Electric Rope Shovel Cost Reduction, LCP 2013

Corey Wurtzbacher, Product PurchasingMark Cigich, Product Purchasing,

Matthew Cena, Engineering

In-Scope Sections on 7495HR, 7495HD and 295

27 Sections1. Air & Lube System 15. Hoist2. Ballast 16. House Filter3. Boom 17. Housing4. Operator Cab 18. HVAC5. Cables 19. MCC6. Center Pintile 20. Paint7. Collector Rings 21. Propel8. Crawler 22. Rack & Rollers9. Crowd 23. Rev Frame10. Dipper 24. Skid11. Electric Room 25. Swing12. Equilizer Links and Ropes 26. Walkways13. Fire Suppression 27. Winch14. Frame

Phase 1: Idea Generation

• Purchasing, Engineering, Warranty, Field Service and Product Support to generate cost deliverables on in-scope rope shovel vehicles

• Meet weekly until all sections of machine covered• Emphasis on new cost reduction ideas and

collaboration between organization• Positive collaboration and support needed between

departments• Ideas to be recorded and organized by Mark

Phase 1: Involved Parties

• Pam Peterson, Purchasing• Tom Hassel, Field Service• Mark Cigich, Purchasing• Dan Larson, Engineering• Mike Burkhard, Purchasing• Matt Cena, Engineering• Maria Glorioso, Product Support• Louis Chang, Warranty

Phase 1: Deliverables

• Proposal Prioritization Matrix, December 1, 2012

Project Proposal Prioritization MatrixRope Shovel Section Proposal Rating (1 Unfavorable 5 Favorable)

Cost Saving

Impact to Customer

Implementation Cost & Time

Implementation Risks & Difficulty

Priority Rating

From

Dept. Responsible

Air & Lube System

1Standardize air & lube tubes 4.2 2 4 4 3.6 M. Cena Purch P. Peterson

2Explore use of different composites for tubes 4 3 4.1 2 3.3 M. Cena Eng. M. Cena

3Align order quantities of Rope Shovel tubes with other Cat products 5 3.3 4 3.8 4.0 M. Burkard Purch M. Burkard

Boom

4Quote weldments to outside vendors 3 2.5 4 4.9 3.6 M. Glorioso Purch. M. Burkard

5Redesign sheave point to leaner design and quote 4.5 3.7 3.8 2 3.5 M. Cena Eng. M. Cena

6Rationalize boom vendors, Re-Negociate Order Qty 4 3.1 3 3.3 3.4 D. Larson Purch. D. Larson

Crawlers

7Quote crawler links to crawler suppliers for discount 4 3 4.1 4 3.8 T. Hassel Purch. P. Peterson

8Renegociate contracts of crawlers for future demand changes 5 4.2 4.8 2.4 4.1 T. Hassel Purch. P. Peterson

Base/ Ballast

9Quote ballast assembly to other vendors 3.9 2.5 4.1 4.8 3.8 L. Chang Purch. D. Larson

10Redesign post girder to eliminate machining operations 4.8 4.9 5 2.5 4.3 D. Larson Eng. M. Cena

11Explore scrap metal use for ballast 3 3.5 3.3 5 3.7 T. HasselField Service M. Burkard

Phase 2: Feasibility on Proposals

• Follow through with investigation of proposals– Create storyboards for feasible proposals

• Many proposals may not be feasible, but we have accomplished our collaboration goal; we have opened the dialogue on cost reduction goals between engineering, purchasing, field service, and warranty.

Phase 3: Storyboard Creation

• Create storyboards on feasible proposals• Include anticipated savings, internal parties involved,

suppliers involved, risks and concerns, time required and final savings completion date

• These to be used for management for authorization for project execution

Phase 3: Story Board Creation

Phase 3: Storyboard Organization

Proposal Dept. Rep. Storyboard Created

Savings Date Savings Commitment (Annual)

Submission for Approval

PO Before PO After Actual Savings

Air & Lube

1Purch P. Peterson 8/22/2012 9/1/2013 $30,000 1/18/2013

2Eng. M. Cena N N -

3Purch M. Burkard 8/23/2012 7/1/2013 $50,000 2/18/2013

Boom

4Purch. M. Burkard 8/22/2012 5/1/2013 $380,000 3/17/2013

5Eng. M. Cena N N -

6Purch. D. Larson N N -

Crawlers

7Purch. P. Peterson 9/1/2012 9/1/2013 $200,000 4/19/2013

8Purch. P. Peterson 9/1/2012 9/1/2013 $305,000 3/17/2013

Base/ Ballast

9Purch. D. Larson N N -

10Eng. M. Cena 10/4/2012 9/1/2013 $355,000 3/17/2013

11Field Service M. Burkard N N -

Deck Assembly

12Purch. D. Larson 10/5/2012 9/1/2013 $70,000 3/17/2013

13Eng. M. Cena 8/22/2012 10/1/2013 $55,000 4/19/2013

14Eng. H. Littman 9/1/2012 10/1/2013 $60,000 4/19/2013

LCP Results, 2013

• $708,000 estimated savings for 2013• Project Organization executed for future management

of cost saving projects• Engagement between functions successful

– 30+ proposals generated

Acknowledgements

• Mark Cigich, Purchasing, Organizer• Pam Peterson, Purchasing• Tom Hassel, Field Service• Dan Larson, Engineering• Mike Burkhard, Purchasing• Matt Cena, Engineering• Maria Glorioso, Product Support• Louis Chang, Warranty