MGSM890

INDIVIDUAL CASE REPORT: OPERATIONAL

IMPROVEMENT

LECTTUER: ROD LOPEZ

OPERATIONS MANAGEMENT

CHIHUA (BEN) LI
STUDENT NUMBER: 45110743
1.0. Introduction
Favelle Favco Australia is of one the subsidiaries of the Favelle Favco Group. With 55 years history of
making cranes, it comes with the wealth of experience, this allows Favco to offer tailor solutions to meet
customer’s requirements. ("Favelle Favco: Heavy Lift, Offshore And Tower Cranes") This report will focus
on the Australia engineering department, to explain the current issues and propose a way to change this
department into be a more efficient operation.

For all projects, each subsidiary handles its own tendering process, but once the contract has been awarded,
all subsidiaries engineering departments will work together to meet contractual, statutory, regulatory, and
specified requirements by the clients. After initial technical contract review, group engineering manager will
assign one project engineer to overseeing this project. He will lead a team of engineers and other relevant
resources to carry out the design phase. Once it is completed, he will then issue drawings, procedures, and
documents to purchasing, production, customer service and quality control departments so they will
continue with the fabrication, testing and commission process. Figure 1 below shows the current top-level
operation flow chart.
FAVELLE FAVCO CRANES PTY. LTD. - PROCESS FLOW DIAGRAM

IDENTIFY YES
NEGOTIATE FURTHER DESIGN CONCEPT ESTIMATE PLAN FURTHER DESIGN YES
PROSPECTIVE SALE REQ'D? DESIGN COSTS PRODUCTION REQ'D
SALE

NO
NO

AGREED
EVALUATE SALE PRICING
DETAILED
DESIGN

PROCURE
FINANCE
MATERIALS

DISMANTLE
TEST ASSEMBLE SCHEDULE
& PACK MANUFACTURE
PRODUCTION

QUALITY
CONTROL

COMMISSION PROGRESS
SHIP ASSEMBLE HANDOVER
BILLING

FINAL
BILLING

Figure 1 Current process flow diagram

2.0. Gap Analysis

Despite Favco holds reasonable market share globally in this steel manufacturing business, clients still
raised quite a few concerns, some of which are the reasons why customer more favourites competitor’s
products. I will use performance and importance matrix (Figure 2) to demonstrate the voices and needs from
our customers, those sections under improvement and urgent improvement areas are where I believe
Australia engineering department should put most resources into.

2.1. Current State

Favco cranes always known as the high performance and safe crane, not only because Favelle is the inventor
of the luffing crane, our engineering department also have a continuous development program to use
innovation ideas to improve our product performance. It has guaranteed our market leader position.

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One of the negative feedback from client is overweight. More than half of our cranes are used on off shore
projects, where the weight is crucial to those drilling ships and oil and gas platforms. The extra weight from
the cranes means those ships needed to reinforce their structures. It adds more cost to the whole offshore
project. But the most urgent need to improvement area, is the long lead time of delivering spare parts and
inconsistent workmanship, these has strongly relations from engineering uses and designs unstandardized
components. The other major complaint is Favco’s poor on time delivery, in average, three-month delay in
delivering the cranes to the shipyard is usual, mostly because of the late engineering department drawing
release which result in delaying the fabrication process.

Figure 2 Performance and Importance Matrix

To improve the above-mentioned sectors, we also need to eliminate the wastes in engineering department
operation. I will use TIMWOOD to address the current state.

T I M W O O D
Engineering X X
Manager
Project X X X
Engineer
Specialist X X X X X X
Engineer
Draftsman X X X X
Document X
controller
Service X X X
Engineer
Table 1 TIMWOOD Analysis

One of the major wastes in engineering department is the multiple travels of paper drawing within the
department. Drawings can be push backwards and forwards between various engineers for almost a week,
without even shows inside of the engineering manager’s office. For new drawings, the chance of rejected by
engineering managers are very high due to drafting and design errors. Even when the drawings are approved

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and released to the other departments, drawings could issue to the wrong project, and the whole process of
finding correct drawings to correct job are time consuming.

Waiting is another major waste sector. With limit software licences, engineers can’t use software to solve
problems and design when required, this could take up to two days. Because engineering manager only
approves drawings at the end of the day, the for-approval drawings could sit in manager’s office for a day
without been looked at. More critically, because sales didn’t check the capacity of the design office, the
project sometimes not even started when contracts are two-month-old, which delays to meet manufactory
millstone for months.

Our legacy data are mainly stored in paper based format, in addition to increase the inventory of drawings; it
also adds the difficulty to find historical data for cranes maintenance. Our service engineers have limit
access in finding initial customer requirement. They will have to find the project engineer who handles the
project. But in lot of the cases, this engineer has left company, which cause tremendous problems and time
waste to understand the issue as well as finding the solution to solve the problem.

Different streams of engineers are expected to work together closely, but because of no proper
communications channel between specialist and project engineers, there is no stream line design operation.
Engineers could work on the design which has been addressed previously by other engineer; two draftsmen
could spend time on same drawing simultaneously, such ineffective resource management is the reason for
design inefficiency. Furthermore, because the project engineer does not pass full requirement from the
contracts to the team, components are usually over designed, this along with other over process and over
production have drain resource away where they can generate more profits for the company.

On top of increasing our price and inventory level up, slowing the design speed down from unstandardized
design. Since for every crane has different design and special made part, the turnover for drawings is low
and the mistake in drawing and design is unavoidable.

