In this month's blog, Marc Hermsen, director of Hitachi Consulting reports on the operational changes Hitachi Consulting helped dredging and land reclamation provider DEME make to smoothen maintenance and major repairs and how the rest of the industry can attain operational excellence.
The challenges being faced by DEME are not unique to this company: All organisations in the marine industry know the difficulties of organising efficient running maintenance and major repairs (turnarounds), particularly on a global scale. The actions taken by DEME therefore are relevant to a great number of operators looking to improve their ways of working. DEME is a world renowned solutions provider in the dredging and land reclamation industry. In the past decade DEME has grown exponentially – the group now has 4,500 employees and 100 main vessels - putting a strain on the support functions within the business. This strain led DEME to identify the maintenance and purchasing & logistics departments as key areas where Hitachi Consulting could help.
The maintenance challenge
When we first started working with DEME, vessels all had their own way of conducting day-to-day maintenance, leading to difficulties retrieving and evaluating maintenance records across the fleet. In addition to this, the maintenance department relied on the experience and quality of the vessel’s crew to maintain the correct stock profile of technical spares on board. This resulted in high stock levels and, although fleets were often highly stocked, at times it resulted in the unavailability of critical stock items.
Major repairs or turnarounds were planned on an ad hoc basis with the scope and specifications written at short notice, causing inefficient purchasing and shipping of parts to the vessel. When in repair, a critical path for the repair planning was not defined and numerous additional works were approved on site. As a result, no reliable end date for the repairs could be given, hampering efficient project planning afterwards. All of these factors contributed to major repairs often running over time and budget.
Although aware of these inefficiencies, the maintenance management team did not have enough authority to change the existing ways of working on the vessels or to break the unproductive and costly behaviours surrounding major repairs.
The purchasing and logistics challenge
On the purchasing & logistics side, the sourcing process needed to be improved to decrease expenditure. Within the wider supply chain there was a lack of transparency and an embedded silo mentality, creating a wasteful process. The challenge here was to transform this area into a proactive, effective and efficient organisation where boundaries, procedures and responsibilities were clear and acted upon in a cost-effective manner.
Hitachi Consulting was brought in to help DEME improve three critical areas:
* Sourcing (reduce material and service costs)
* Supply chain (improve reliability and ‘on-time-in-full’ OTIF delivery to the vessels)
* Maintenance (improve vessel reliability and cost effectiveness)
The team’s approach was to develop ‘one best way of working’, and implement this on the vessels and major repair sites all over the world. When presented this approach, the COO of DEME had concerns as to whether this vision would be achievable. Vessel captains were accustomed to operating autonomously, and the COO believed that they would reject the idea of a standardised approach to working. DEME decided to implement the solution using Hitachi’s proprietary MCRS® performance management system. This identified a clear set of common performance metrics which were reviewed on a daily, weekly and monthly basis for all of DEME’s vessels worldwide. Hitachi Consulting began the process by undertaking a 6-week assignment with each vessel using Hitachi’s Closework approach. On each of the vessels in the programme we worked closely with the captain and his team to make sure they understood the benefits of the new way of working before making each vessel manager accountable for operational and financial results – something completely new to the business.
For major repairs, a stage gate process was developed to ensure all preparation was done ‘on-time and in-full’, forcing the technical management and the vessel crew into a structure of proactive planning. Key to the success of this initiative was the Closework done with the major repair teams at shipyards where the theory was put into practice.
To achieve efficient stock levels a functional component hierarchy was defined, after which the criticality of main components were determined. This formed the generic base, from which the criticality could be determined for each vessel down to part detail.
For the purchasing and logistics department a more comprehensive solution was required. In order to optimise the total cost of ownership across all areas, the department needed to be split up into a day-to-day, business-as-usual function and a strategic, technical and category buying function. As a result, the logistics department became a dynamic and transparent organisation that embraced lean principles, allowing transport to be planned in a more efficient manner.
The biggest accomplishment is the significantly improved control on all levels and the awareness of costs and results. By implementing one way of working and reporting, DEME now has a grip on all maintenance and logistics processes. Stock levels of spares are under control, freeing up working capital for the organisation. The major repairs are planned, structured and delivered in a detailed and compliant way. This results in better work plan and budget attainment. Supply chain efficiency resulted in a transparent process focused on service delivery towards the vessels.
* €7.1m cash bottom line savings in 2 years
* 94 operational days gained in 9 months (120 days annualised), due to improved reliability of vessels.
* €15-20m identified stock reduction over 5 years, based on the difference between actual and maximum stock levels
* On-time-in-full delivery improvement of 30%