CompetitorsMarkets/Competitors• Performance indicatorsPerformance indicators

2. Analyze Spend:2. Analyze Spend:• CategorizeCategorize

• Classify categoriesClassify categories• Determine market dynamicsDetermine market dynamics

Owner Competencies

Owner/Contractor/

Supplier SharedCompetencies

ContractorCompetencies

SupplierCompetencies

EPCSUPPLIER/

SUBCONTRACTOR

OWNER

Supplier/ContractorShared Competencies

Owner/SupplierShared Competencies

Owner/ContractorShared Competencies

Distribution of CompetenciesDistribution of Competencies

Buddy Clark

Frank Dombrowsky

• Project Dynamics and Change Project Dynamics and Change ManagementManagement

• UncertaintyUncertainty

• ConstraintsConstraints

• ComplexityComplexity

• Organization Stove-PipingOrganization Stove-Piping

• Balancing Project Requirements Against Balancing Project Requirements Against Production Production Requirements of ResourcesRequirements of Resources

• Corporate InitiativesCorporate Initiatives

• Individual Project UniquenessIndividual Project Uniqueness

• Requirements Planning and Demand Requirements Planning and Demand ForecastingForecasting

Organizational ChallengesOrganizational Challenges

SelectSelect

Frank Dombrowsky

Overall Overall CriterionCriterion Selection CriteriaSelection Criteria

TimeTime • Longest lead timeLongest lead time• Least reliable delivery dateLeast reliable delivery date• On critical path for projectOn critical path for project• Most subject to change and thus iteration Most subject to change and thus iteration

and reworkand rework

CostCost • Highest relative cost (component Highest relative cost (component cost/Total Installed Cost as %)cost/Total Installed Cost as %)• Relation to risk managementRelation to risk management

QualityQuality • Highest failure rateHighest failure rate• Highest contribution to total installed costHighest contribution to total installed cost• Least reliable componentLeast reliable component

SafetySafety • Component Commonly related to incidentsComponent Commonly related to incidents• Installation is inherently dangerous Installation is inherently dangerous (intuition)(intuition)

MapMap

Paul Behnke

• High Level Cross Functional MapHigh Level Cross Functional Map

• DetailedDetailed Cross Functional MapCross Functional Map

• Value Stream MapValue Stream Map

High Level Cross Functional High Level Cross Functional MapMap

Engineering Firm

Pipe Support Supplier

Locate PipeSupports

Contractor

PerformPipe Stress

Analysis

Design PipeSupports

CheckInterferenceand Loads

AnalyzeInformation

SelectSupplier &Send Info

Negotiate

FabricatePipe

Supports

Route Pipe

Deliver PipeSupports

Approve

Match Pipeand Supports

InstallSupports

Paul Behnke

Detail Cross Functional MapDetail Cross Functional Map

Project Manager

Structural Engineer

Piping

Engineer

Pipe Designer

MechanicalEngineer

Pipe Support Vendor

Pipe Fabricator

ProcurementDepartment

Supply-Chain Map of Pipe Supports

Model 1 : Engineering Firm designs Pipe Supports

DesignSupport

Feasible?(e)

Stress Analysis

OK? (b)

No

Yes

10 %Yes

90 %

Yes

SupportsAvailable

in Catalog?(f)

No

Special

Design or Catalog?

(d)

Can Supports be Relocated?

(c)

Yes

By RJA and IDT 04/15/01

1

Contractor

2

Define Pipe Diameters and Schedules, Value Weights

and Lengths 1-6

Get

Preliminary Pipe Support Loads 1-4

(20 ht-1p)

Get Final Pipe Support Loads

1-8

Select Vendor in Advance 1-10

Paul Behnke

Route Pipe 1-1 (80-100ht*-1p*)

LocatePipe

Supports1-2

(20ht – 1p)

IdentifyPreliminary

Pipe SupportLoads 1-3(20ht-1p)

PerformPipe

FlexibilityAnalysis

1-5(40-60 ht-2p)

RefinePipe

SupportLoads 1-7

PerformPipe Stress

Analysis1-9

(100-120ht-3p)

SpecialPipe

SupportDesign 1-12

(3-4 days-1-p)

SelectFrom

Catalog1-11*

(1 day-1p)

