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1 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal
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Page 1: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

1CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

LEAN Six Sigma In Construction

CFMA July 29, 2015

Presented by:Jim SchugPrincipal

Page 2: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

2CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Who is FMI?

Page 3: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

3CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Typical elements of FMI Operational Excellence engagements include …..

• Leadership coaching• Organizational Design/structure• Interactive Training• Development of a shared vision• Incentive compensation (Short and Long Term)• Systems development and implementation• Integrated, simple and well-used best practices• Accountability improvement• Field Metrics/Dashboards development• Staff Dashboards development• Intense Leader field presence

Page 4: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

4CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Testimonials

“I think everyone really knows what they need to do. But without FMI’s help, we probably wouldn’t have resolved all of our issues and overcome our challenges.” President/Chief Operating Officer, Large Mechanical Inc.

“The strategy and expertise FMI brought to Miller Pipeline was and continues to be a ‘game changer’.” Dennis Norman, Vice President of Corporate Performance, Miller Pipeline

“FMI’s productivity training forced us to shift our focus from solely building projects to reevaluating our processes on how we run our business…..” CEO, Large SubContractor, Inc.

“Thanks to the processes FMI introduced to our company, productivity increased by double digits.” President, Mechanical Contractor

“We’ve seen significant gains in productivity since we hired FMI. In just the first year, we improved productivity by 10-12 %. Today, we’re about 20-25% more productive on an average man hour compared to when we first started working with FMI.” VP/Owner, self-performing General Contractor.

Page 5: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

5CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Trends impacting A/E/C Industry

Changing nature of business

Construction 2.0 : productivity +

Smart Buildings Globalization Modularization &

prefabrication Recovering the

lost generation & the war for talent

Industry consolidation

The fate of public works

Page 6: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

6CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

What Should We Do?

• Contractors “pinched” in the middle

• Volatile and complex environment

• Competitive advantage disappears quickly

Page 7: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

7CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Adoption Curve Compression

Source: Adapted from “Crossing the

Chasm,” Geoffrey Moore

Lean

SkepticsNo way!

ConservativesHold on!Pragmatists

Stick with the herd!

VisionariesGet ahead of the herd!

TechiesTry it!

InnovatorsEarlyAdopters

EarlyMajority

LateMajority

Laggards

Page 8: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

8CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Adoption is compressed

Personal Computer(8 years)

Smart phone(4 years)

BIM(3 years)

Page 9: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

9CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

“Strategy is stuck,

SustainableCompetitive Advantage is fleeting,

And Companies must learn to change and adapt more rapidly.”

Adapted from The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business -- Prof. Rita Gunther McGrath

Page 10: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

10CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Biggest Leadership Mistake

10 - 10 -

Page 11: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

11CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Lean Business

Is there such a thing as Lean Strategy?

'The purpose of business is to create and keep a customer.‘

--- Peter Drucker

Page 12: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

12CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Lean Business

Who are our customers? What do they value?

Can we build a sustainable business to provide our customers this value?

How do we create a repeatable system that minimizes cost to deliver this service?

Market

Estimate

Design

Build

Manage

Page 13: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

13CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

What do great operations look like?

• ___________________________________________

• ___________________________________________

• ___________________________________________

• ___________________________________________

• ___________________________________________

• ___________________________________________

Page 14: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

14CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

How do we know we are excellent in operations?

• ___________________________________________

• ___________________________________________

• ___________________________________________

• ___________________________________________

• ___________________________________________

• ___________________________________________

Page 15: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

15CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

What is our company (or division) strategy?

• ___________________________________________

• ___________________________________________

• ___________________________________________

• ___________________________________________

• ___________________________________________

• ___________________________________________

Page 16: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

16CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Lean Business

A Lean Company has a well-synchronized business model.Remove waste in delivery of value to customer.

Strategy

Systems

Structure

Is your business “Lean”?

Page 17: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

17CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Lean Portfolio Management = Good strategy!

