Lean Timwoodp

Lean Applications in
Electrical PreFab
NECA National Convention
September 2012
LEAN APPLICATIONS IN ELECTRICAL PREFAB

AGENDA
Section I
Section II
Section III
Section IV
Section V
Lean & Organizational Strategy

Introduction to Lean
Lean Applications in Prefab
Measuring ROI on Prefab
Third Party Prefabrication
MAXIM CONSULTING GROUP OVERVIEW
Todays Objectives
Understand Lean and its relationship to organizational strategy

Apply lean concepts to approach prefab as a manufacturer, not a contractor
Understand how to bring 20-30% of field labor into the fab shop
Link estimating, detailing, prefab, and field installation with total process control
Page 2 of 34
Maxim Consulting Group, LLC
100 Fillmore Street, 5th Floor, Denver, Colorado 80206 | 303-688-0503 | www.maximconsulting.us
LEAN & ORGANIZATIONAL STRATEGY

Todays Challenges
As the market-life for many products and services becomes shorter, organizations must:
Speed up their product and service development cycles
Improve Quality
Have In-house capabilities
Meet international standards, if they wish to compete globally

Without a skilled, knowledge based workforce
how can we keep up with change?
Strategic Alternatives
Position for future source of competitive advantage
Increase Current Markets
Increase Client Base
Geographic Expansion
Service Line Extension
Transformative acquisitions
Horizontal and vertical diversification opportunities
Understanding Strategic Alternatives
Page 3 of 34
Convergence in Construction
Profit Equation
The Market Now Sets the Price!
Prefab - Internal Benefits
List internal benefits of prefabrication to the contractor
Page 4 of 34
Internal Benefits to Contractor
Saves the contractor money
Productivity improvement
Workers Comp Insurance
Ancillary benefits
Reduce field staff
Fewer trucks
Less Insurance
Less Risk
Drives project pre-job planning
Enhances overall quality
Reduces safety risks
Provides a training venue for new employees
Cost Savings Workshop
Typical contractors pull less than 3% of field labor hours into shop
Average annual labor hours =
____________
Average labor rate =

Total annual labor expense =
Best in class contractors pull 20-30% of field labor hours into shop
Assume prefab is 30% more productive
Prefabrication labor hours =
Prefabrication labor rate =
Prefabrication labor savings =
Meaningful Differentiation
Prefab = Speed
Layout & Detailing = Fewer Problems
Reduce Waste = Cost Savings
Faster Installation Time = Better Project
Competitive price
Reduced trade stacking
Safer
Cheaper
Faster
Better
Page 5 of 34
INTRODUCTION TO LEAN
Why a Lean Enterprise?
Every morning in Africa, a gazelle wakes up. It knows it must run faster than the fastest
lion or it will be killed.
Every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will
starve to death.
It doesnt matter whether you are a lion or a gazelle, when the sun comes up,
you had better be running.
Cultural Impact Hope/ Heartbreak Cycle
Page 6 of 34
Focus On Cultural, Behavioral and Emotional Change
Is it time for the next level of sophistication?
Page 7 of 34
Step Change
What many organizations are missing is that incremental change may NOT be enough
for todays challenging landscape
Many incremental change programs treat symptoms not underlying conditions
Many organizations do not need to improve themselves, they need to evolve and
potentially reinvent themselves
NOTE: Reinvention is NOT changing What is but creating What isn't
When an organization reinvents itself, it must ALTER the underlying assumptions and
invisible premises on which its decisions and actions are based
Reinventing the Organization
When an organization is threatened or eager to break new ground, will it confront its
past and decide to dramatically advance from its current state
If organizations do NOT embrace step change, all they are doing is improving their
current state and perhaps incremental improvement to their competitiveness
But if an organization reinvents itself through dramatic step change, it will alter the
culture and realize unprecedented results
Making the Transition from Basic Procedural Improvement to Culture Change
Page 8 of 34
Total Process Control Delivered
The fundamental success of Total Process Control will not stem

from any one given element, Statistical Process Control tool,
chart or technique.
Total Process Control is the product of a collective system of:
Process
Performance
People
Utilized by empowered, engaged and result oriented team members
THE HISTORY OF LEAN