CheckInterference

1-13(2 days – 1p)

No

No

Info from

Route Pipe

LocatePipe

Supports

AnalyzePipe

Stress

DesignPipe

Support

CheckLoads and

Interference

ReinforceStructure(incl. NewDetails)

Issue PipeSupportDetails for Fab

Advise

Suppliers

AnalyzeEng.Firm

SelectSupplier

andSend Info

PreparePipe

Support Drawings

Total Queue Time =

Total Processing Time =

Total Time in System =

41.3-50.9

Duration(hrs)

%

96.3%

3.7%

100.0%

2-2.5 m-hrs 0.5 m-hrs 1.8-2.3 m-hrs 0.5-1.0 m-hrs 3.5 m-hrs

3.5- 6 m-hrs 1m-hrs 1- 2 m-hrs 0.4- 0.6 m-hrs

2-5 m-hrs

Approve

DrawingsFabricate

1-2 m-hrs

0.1- 0.5 m-hrs

24 m-hrs

Total Duration = 29 -33 weeks

Hours per week = 40 hrs.

Total Time in System = 1160 - 1320 hrs

1160-1320

1118.7-1269.1

8 weeks 2-3 weeks

2-4 weeks 1 week2-3 weeks

10 weeks 6-8 weeks

SupportsReadyto Ship

Notes:1. All duration's are per unit of support (m-hrs = man hours).2. Values in RED color were assumed by RJA. The number of man-hrs for the fabrication and delivery activity was assumed as 24 m-hrs/suport. The queue values are so big that this assumption won’t affect the final result.

DeliverSupportsOn Site

Value Stream MapValue Stream Map

Paul Behnke

Collect DataCollect Data

• Written internal Written internal documentsdocuments• Secondary information Secondary information sourcessources• Web pages (public and Web pages (public and private)private)• InterviewsInterviews

• QuestionnairesQuestionnaires

• ParticipationParticipation

• ObservationObservation

Skip Stuart

• Effective ways to collect dataEffective ways to collect data

• Decide what data to collectDecide what data to collect

SelectSupplier

Est. Reqts.Price+Detail.

Check Loads+Interference

± 5 mh ± 1 mh ± 9 mh

Design PipeSupports

DesignPiping Syst.

± 2 weeks ± 1 week ± 8 weeks

± 1 mh ± 2 mh ± 6 mh

Prep. Supp. Drawings

± 3 weeks ± 6 weeks

± 2 mh ± 24 mh

FabricateApproveDrawings

± 13 weeks

Lead TimeLead Time±± 33 weeks 33 weeks

Map and Compress SC Lead Time Map and Compress SC Lead Time for Pipe Supportsfor Pipe Supports

(1) Involve Supplier Early in Design(1) Involve Supplier Early in Design(2) Standardize Supports(2) Standardize Supports(3) Use EDI + Standardize Processes(3) Use EDI + Standardize Processes

Check Loads& Interf.

± 5 mh ± 1 mh ± 9 mh

Design PipeSupports

DesignPiping Syst.

± 6 weeks

Engineer and Supplier Collaborate

± 6 weeks

± 24 mh

Fabricate

± 13 weeks

New Lead TimeNew Lead Time±± 25 weeks 25 weeks

Map and Compress SC Lead Time Map and Compress SC Lead Time for Pipe Supportsfor Pipe Supports

± 7 mh

Iris Tommelein

Analyze Stress

± 2-2.5 mh ± 0.5 mh ± 1.8-2.3 mh

LocateSupports

Route Pipe

± 8 weeks

Computer Tools for SCM: Computer Tools for SCM: Example SimulationExample Simulation

Iris Tommelein

SimulationSimulation

Iris TommeleinIris Tommelein

ImplementImplement

Terry Zgabay

Implement Supply Chain ChangesImplement Supply Chain ChangesA. Develop Deployment PlanA. Develop Deployment Plan• Direction / scopeDirection / scope• Stakeholder engagement and supportStakeholder engagement and support• Competency development and behavior shapingCompetency development and behavior shaping• MetricsMetrics• Planning and modificationsPlanning and modifications• ResourcingResourcing

B. Develop Operating PlanB. Develop Operating Plan• ResponsibilitiesResponsibilities• Competency assurancesCompetency assurances• Stakeholder engagementStakeholder engagement• Organization and systemsOrganization and systems• MonitoringMonitoring

