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Application of Lean Six Sigma at DTE Energy
Real People
Real Contributions
Real Successes
Real Possibilities
Shawn Patterson
Tom WitteOctober 20, 2005
2
DTE Energy: A Quick Look
• Provider of Energy Products and Energy Services located in SE Michigan
• $6.75B in Annual Revenue• Approximately 10,500 Employees (includes both non-
represented and union employees)
-Detroit Edison-Michcon-DTE Coal Services-Energy Trading-Energy Services-DTE Energy Biomass-Gas Production-Plug Power (33% ownership)
55% DetroitEdison
9% MichCon
25% EnergyServices
4% Energy Trading2% Coal Services
1% Biomass 4% Gas Midstream & Supply
2002 Net Income by Profitable Business
3
DTE Energy CI Timeline
1998 1999 2000 2001
DTE Energy Commits to creating DTE Energy Operating System
Director hired to start development of Operating System
Kaizen program launched to introduce Lean concepts
50 Facilitators Trained across the enterprise
Over 100 Kaizens conducted, Kaizens pushed in the organization
MERGER
4
CI Timeline
2001 2002 2003 2004
Operating Council formed charged with finalizing development of Operating System
Initial Operating System framework created with 2-year deployment plan
Black Belts trained, OS projects accumulate savings of $25MM
MERGERSix Sigma tools formally added to Operating System framework
DTE Energy Operating System becomes a way of life
2005
5
DTE Energy Operating System
HBS
Lean (TPS) Six Sigma
6
Operating System Framework
OperateConsistently
Measure, Learn & Analyze
DTE Operating Principles
• Safety of our employees, customers and general public
• Meet and exceed customer expectations
• Communicate honestly and effectively
• Hold each other accountable and reward success
• Drive decision making to the point of activity
• Gain high agreement on what and how
• Create a learning environment
• Internal collaboration and partnership
• Understand current reality through fact based measures
• Surface problems quickly
• Identify and eliminate waste• Focus on activities,
connections and flows
Continuously Improve
Vision: To establish DTE Energy as the premier regional integrated energy company by providing sustained earnings growth.
Corporate Goals
People Effectiveness
Process Excellence
Customer & Regulatory Relationships
Financial Effectiveness
Vision Principles Actions ResultsOperating SystemFramework
Plan & Engage
Develop People
Change Management
Lean Operations
Employee Engagement
Six Sigma Tools
Strategic Planning Corrective Action
Project ManagementEmployee Development
Operating System Toolbox
How We WorkHow We Think What We GetOperate
Consistently
Measure, Learn & Analyze
DTE Operating Principles
• Safety of our employees, customers and general public
• Meet and exceed customer expectations
• Communicate honestly and effectively
• Hold each other accountable and reward success
• Drive decision making to the point of activity
• Gain high agreement on what and how
• Create a learning environment
• Internal collaboration and partnership
• Understand current reality through fact based measures
• Surface problems quickly
• Identify and eliminate waste• Focus on activities,
connections and flows
Continuously Improve
Vision: To establish DTE Energy as the premier regional integrated energy company by providing sustained earnings growth.
Corporate Goals
People Effectiveness
Process Excellence
Customer & Regulatory Relationships
Financial Effectiveness
Vision Principles Actions ResultsOperating SystemFramework
Plan & Engage
Develop People
Change Management
Lean Operations
Employee Engagement
Six Sigma Tools
Strategic Planning Corrective Action
Project ManagementEmployee Development
Operating System Toolbox
How We WorkHow We Think What We Get
7
Operating System Tools
Lean Tools
•Kaizens•5S’s•7 Wastes•Error-Proofing•Visual Management•Flow Concepts•Andon•Standardized Work
Six Sigma Tools
•Basic Statistics•DOE•ANOVA•Pareto Charts•Histograms•Run Charts•Measurement System Analysis•Statistical Process Control
8
Delivery Methodologies
ProcessRedesign
Incremental
Sco
pe o
f Cha
nge
QuickEngagements
(<1 Week)
Long-TermProjects
(3-6 Months)
Event Duration
Kaizens
Waste Walks
CARs
5S Workshops
AAR’s
Learning Lines
9-Step Projects(DMAIC)
Very Effective ToolFor Service and Transaction Processes
9
DTE Energy Operating System
The DTE Energy Operating System starts with the vision of the corporation and then works through a set of principles and tools that govern how we will accomplish our goals.