The History of Lean
HENRY FORD- 1913
Moving assembly line
Mass production and batching
Endless demand for product
Limited variety
GENERAL MOTORS - 1920s
Expanded product offerings
Gave customers more choices
Modified mass production concepts
Focused on variety
1940s Taiichi Ohno Father of TPS (tasked by Eiji Toyoda focused on Lean principles and
refines Toyota systems to reduce waste, continuously improve and maximize value by minimizing the
consumption of resources
1950s A statistician named Deming shares concepts regarding measurements, data and variability
with the Japanese
Joseph M. Juran 20th century management consultant who is principally remembered as an
evangelist for quality and quality management, writing several influential books on those subjects
1945- 1975- QUALITY MOVEMENT/ Shigeo Shingo / Joseph Juran
Toyota discovered that factory workers had far more to contribute. This discovery originated in the
Quality Circle, (Ishikawa, Juran)
Today- These concepts are relentlessly improved creating the Toyota Production System (TPS)
Page 9 of 34
The Four Principles
The vast information, tools, methodology and self-proclaimed experts have removed focus on the
origins of Lean
Profitability for
Value
Improving profitability
by creating value for
customers
People
Resources
Resources are limited
and must never go to
waste
Competition
Intensifying
competition demands
that all business
enterprises improve
People are intelligent

and motivated to do a
good job, provide the
right tools and
autonomy,
they
will make
improvements
How do we Define Lean?
Lean is a systematic approach, to identify and eliminate waste through continuous improvement by
flowing the product at the pull of the customer in the pursuit of perfection.
Lean Seeks to Systematically Eliminate Non-Value Add
Value Defined:
Can only be defined by the ultimate customer throughout the value stream
It is only meaningful when expressed in terms of a specific product (a good or a service,

and often both at once)
Meets the customers needs at a specific price at a specific time (what is the customer
willing to pay for?)
Fit
Form
Function
Percent Of Value Added
Page 10 of 34
Current Process
Muri (Overburden)
Definition:
Overburdening or pushing Team Members or machines beyond their comfortable or

practical limits.
Mura (Unevenness)
Definition:
Unevenness or fluctuations in the flow of material, people and information.
Fluctuation in equipment operation.

Muda (Waste)
Definition:
WASTE - Waste is anything that uses time, resources or space but does not add value
to the product or service from the customers perspective.
Activities that consume resources, but create no additional value

Relentless Search for Waste TIMWOOD + P
Transportation
Inventory
Motion
Waiting
Over Production
Over Processing
Defects
People
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Transportation
Unnecessary movement of product and materials
Poor layout
Poor understanding of the process flow
Large batch sizes, long lead times, and large storage areas
Spaghetti Diagram (Transportation)
Inventory (In-house or On-site Material)
Anything more than is required to do the job
Need for buffer against inefficiencies and unexpected problems
Project complexity
Unleveled scheduling
Poor market forecast
Unbalanced workload
Misunderstood communications
Unreliable shipments by suppliers

Inventory
Any supply in excess of a one-piece flow through your office process
We have files that pile up between work desks
We have documents that are waiting to be matched or signed
We have no storage space because it is filled with other items we dont need
We have E-mails waiting to be read
We have unused records in our shared drives
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Motion
Movement of people or equipment that does not add value to the product
Poor people/equipment effectiveness
Inconsistent work methods
Unfavorable process or project layout
Poor workplace organization and housekeeping
Any movement of people or equipment that does not add value to the service
We duplicate our efforts
We are constantly looking for items because they do not have a defined place
Employees are working by experience instead of a standard method
We constantly make drafts before preparing formal documents

Waiting
Idle time when waiting for materials or information
Unbalanced workload
Long process/ project setup times
Upstream problems
Unlevel scheduling
Waiting Examples
We provide and receive information too early

We have constant printer and computer break-downs
Not all attendees on-time for meetings
We consistently have a lack of required information
Our quality is suspect
We must wait for customer responses
Overproduction (False Starts)
Over-production hides other wastes therefore is the worst possible waste.
Making more than is required
Making earlier than is required
Making faster than is required

Causes of overproduction
Unlevel scheduling
Long process/ project setup
Unbalanced workload
Over engineered
Redundant inspections
Page 13 of 34
Overproduction Examples
We prepare monthly reports early