CC. . Get Agreement to ImplementGet Agreement to Implement

D. Deploy and OperateD. Deploy and Operate

E. Monitor Progress and ResultsE. Monitor Progress and Results

ImplementImplement

Terry Zgabay

Things to Do:Things to Do:• Allow adequate timeAllow adequate time

• Move at proper paceMove at proper pace

• Address highest priorities firstAddress highest priorities first

• Start with areas open to changeStart with areas open to change

• Map internal processes before mapping SCMap internal processes before mapping SC

• Get executive commitment Get executive commitment andand involvement involvement

ImplementImplement

Terry Zgabay

Areas on Which to Focus Tools DuringAreas on Which to Focus Tools DuringImplementation:Implementation:

• Behavior analysis and shapingBehavior analysis and shaping

• Gap analysis (DCOM)Gap analysis (DCOM)

• CommunicationCommunication

• PlanningPlanning

• Performance measurementPerformance measurement

• Stakeholder analysisStakeholder analysis

• Sustainability checkSustainability check

Evaluate and IterateEvaluate and Iterate

J.C. Boyers

• How do you evaluate success ?How do you evaluate success ?

• What has the improvement been ?What has the improvement been ?

• What are the next opportunities ?What are the next opportunities ?

• How do you maintain progress in SCM ?How do you maintain progress in SCM ?

Evaluate and IterateEvaluate and Iterate

Metrics are Metrics are units of measure units of measure such as cost [expressed in $], such as cost [expressed in $], cycle time [expressed in days cycle time [expressed in days or hours] that quantify or hours] that quantify performance or results of a performance or results of a process.process.

MetricsMetrics

J.C. Boyers

MetricsMetrics

Desired OutcomesResults Metrics Deviations Process Metrics

Total Installed

Cost (TIC)

Reduction

• Landed Cost

• TIC – for mat-

erials

installed

• Payment timing

• Liquidated

Damages

• Labor, material,

freight

surcharges

• Scrap expenses

• ECO Cost

• Labor Cost

• Material Overhead

Cost

per Dollar Material

Expenditure

• Warranty costs

J.C. Boyers

SCM QuestionsSCM Questions

Mark Hodson

• What is it ?What is it ?

• What good is it ?What good is it ?

• How do I implement it ?How do I implement it ?

Supply Chain ManagementSupply Chain ManagementImplementation SessionImplementation Session

Mark Hodson

Questions and Questions and AnswersAnswers

Modularization - KA 2.1

Supplier Managed Inventory

Standardization of Productsand Processes

Mapping ToolsProcess Mapping

Organizational Mapping

Simulation

Databases

Decision-support Systems

Internet-based Systemse-Business Systems

Optimization

CPS

SCM

DFX: Design forConstructability

Maintainability - KA 5.2Safety - KA 11.3

Materials ManagementKA 3.1

DesignKA 2

ConstructionKA 4

PEpC

Sourcing

VERSION 2 - UPDATED BY IDT 7/12/02

Purchasing

Expediting

Warehousing

Transportation

Front-end PlanningKA 1

Corporate Strategy

Multi-project StrategyCore Competency

Optimization

Supplier RelationshipsKA 3.2

Pre-Project Planning - KA 1.1

Alignment - KA 1.2

Early Estimating - KA 1.3

Fabrication

Manufacturing

Scope Definition and Control

Planning for Startup - KA 5.1

Design Standards - KA 2.4

Startup and OperationsKA 5

PeopleKA 6

OrganizationKA 7

Project ControlsKA 9

ContractsKA 10

Safety, Health, andEnvironment

KA 11

Globalization IssuesKA 13

International Standards - KA 13.1

Third Party LogisticsProviders (3PLP)

(sub)Contracting

International CommercialTerms (InCoTerms)

Asset Management

Project ManagementProduction Management

PROCUREMENTKA 3

LOGISTICS

OPERATIONSMANAGEMENT

INFORMATIONTECHNOLOGY ANDCOMMUNICATION

SYSTEMSKA 12

Customs Clearance

Project ProcessesKA 8

Customer RelationshipsManagement (CRM)

Enterprise ResourcePlanning (ERP)