2.2. Future State

Soon, Favco should implement electronic drawing process, storage, and issuance software. This should save
space and keep the drawing inventory low. Besides, the average time consumed on drawing travel is about a
week, with the digital drawing management system it could limited the drawing travel time to three days.
This provides engineering department a more efficient and more secure drawing approval process. In
addition, engineering manager could check the for-approval drawing more frequently, which will reduce the
waiting time of the drawing by half. Each drawing will have a digital code attached, so the correct drawing
will be released to correct project without any confusion. Instead of spending weeks on finding historical
data, service engineer could access all information in one day without going through the drawing archive,
and historical folders from project engineers.

There are several ways to keep the communication channel open and clear, first, to have daily stand-up
meeting within project teams, so engineers and draftsman are aware of each other’s task, which eliminate
repeated task. Also during this meeting, the needs of using software could be discussed, within the team they
could distribute licences. Secondly, weekly engineering group meeting for different streams, so that they
could share their lesson learn and innovation ideas, this could reduce the cost for human errors. Lastly, when
sales department pass over the contract to project engineer, they should have a hand over meeting to discuss
the requirements and special condition, so project engineer can have a project overview, to avoid over
process and over production.

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To standardize parts will lead to less flexibility, but this improves crane quality, drawing efficiency, spare
parts delivery, inventory level and profitability, it is a nice trade off. The standardize process will be
discussed in detail in next section. Figure 3 shows the estimate improvements from current to intended state.

DEPENDABILITY

CURRENT STATE
QUALITY COST
FUTRUE STATE

SPEED FLEXIBILITY

Figure 3 Compare the current and future state of the design

3.0. Implementation Plan For Standardization

My length of proposed implementation process are 7 months, the overview of the plan can be viewed in
figure 4. It is designed according to DMAIC. The detail breakdown of each phase will be separated shown
and explained in later of this section.

Figure 4 Implementation plan Gantt Chart Figure 5 DMAIC, SIX Sigma Improvement cycle

To implement the standardization of design, I will coordinate more effect at the early stage, so the whole
process will be well thoughted and planed. The other benefits are the increasing in launch speed and avoid
high work load towards to the end and saving cost.

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Figure 6 Coordination Effort In Early Stage vs Late Stage

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I have defined the problem through TIMWOOD analysis which find out an electronic drawing process and
data storage system could help implementing the standardization. The product suits Favco’s need is
Autodesk Vault Professional, and luckily the resource distance is close, management accept this learning
process is relatively high.(Operations Management) I am setting my goal in standardize eighty percent of the
parts, which means only twenty percent of components are customized, this sounds easy for other industry,
but as Favco’s strength are tailor designed crane, it is quite difficult to achieve.

Figure 7 Resource and process distance

The First stage of this standardise process are 3 weeks. I will ask Autodesk to give presentation about their
product and technical requirement, follow by our internal feasibility study and request for funding. Set the
goal for this implementation to complete in seven months.

Figure 8 Define

It followed by second stage: measure. Because Autodesk Vault standard version cannot solve our problem. I
will ask for feedbacks from head of each specialist team for reconfiguration ideas. Then I will gather those
data and provide to Autodesk, so they could customize the system to suit Favco’s need, this period is 30
days. Once the customization is completed, there will be multiple testings and turnings, this could take up to
20 days. After measure of the system performance output, it will release for user acceptance test for 10 days.
Autodesk will issue documentation and operation procedures to Favco if engineers accepted the system
within 3 days of the handover.

At the same time, all head of each team will identify most common components, the amount of the parts
should be sixty percent of the target goal. Those data will be ready to import to Vault system, so that at day
one of the system rollout, they will be immediately transferred. By mid of October, the Vault system will be
online.

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 Figure 9 Measure

Stage three is Analysis. This include 5 weekly standardization committee meeting. During the meeting, they
will use PICK matrix to identify the low efforts and high benefits components to add in Vault. The High
Efforts and low Benefit part will be the ones left in the customised part category.

Figure 10 PICK Matrix

Those meetings will also investigate the root causes of why after fifty-five years operation, Favco still
cannot streamline the design, and develop the best practice of process by using standardized components,
this will be related to stage five. After these meeting, they will finalize another twenty percent of
standardized part to Vault, together with the first batch, the goal of eighty percent will be achieved.

Figure 11 Analysis

Stage four is how to improve, it takes the longest time during this implementation, but it has huge impact on
reducing waste and increase efficiency. It is wildly agreed that if Vault link to ERP system, it can help
reducing the lead time of procurements and inventory level. Once those systems talk to each other, every
time when engineers selecte the parts in the drawing, the Vault will talk to ERP, if they found out part is low
in stock level, it will send an alarm to both engineer and purchasing department. When engineer sees the
alarm, if it’s an unstandardized part, then he will try use the common component, if it is unavoidable, then
the purchasing officer will place order to meet requirements. We will spend 30 days on preparing data base

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in ERP, and 20 days for interface ready, followed by turning and test by 15 days. When Vault is online, we
will spend another 20 days to connect two systems together.

Figure 12 Improve

The last stage is to control the established performance. Favco will spend 33 days on produce procedure on
how to use standardized parts in design and how to add standardized parts in Vault. Also, take 2 weeks on
how to check inventory level when design. From the lesson learnt from Toyota, the cost for innovation and
other business activity are far cheaper if ask employee to follow the procedure than base on talent. With
these procedure in place, all engineers know how to do and where to find information much easier, this will
keep the standard up and keep up the performance.

Figure 13 Control

In conclusion, the Vault system is an excellent tool for Favco to implement standardized design, this could
reduce the inventory level, minimize over design and over process, and reduce design. Also with the
eliminated paper drawing, it also reduces drawing movement and waiting time.

4.0. References
1. "Favelle Favco: Heavy Lift, Offshore And Tower Cranes". Favellefavco.com. N.p., 2017. Web. 5 June 2017.
2. Operations Management. 8th ed. sydney: NIGEL SLACK, 2016. Print.

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