Background: A transformer refurbishment company repaired a variety of large transformers at a rate of approximately one per week. These transformers weighed from ten to several hundred tons and were usually shipped by rail car or special truck. Billing per job was typically between $250k and $1MM. Largely because of the lead time for bushing manufacture, an expensive item that were frequently sourced from Europe, refurbishments took several months to a year to complete.
Situation: Jobs were consistently coming in with lower than expected profit.
Analysis: A review of each job after completion revealed a variety of reasons for lower than expected profit, including extra work being done but not quoted to the customer, additional scope being done without need, liquidated damage charges being assessed due to delays in ordering long lead items, etc.
All company employees who were involved in the refurbishment job from proposal through collection were assembled in one room. A detailed "swim-lane" process map of the job was created on the wall using Post-It notes. The activities of each person in the process were detailed. The communication point for each of the issues identified in the job completion review was identified. In many cases the root cause was poor, verbal, or non-existent communication among the people involved in the refurbishment and between the company personnel and the customer.
Improvement: Participants stated there was significant value simply in having all participants in the refurbishment agree to how the full "standard" process should be and be able to refer to a process map that defined their "standard work."
Certain communication activities identified as "critical to quality" accounted for the vast majority of communication deficiencies. These activities were listed on page 1 of the "standard work" process map, and evidence of their completion was required in the job folder.
Result: Profit leakage due to communication deficiencies dropped to near zero. Process rework – time required to investigate and correct problems – dropped to near zero. Profit leakage due to communication deficiencies followed it down. Both quality and delivery improved, as did customer satisfaction. Operating margins improved approximately 5%.