We have multiple bosses dotted line
We have multiple jobs hats that cause conflicting priorities
We provide memos to everyone
We provide more information than the customer or the next operation / process needs
We create reports no one reads
Over Processing
Processing that adds no value to the product from the customers viewpoint
Project changes without process changes
True customer requirements not clearly defined
Over-processing to accommodate downtime
Lack of communication
Redundant approvals
Extra copies
Excessive information
We have repetitive information on different forms
We use different software in different departments when processing orders
We create more detailed reports than required
Our decision criteria is often unclear
We propagate poor decisions
Defects (Rework)
Utilizing resources to inspect and/or repair product
Weak process control
Unbalanced material level
Deficiently planned maintenance
Inadequate education/training/work instructions
Product design
Customer needs not understood
Inspection and repair of material in inventory
Rework often produces rejects that must be discarded
Lean and continuous flow results in a significant decrease in defects, scrap and
rework
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Defects
We have no standard work, allowing individual methods

Our paperwork often does not match
We have significant software incompatibility
We have data entry errors
We have pricing errors
We have missing information
We have incorrect or missed specifications
We lose records or prints
Our tolerances are often exceeded
We have and provide ambiguous information
Wasted Human Resources
Not using peoples mental, creative, and physical abilities to their fullest potential
Business culture
Low or no investment in training
Page 15 of 34
LEAN APPLICATIONS IN PREFAB

5S
Does Workplace Organization Impact Our Business?

Where is Value being added??
What are the 5Ss
Sort
Elimination of all unnecessary items or equipment from the workplace to include

items that are only used occasionally.
Straighten
Establish a functional layout for tools, equipment and material so that everything
required for the job is readily available.
Shine
Removing all dirt, grease and grime from the workplace; Inspecting for defects and
maintaining optimum conditions.
Standardize
Establish standards for maintaining a clean and trouble free workplace.
Sustain
Create a work environment where the rules and standards that everyone has
established is the natural thing to do.
1 - Sort (Seiri)
Organize
Eliminate unnecessary items and materials and ensure needed items are present:
Examine area and determine what is needed
Remove unneeded items
Perform red tag activity and move tagged items to central area
Red Tag Process
Red tag all unused and unneeded items.
Move tagged items to designated area for review.
Predefine time period for red tagged items to be reviewed by all interested parties.
Relocate or dispose of all items left in holding area
Red tagging will systematically identify unneeded items in administrative as well as

production areas.
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2 Simplify / Straighten (Seiton)
Orderliness
A place for everything and

everything in its place
Analyze environment
Determine best locations
Standardize names of parts and tools
Optimize overall impact
Ask yourself these questions after Sorting:
What do I really need to do my job?

Where should I locate these items?
How many of each item do I really
need?
How do I enhance the Flow?
Simplify / Straighten
Storage Methods
Shadow Boards
Point of Use POU
Sign Boards
3 - Sweep / Shine (Seiso)
Cleanliness
Keep your workplace clean by:
Cleaning, eliminating the source of contamination
Eliminating all forms of contamination
Adopting cleaning as a form of inspection
Making cleaning part of your everyday work
4 Standardize (Seiketsu)
Create an environment where what is supposed to happen actually happens, on time,

every time, day and night
A procedure to maintain and monitor the first 3 Ss
Ensure information sharing
Maintain adherence
Create standard methods
Page 17 of 34
4 Standardize (cont.)
5S Standard Color Schemes

Yellow
Yellow/Black
Walkways and Safety - mark physical hazards which

might result in stumbling, falling, tripping, etc
Blue
Aisle and Process Lines - designate traffic aisles,

stairways, borders
Work in Process - Component part pallet storage at
the work center
Green
Finished Goods - Mark pallet areas or pick up areas

for completed items
White
Black
Black/White
Trash can storage locations

Stop, Danger & Scrap - Mark emergency stop
features on equipment, flammables, fire fighting gear,
exits
Red
Gray
Gray/Black
Orange
Auxiliary equipment, tools, fixtures

Intermediate Hazards - fans, tape machines,
conveyors
5 Sustain (Shitsuke)
Self-discipline
Train, educate and change habits while relentlessly following the previous 4 steps
Everyone is trained
Correct procedures are now a habit
Environment is orderly and meets standards
Factory is committed to the principles
Everyone has adopted 5S/Visual Factory
Audit Zone
Page 18 of 34
Beyond 5S Next Steps
Visual Display
The 5 Minute Manager saysAsk yourself..Can anyone walk into your workplace
and visually understand the current situation in 5 minutes or less?
The 5 S system is designed to create a visual workplace
VALUE STREAM MAPPING

