2020Case16Mercury

Contents Lean Construction Ireland Annual Book of Cases 2020 Ca e 16 Lean thinking was born in manufacturing out of the need to make things better and to be more efficient. We began looking at ways to leverage learning in how manufacturing procures raw materials. In manufacturing, production planning requires forensic detail on materials availability, cost, and specification. Each material and component is identified with a unique identifier specific to that material or component and specific to each vendor it is procured from. On review of the data in our own ERP, very few of the 2,500 active MMs contained detailed product descriptions to include, for example, client specs, manufacturer part numbers, lead times, units of measure, or pricing. Most of the MMs were generic and required further manipulation/ editing, either as part of a requisition or PO. This more or less rendered the MMs in the system useless as the various editing of the same MM would ultimately change the conditions in our ERP and, consequently, automation and meaningful analysis were impossible. We needed to take a common-sense approach given the volume of variables in materials conditions and the bandwidth of the supply chain. The task was to have manufacturing grade data for all materials and equipment to be procured, and specific to each vendor. Key data required included: item descriptions; client specification; supplier and/or manufacturer part numbers; units of measure; agreed prices; and agreed accurate lead times. The data build was broken into three key phases, com- mencing in 2013. At the time of writing, ongoing updating and maintenance of the data is simply “how we do things around here”; however, to suggest in 2013 that this would be the way we would do things for all materials would have been a big and bold statement. Tasks and activities contained in each element were not limited to just those set out in each element as, in some cases, all elements of work for some vendors were achieved in the first two years of the initiative. As client project work ramped down in late-2014/ early-2015, the Lean initiative’s work also ramped down. Into 2018/2019, and in preparation for the 2020 project build for the same client, this Lean initiative recommenced. Element I – Commenced 2013 The focus here was primarily on cleansing the existing data in the system and agreeing a process to set up new data that would suit the construction team, the engineering team, plus the vendors. Key activities carried out during this phase included: initial data cleansing of obsolete records in the ERP system; developing an ongoing obsolescence procedure; implementing a process of ongoing communication with vendors for all new data set-up to ensure continuous alignment of supplier and manufacturer part numbers; commencing realignment of supplier quoted units of measure (UOM) against our MTO UOM; and commencing an agreed pricing model for 2,000 individual materials. Element II – Commenced 2018 The focus here was to agree pricing T&Cs with suppliers. The main challenges with this phase was to agree long-term and medium-term pricing with suppliers. In particular with commodities that are high-value bespoke items, the supplier reluctance to commit became our biggest challenge. Processes were agreed where products were categorised and expiry dates on prices were integrated into the ERP system. We set up price information records (PIR) with key vendors. We enabled access to commercial teams to view PIRs for budgeting purposes, and we set up an agreed BAS process. We collaborated with the BIM and Engineering teams to ensure that new data set-up was cleansed and approved through the design specifications. Even where long-term pricing could not be agreed, the work associated with the initial phase enabled a much more efficient turnaround of “price on application” (POA) queries. The extra time saved enabled several outcomes, including: semi-automated PO process; set-up of consignment stock agreements; better competition in the market due to increased time to conduct RFQ and BAS; increased focus on managing stock at hand; increased number of progress meetings with suppliers; increased time for reporting to senior management; better quality reporting to senior management. The most significant shift in activity with this phase was the reduction in reliance on discrete knowledge. Regularly bought items could be processed by junior team members and work could be seamlessly reassigned to others less experienced. Time was created for more strategic tasks to be executed by the more experienced team members. Point in case was that a new buyer to the company with no experience in the industry did most of the day-to-day buying for a smaller but significant project in 2017 for the same client. Element III – Continuing in 2018 The focus here was to agree lead times. For project planning to be effective in the context of materials scheduling, it is necessary to know the relevant lead times, the long lead, the local supply, and where risk lies. On any project, experienced people will easily call out some of the historically long lead items, but this is not an exact science in itself. The basis of the EMR referred to earlier, is that POs are placed based on a need date in the future – the FND. Required PO dates are calculated very simply by ordering on or before the FND, less the lead time, and allowing for a buffer time. The logic of the buffer time is to cover where delays might occur and/or to allow for procurement RFQ timing. FND= X – Lead Time= Y – Buffer time= R – Required PO Date= Z Z = X-(Y+R) This formula is the basis for the timing of cutting POs; however, it is laden with risk due to the fluid nature of material availability. Factors such as quantity, required date, budget, client specification, minimum order quantities, delivery methods, and customs considerations, all weigh heavily on the validity of lead times quoted, and accuracy and honesty also play a big part. Suppliers had a huge