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Lean Six Sigma

Lean Six Sigma. Water Main Replacement Cost Reduction. Greg Meszaros, Director of Public Works and City Utilities. Define Phase. Project Description. Project Description. Problem Statement:. Water main replacement costs are higher than last rate plan estimate.

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Lean Six Sigma

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  1. Lean Six Sigma Water Main Replacement Cost Reduction Greg Meszaros, Director of Public Works and City Utilities

  2. Define Phase

  3. Project Description ProjectDescription Problem Statement: Water main replacement costs are higher than last rate plan estimate Decrease water main replacement construction bid costs from $60/ft to $50/ft Objective:

  4. Time Line Define Feb 2002 Measure Mar 2002 Analyze Apr 2002 Improve May 2002 Control May - Dec 2002

  5. Project Team Champion: Ted Rhinehart Black Belt: Greg Meszaros Team Members: Matthew Wirtz Mark Gensic Paul Powers Dan Smith Ken Stempien Bob Hinga Outside Members: Contractors, Engineering Firm

  6. Big “Y” Y= Water main replacement construction bid cost per foot • Every $1/ft reduction = $32K per year in savings

  7. Benefits • External (Customer) Focused • Decrease in Service Interruptions • Improved Water Quality • Improved Fire Protection • Improved Control of Utility Rates • Provided customers with a reliable, sufficient water distribution system • Replaced 6 miles of water main per year (150/year replacement cycle)

  8. Measurement Phase

  9. Inputs and Outputs 50,000 ft. Water Main Design Process Map Inputs and Outputs

  10. Inputs and Outputs

  11. Inputs and Outputs

  12. Cause and Effect Matrix

  13. Cause and Effect Expert Opinion • Time of Year Project is Bid • Construction Method Specified • Size of Project (Footage of main replaced) • Wage Rates • Mixture of Work • Quality of Underground Facility Data • Engineering Firm

  14. Failure Mode Effect Analysis (FMEA)

  15. FMEA and Process Hardening FMEA & Process Hardening • Wage Rates • Require review of all engineer’s estimates between $150K and $200K before requesting prevailing wage rates • Applies to all construction bidding, not just main replacement work • Construction Method • Allow ductile iron (open trench construction) or HDPE (bored construction) option on all main replacement work

  16. FMEA-Wage Rate Example • Colony Drive - Estimate: $192,685 *Requested prevailing (higher) wage rates because initial estimate > $150K • Actual Bids • $109,785 • $118,622 • $149,200 • $159,388 • $175,272 • $183,029 *Three bids under $150K Prevailing wage rate structure is not required for this work.

  17. MSA Study-Verification Construction bid tabulations were verified with original bid documents from Board of Works records.

  18. Analyze & Improve Phases

  19. Distribution Normal Distribution, Mean=$61.01/ft; StDev=11.05

  20. Control Chart-In Control

  21. Initial Capability Study Cpk = 0.49 with LSL=$1.00/ft and USL=$75/ft

  22. Interesting Box Plots Time of Year (Season) Project Size Mixture of Work

  23. ANOVA Work

  24. Interesting Interaction Size & Season Time of Year (Season)

  25. Interesting Interactions Size & Mixture of Work

  26. Improvement Conclusion Large (footage>3000 feet), stand alone main replacement work bid in the cold weather

  27. Process Change Summary • Do not request prevailing wage rates until cost estimates exceed $200K • Bid all projects with construction method choice (open cut or bored) and award on lowest cost solution • Bid larger (total footage) main replacement projects by replacing all under performing water main in an entire neighborhood (as opposed to individual streets) Bid the larger neighborhood replacement projects in the cold weather months (December - March) • Bid the larger neighborhood replacement projects with a minimal amount of additional construction work not directly associated with the water main replacement work (don’t add lots of surface paving work into the replacement project)

  28. Control Phase

  29. Control Plan

  30. Control Plan

  31. Control Plan- Close Up Example • Process Step: Bid Preparation • Input: Construction Method • Output: Final Bid Packet • Process Spec:Allow for two construction methods (open cut or bored) on all main replacement projects and select based on lowest cost • Control Method: Review bid tabulation sheet to verify that base (open cut) and alternate (bored) methods are specified for each bid

  32. Process Improvement Results

  33. Project Bid After Improvements Normal Distribution, Mean=$49.92/ft; StDev=4.95

  34. Control Chart Control Chart - Before & After Improvements

  35. Final Capability-Bids After Improvements Cpk = 1.28 with LSL=$1.00/ft and USL=$75/ft

  36. Financial Results

  37. Costs Savings • Direct Savings • Before: $2,824,861/46,498 feet = $60.75/ft • After: $1,325,283/27,041 feet = $49.01/ft • Marginal Difference: $60.75-$49.01 = $11.74/ft • Savings: $11.74*27,041 = $317,461 • Indirect Savings • Savings do not include “spill over benefit” of process hardening activities such as wage rate optimization on other types of project bidding

  38. Project Tracking Project Description Process Map C & E Matrix Preliminary FMEA MSA Measure Analyze Improve Control Initial Capability Study Multi-Vari DOE (or other improvement) ControlPlan Hand OffTraining Final Capability Study OwnerSign-Off Final ProjectReport

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