Developing business models

Complete business models – have customers,

fine tuning systems/delivery . Keep close watch

on customer needs (High Profit)

Repeatable - Lean Operations (High Revenue)

Page 18: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

18CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Lean in Context

• Lean Firm

• Lean Operations– A temporary relationship amongst an owner, engineer

and contractor, subcontractor or any combination of these

– An integrated engineering and construction supply chain

FIRM

PROGRAM

PROJECT

Page 19: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

19CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

A Lean Firm is …

• Lean is a philosophy….not a process– Measurement– Continuous improvement– Identification and reduction of waste– People oriented – and engaging

• Lean uses various tools and techniques– Waste walks– Spaghetti diagrams– Kaizen events– Five S– Poka-Yoke– Activity analysis or work sampling (value stream mapping)

Lean is…

Page 20: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

20CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Structure

Page 21: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

21CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Focus on Reducing Waste

EightWastes

Motion

Transp

orta

ti

on

Not Engaging Employees

Wait Tim

eOver

Pro

duct

ion

Inve

nto

ry

Excess ProcessingD

efe

cts and

Rew

orkContinuous

ProcessImprovement

Just-in-Time (JIT)

Six Sigma

Lean

Page 22: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

22CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Key Processes Needed?

• What Processes do you have?• What processes do we have that need to be

adjusted?• What is/isn’t working?

Page 23: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

23CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Lean Operations – reduce waste in operations!

Page 24: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

24CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

How Field Employees Spend Their Time in the Construction Industry

Recoverable Lost Time (32%)Waiting for information, materials,

equipment, tools, manpower, or other trades. Rework on items already

installed.

26%

32% 42%

Primary Time (42%)Installing units of work

for the first time.

Secondary Time (26%)Planning, scheduling,

material handling, lay-out, set-up, mobilization, etc.

Page 25: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

25CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Tools Used to Create Clarity

OrganizationalLevel

ProcessLevel

Page 26: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

26CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Tools Used to Identify and Eliminate Redundant Efforts

Redundant

Redundant

Page 27: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

27CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Tools Used to Identify Underlying Causes and Address Them

Page 28: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

28CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Real-Life Example of a Construction Company’s Margin Gain/Fade Spread

What is the difference between the top spread (actual performance) vs. bottom spread (expected performance)?

What field or office management techniques could improve the consistency of margin gain/fade?

Would improvements to technical skills and/or control processes improve this?

What could project managers do to help improve this?

Having the Right Data Allows for Great Insights

Page 29: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

29CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

The Process Improvement Cycle “DMAIC”

Implementation

Change Management Strategies

Training

Roll-out

On-going Data Collection/ Comparison Against Benchmarks

“Stand and Deliver” Reporting

Celebrating Successes

Reporting Results

Planning & TeamSelection

Problem Identification & Analysis

Identify Solutions

Reason for Improvement

Identify Problems

Problem Statement

PI Plan

Assemble the Right Team

Root Cause Analysis

Process Mapping

Data Collection / Benchmarking

Quantify Benefits

Identify Barriers and Aids

Building theBusiness Case

Identify Countermeasures

Evaluate Practical Solutions

DefineMeasure & Analyze

Improve Improve Control Control

Page 30: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

30CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Lean Project Management Process

Pre-Job Planning

Short-Interval Planning

Daily Huddle

Exit Strategy

Post-Job Review

Fabrication Process

Mate

rial

Man

ag

em

en

t

Measu

rem

en

t

Feedback Process

Lean Operations

Control Center

Page 31: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

31CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Implementation challenges?

Page 32: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

32CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Build a Learning Organization built on field management tools

Adopted from Dr Judy O’Neil www.partnersforlearning.com

Page 33: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

33CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Project-Focus Business-Focus

Managerial Needs Plan Organize Control

Leadership Needs Set Goals Align Resources Motivate Staff

Project Manager

Accountant

Operations Director

CEOPresident

CFO

Controller

Craft Employee

Project Super

Foreman

General Super

VP Operations

Estimator

Career Focus Matrix (with Example Positions)

Business Developer

Admin Staff

Project Engineer

Project Executive

Business Unit

Leader

Leadership Development

Page 34: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

34CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Business Dev.

Standard-

ization

Customer

Mgmt.

People Dev.

Financial

Mgmt.

Technical

Approach

BudgetSched

uleScope

Man-power Mgmt.

Material Mgmt.

Sub / Vendor Selectio

n

VP of Ops

Project Executive

Project Mgr.

General Super.

Super

Foreman

EstimatorKey: Minimal/no ownership Some Ownership Primary Owner

Yellow indicates targeted growth focus Green indicates current skill set

Implementation challenges?

Page 35: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

35CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Leonard Bernstein should have been a contractor!To achieve great things, two things are needed: a plan, and not quite enough time.” - Leonard Bernstein

Page 36: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

36CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

We need a structured implementation approach!