Value Stream Map- Create Continuous Flow
Page 19 of 34
STANDARDIZED WORK TOOLS

Standardized Work
Definition: An efficient and orderly method of producing without waste, centered

around people
Purpose: To promote and assist Kaizen activities at the jobsite
To enable team members to safely build high quality products at the lowest possible
costs
History of Standardized Work
Based on proven U.S. military methods

Incorporated by Taichi Ohno during the 1950s at Toyota
Part of Standardization, which is the foundation of Toyota Production System
Without Standards, there can be no Kaizen (Continuous Improvement)
Old vs. New Paradigm
I dont care how you get the job done, just do it.
Everyone does the job the same way each time.
Standardized Work- Job Instruction Four-Step Method
Page 20 of 34
Example 1: Single Point Lessons
Example 2: Numbering Standards
The Item Number begins with a 4digit prefix that signifies the category
In the example below, the prefix

0016 is for submittals related to
Grounding devices and material
Page 21 of 34
Example 3: Document Change Flow - Develop ECO, ECN & ECR Std.
Example 4: Pre-Fabrication Standards
Page 22 of 34
Example 5: Manufacturing Team Structure Standards
Eligible pool:
Indentured in the XYZ apprenticeship
program
Have been employed for at least 90 days
Eligible to drive company vehicle
No disciplinary, quality or attendance
problems
Have a desire to participate on a
manufacturing team
Intake process:
Manufacturing Function Manager
requisitions new Team Member(s)
HR generates list of eligible employees
If none are available, XYZ is
contacted for dispatch
HR performs initial interview to determine
interest and narrows to top 3 candidates
Function Manager and Group Leader
perform 2nd interview
Function Manager communicates preferred
candidate(s) to HR
HR performs transfer
Initial Training performed by Group Leader
Orientation to Manufacturing
Safety
Lean Basics
5S
DESIGN FOR INSTALLATION (DFI)
.what if we were able to standardize our design for both manufacturing and installation?
Page 23 of 34
Traditional: Design
Development Cycle
Endless design changes
Non standard parts with mix of lead times

Quality
Designed and thrown over the wall
Lower quality due to more parts, manual processes, and untested parts
Cost
Higher due to unique designs and specialized parts

Equipment and Tooling
Reliability and quality problems
Cost & Control
DFx Introduction
DFx allows you to improve efficiency by:

Minimizing the number of parts through part standardization and/or modular architecture so that the
manufacture, assembly and installation is cost effective and efficient.
Page 24 of 34
DFI Introduction
The objective of DFI is to identify design concepts that are easy to manufacture,
assemble and install
Focus on elements that can be controlled
Focus at the component design for ease of manufacture, assembly and installation
Integrate into design process installation, assembly and manufacturing to ensure the best
match of needs and requirements.
Create cross functional teams: Field install, assembly, manufacturing, estimating,
suppliers and where appropriate customers.
Use of the tools and methods to enable DFI meets design objectives.
Lean Product Design/DFx Gives Us
Page 25 of 34
Work Break-down Structure Standards
Standardized Components and Assemblies
Focus on developing and selecting standardize material and Pre-Fabricated Assemblies

Contractor went from over 450 Standard Assemblies down to 5 that are used in 70%
of projects
Why Kits
Designed for ease of installation, pre-fabrication and use manufacturing

Ease of assembly
Easy placement of items & removal in the field

Convenient to ship to the field & easy to move about
Easy to verify quality
Right parts, right quantity
What Is A Kit?
A Kit describes an assembly or mixture of items that contains the components needed in
one unit to complete a section of a job or the complete job.
Contractor defines a kit or kits as the items needed to complete a task that are not easily
affected by other trades
Rough
Ceiling
Trim
Page 26 of 34
What Is Typically In a Kit
Commodities
Sub-assemblies
Hardware
Tooling
Pick lists
Fixtures
Detailed instructions for special items
CONTINUOUS IMPROVEMENT (KAIZEN)