Vision
Principles
Tools
Results
10
Real Contributions
20
45
105
120
$0
$20
$40
$60
$80
$100
$120
$140
2002 2003 2004 2005
Plan
Actual
Operating SystemSavings by Year ($MM)
The Operating System has been delivering increasing results since its inception in 2002
2005 YTD thru August
11
Real People – Investing in Continuous Improvement Personnel
DTE’s growth in savings corresponds with our investment in continuous improvement personnel which is now approximately 2% of our total employees
FulltimeCI Personnel
0
50
100
150
200
2002 2003 2004 2005
12
1300
20067
0
200
400
600
800
1000
1200
1400
Trained Specialist Fulltime CIPersonnel
Certified Black Belts
Real People – Investing in Training and Certification
13
Real Successes
Issue: A power plant needed to replace one of their main station transformers.
This process would normally take a minimum of 19 days. The power from this plant would need to be replaced by more expensive power from either inside or outside Detroit Edison.
Generation Planned Maintenance Outages
Solution: Set up Kaizen to develop a plan that would cut the outage time in half:
• Walked through process several times prior to shutdown (Eliminate Motion)• Preliminary prep to new transformer during delivery phase (Eliminate Waiting)• Lighting and other environmental modifications to enable around-the-clock work (Eliminate Waiting)
Outage reduced by 10 days;$3.5 M in savings
14
Real Successes
•The application of the DTE Operating System in our Customer Service organization has allowed this team to analyze and take action on the key inputs that were driving an increase in our uncollectible accounts.
Customer Service Collections
Operating System Tools Utilized
• Benchmarking
• Process Mapping
• Regression
• DOE
• Ideal State Workshops
• Visual Management
15
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2005 YTD Actual
2004 YTD Actual
2005 YTD Uncollectible Expense as Percentage of Revenue
$45 M in savingsin 2005 YTD
Real Successes
16
Real Successes
•One of DTE’s Gas Operation Service Centers was consistently performing at approximately 20% less in productivity than the other centers.
•A Lean Learning Line was established at this facility.
Gas Operation Efficiency: Worst to First
17
Real Successes
Gas Operation Efficiency: Worst to First• Within 4 months the center was consistently outperforming the other centers by 10% - 20%.
Customers Served
0.70.80.9
11.11.21.31.41.51.6
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Weekly - April / May / June
Cu
sto
mer
s/h
r.
1st Year
2nd Year
18
Real Successes
•The use of Lean and Six Sigma has also been applied to reduce the number of injuries experienced by our employees. DTE Energy’s OSHA recordable rate has dropped every year for the past three years. 50% reduction in injuries.
Reduction in Injuries
0
1
2
3
4
5
6
2002 2003 2004 2005
OSHARecordable
Rate
Regression analysis demonstratedstrong correlation to deployment of:
• Injury root cause analysis investigation• Development & Discipline of SWI’s• 5S for housekeeping
19
Tour
TO M
ar
22.520.017.515.012.510.07.55.0
10
9
8
7
6
5
4
3
2
1
S 1.27162R-Sq 86.4%R-Sq(adj) 83.7%
Fitted Line PlotTO Mar = 13.07 - 0.5441 Tour
O
SH
A R
ate March
Jun
April
May
July
AugustSeptember
OSHA = 13.07 – 0.5441 Score
5 S for Safety
Real Successes
20
Real Successes
•The Electrical Meter Repair Shop applied Lean concepts of waste elimination throughout its facility.
Waste of Motion Waste of Waiting Waste of Transportation
•There were over 40,000 meters waiting to be repaired on the floor at the shop. In just six months, the shop increased productivity by 250% while reducing the cost of the repairs by 75%. Today, there is virtually no backlog of meters to repair saving the company $480,000/year.
Electrical Meter Repair Shop
21
Electrical Meter Shop Improvement
Space Constraints
Job Shop Processing
Growing Backlog > 40K Meters
Operating System Tools
Straight–line Processing
Uniform Work Stations
5S
Employee Engagement
4-Gate/9-Step Project
Productivity: 40/day/FTE Cost/Meter: $12
Productivity: 72/day/FTE Cost/Meter: $6
Productivity: 101/day/FTE Cost/Meter: $4
Phase I
Phase 2
Phase 3
22
Real Successes
• Fossil Generation Used Operating System tools to closely analyze the measurement of SO2 at our Fossil Generation plants.