Case forchange Vision Skills Incentives Resources Action

PlanRealChange

Vision Skills Incentives Resources Action Plan

Case forchange Skills Incentives Resources Action

Plan

Case forchange Vision Incentives Resources Action

Plan

Case forchange Vision Skills Resources Action

Plan

Case forchange Vision Skills Incentives Action

Plan

Case forchange Vision Skills Incentives Resources

Status Quo

Confusion

Anxiety

Gradual Change

Frustration

False Starts

Source: Adapted from a Dupont presentation to CURT

Page 37: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

37CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Maintaining the Proper Balance is

KEY

Page 38: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

38CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Why Great Firms Fail

1. Incompetence2. Bureaucracy3. Arrogance4. Tired Executives5. Poor planning6. Short term investment horizon7. Inability to deal with new technology8. Good Management

Adapted from Clayton Christensen – The Innovator’s Dilemma

Page 39: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

39CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Case study: A large natural gas distribution company

• Background– $40 million annual capital spend– Short window for construction– Strategic alliance formed 5 years

ago– Multiple users or “customers” of

construction services

• Solution– Implement integrated planning– Contractor schedules own crews– Pre-fab during winter months– Use mapping and root cause

analysis– Scorecard for performance

tracking

• Result– $1.5 million shared savings

annually– 4 KPIs monitored monthly– Profit targets exceeded 3/7

quarters

Many Customers

Many Crews

Centralized and Integrated Planning

Centralized and Integrated Planning

Resource Requirements

Rough Cut Planning

Capacity Requirements

Tracking/Monitoring

L O

N G

R A

N G

E V

I E W

Page 40: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

40CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

Jim SchugFMI Corporation308 South BoulevardTampa, FL 33606

Tel: 813.636.1254Fax: 813.636.9601E-mail: [email protected] site: www.fminet.com

Jim SchugPrincipal

Jim is a principal and engagement manager with FMI, management consultants and investment bankers for the engineering and construction industry.

With more than a decade of experience as an Army Officer, Jim led operations in complex and challenging environments. Some of his roles included strategic planning, training across large organizations and command with honors. He refined these skills working for a national builder, repeatedly leading his teams to successfully integrate operations, sales and customer service.

Today, Jim is passionate about developing customized strategy and best-in class operations with his clients. He applies practical experience with an in depth understanding of leading lasting behavioral change in dynamic environments.

Jim earned a bachelor’s degree in quantitative economics from the United States Military Academy at West Point and a master of science in engineering management from the University of Missouri. Jim has completed post-graduate work with Cornell University in Achieving Competitive Advantage. He has served in leadership positions on various local and national non-profit industry associations and is frequently invited to speak at industry events.

Thank youJim SchugPrincipal

Page 41: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

41CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

About FMI

FMI is a leading provider of management consulting, investment banking† and people development to

the engineering and construction industry. We work in all segments of the industry providing clients

with value-added business solutions, including:

• Strategic Advisory

• Market Research and Business Development

• Leadership and Talent Development

• Project and Process Improvement

• Mergers, Acquisitions and Financial Consulting†

• Risk Management Consulting

• Compensation Benchmarking and Consulting

Founded by Dr. Emol A. Fails in 1953, FMI has professionals in offices across the U.S. We deliver

innovative, customized solutions to contractors, construction materials producers, manufacturers and

suppliers of building materials and equipment, owners and developers, engineers and architects,

utilities, and construction industry trade associations. FMI is an advisor you can count on to build and

maintain a successful business, from your leadership to your site managers.

† Investment banking services provided by FMI Capital Advisors, Inc., a registered broker-dealer and wholly owned subsidiary of

FMI.

Page 42: 0 CFMA | New Orleans LEAN | July 2015 © 2015 FMI Corporation LEAN Six Sigma In Construction CFMA July 29, 2015 Presented by: Jim Schug Principal.

42CFMA | New Orleans

LEAN | July 2015© 2015 FMI Corporation

www.fminet.com

Denver210 University BoulevardSuite 800Denver, CO 80206T 303.377.4740

Houston3920 Cypress Creek ParkwaySuite 360Houston, TX 77068T 713.936.5400

Raleigh (headquarters) 5171 Glenwood AvenueSuite 200Raleigh, NC 27612T 919.787.8400

Scottsdale 7639 E Pinnacle Peak RoadSuite 100Scottsdale, AZ 85255T 602.381.8108

Tampa308 South BoulevardTampa, FL 33606T 813.636.1364


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