Kaizen
Definition:
A way of thinking and doing whereby instances of MUDA are eliminated
A philosophy of continuous improvement and that everything can be improved
Kaizen is the heart of Lean production

Background:
Improvements relied on the person closest to the problem to make improvements

Kaizen Process/ Practical Problem Solving
Page 27 of 34
We must now create stability, standardization through Gemba Management (Go-and See)
Page 28 of 34
MEASURING ROI ON PREFABRICATION

Cost Code Structure
Cost codes and WBS tie work steps together
Same cost code through lifecycle of product
Utilize different cost types to separate work steps:
Detailing
Fabrication
Installation
Budgeting Process
Project Budgeting must incorporate all aspects of projects
Overall Project Budget
CAD & Detailing Budgets (5-12% of Field Labor by area)
Prefab Budgets (Establish targets and track)
Project Management (10% of labor vs 20% of labor)

Use service module inside accounting package to set up work orders to track specific systems in
specific areas Spool drawing concept
Understand the Workflow
Page 29 of 34
Tracking Shop Production & Costs
Page 30 of 34
Tracking Prefabrication
Page 31 of 34
Fabrication Tracking System
Field Reporting Feedback Loop
Short interval plans with quantifiable production targets

Daily time reporting on project specific cost codes
Installed quantities reported weekly on trackable items
Labor feedback report using unprocessed payroll and JTD Quantities
Goal is to understand total installed cost
Production Tracking System
Page 32 of 34
Validation
Aggregate completed projects cost and productivity information

Use statistical modeling to determine mean and standard deviations
Synthesize information and modify estimating bid units as necessary
Compare cost and productivity savings to fabrication shop investment to establish
breakeven and IRR
CHALLENGES & RECOMMENDATIONS

Challenges to Initiatives
Lack of vision
Lack of leadership
Inappropriate staffing
Old School mentality
Trying to gain consensus
Lack of commitment
Poorly executed plan
Critical Success Factors
Page 33 of 34
Page 34 of 34

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Lean Applications in

LEAN APPLICATIONS IN ELECTRICAL PREFAB

Lean & Organizational Strategy

MAXIM CONSULTING GROUP OVERVIEW

Understand Lean and its relationship to organizational strategy

LEAN & ORGANIZATIONAL STRATEGY

Speed up their product and service development cycles

Have In-house capabilities

Meet international standards, if they wish to compete globally

Position for future source of competitive advantage

Increase Current Markets

Increase Client Base

Service Line Extension

Horizontal and vertical diversification opportunities

Understanding Strategic Alternatives

The Market Now Sets the Price!

Prefab - Internal Benefits

List internal benefits of prefabrication to the contractor

Internal Benefits to Contractor

Saves the contractor money

Workers Comp Insurance

Cost Savings Workshop

Average labor rate =

Reduced trade stacking

Cultural Impact Hope/ Heartbreak Cycle

Focus On Cultural, Behavioral and Emotional Change

Is it time for the next level of sophistication?

Reinventing the Organization

Making the Transition from Basic Procedural Improvement to Culture Change

Total Process Control Delivered

The fundamental success of Total Process Control will not stem

THE HISTORY OF LEAN

HENRY FORD- 1913

Moving assembly line

Mass production and batching

Endless demand for product

Expanded product offerings

Gave customers more choices

Modified mass production concepts

The Four Principles

People are intelligent

How do we Define Lean?

It is only meaningful when expressed in terms of a specific product (a good or a service,

Overburdening or pushing Team Members or machines beyond their comfortable or

Unevenness or fluctuations in the flow of material, people and information.

Fluctuation in equipment operation.

Activities that consume resources, but create no additional value

Unnecessary movement of product and materials

Poor understanding of the process flow

Spaghetti Diagram (Transportation)

Inventory (In-house or On-site Material)

Anything more than is required to do the job

Need for buffer against inefficiencies and unexpected problems

Poor market forecast

Unreliable shipments by suppliers

Any supply in excess of a one-piece flow through your office process

We have files that pile up between work desks

We have documents that are waiting to be matched or signed

We have E-mails waiting to be read

We have unused records in our shared drives

We duplicate our efforts

Employees are working by experience instead of a standard method

We constantly make drafts before preparing formal documents

Idle time when waiting for materials or information