• Based on this analysis, countermeasures were deployed that resulted in improved accuracy of our emissions measurements and correspondingly a reduction in the amount of SO2 credits which were needed.
• This transformed into a $3.9 MM net savings in 2004 and $4.5 MM is expected to be saved in 2005 and beyond.
Emissions Reporting Accuracy
23
Real Successes
Observation
Perc
ent
Erro
r
280260240220200180160140120100806040201
5
4
3
2
1
0
-1
-2
-3
-4
MPP 1-2 Stack CEMS SO2 Calibration error
Emissions Reporting Accuracy
Reducing variation is saving DTE
$4.5MM per year
24
Real Successes
•The DTE Energy Electrical Shop utilized a series of Lean Kaizen events to eliminate or reduce the waste of transportation, waiting, motion, and over processing in the process to repair pad-mounted transformers. The results of the applying lean concepts to this process were:
Original Process New Process32 days of total process time 22 hours12.5 hrs of processing time 6 hours 5,800 feet of travel per transformer 3,000 feet
Annual Savings > $400,000
Transformer Repair
25
Real Successes
• Re-engineered process
• Total cycle time for repair reduced from 30 days to 1 day
• Cost reduced by 51%
Transformer Repair Costs Cut in Half
26
Real Successes
Returned Mail Accounts
4,096
1,145
247
1,4461,659
375217
997644
846828
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2/12 5/6 7/5 8/9 9/22 11/2 11/9 11/18 11/29 12/5 12/12
2004
# o
f A
cco
un
ts
Reduced by 3849 incidents per month or 94% since implementation of new process.
Bill not delivered due to inaccurate address:$800,000 in revenue increase
27
Increasing # of accounts in CSB with returned mail blank mailing address
New scan / update technology,
Post OfficeInvalid ReturnedMail
Customer Avoids Paying Bill
Lack of Business Processes to Update Blank Mailing Addresses
Initial Mailing Address Incorrect
Processes not defined or documented
Ownership & Resources
Gas/Electric Matched Accounts with Good Mailing
Business Impact Not
Communicated
No Clear Sponsor to Support Resolution
Account is <60 Days Past Due
Y X 1 X 2 X 3 X 3 X 4 )
Y X 1 X 2 X 3 X 4
= f (
= f ( X 6 )
Invalid Mailing Address Process(5 codes)
Process to resolve valid mailing address issues (14 remaining codes)
Lack of Business Processes to Update Blank Mailing Addresses
Y X 1 X 2)= f (
(Process operational in Address Mgt. – for codes NSS, NSN, OTH, IA, & ODL) )
Y
Account is >60 Days Past Due
Account is <60 Days Past Due
X 1 X 2)= f (
(Normal Collection Process will resolve address exception upon customer contact)
Customer Phone # - No Mailing Address
X 5
Project Focus Area
Process to resolve valid mailing address issues (14 remaining codes)
Increasing # of accounts in CSB with returned mail blank mailing address
Increasing # of accounts in CSB with returned mail blank mailing address
New scan / update technology,
New scan / update technology,
Post OfficeInvalid ReturnedMail
Post OfficeInvalid ReturnedMail
Customer Avoids Paying Bill
Customer Avoids Paying Bill
Lack of Business Processes to Update Blank Mailing Addresses
Lack of Business Processes to Update Blank Mailing Addresses
Initial Mailing Address Incorrect
Initial Mailing Address Incorrect
Processes not defined or documented
Processes not defined or documented
Ownership & ResourcesOwnership & Resources
Gas/Electric Matched Accounts with Good Mailing
Gas/Electric Matched Accounts with Good Mailing
Business Impact Not
Communicated
Business Impact Not
Communicated
No Clear Sponsor to Support Resolution
No Clear Sponsor to Support Resolution
Account is <60 Days Past Due
Account is <60 Days Past Due
Y X 1 X 2 X 3 X 3 X 4 )
Y X 1 X 2 X 3 X 4
= f (
= f ( X 6 )
Invalid Mailing Address Process(5 codes)
Invalid Mailing Address Process(5 codes)
Process to resolve valid mailing address issues (14 remaining codes)
Process to resolve valid mailing address issues (14 remaining codes)
Lack of Business Processes to Update Blank Mailing Addresses
Lack of Business Processes to Update Blank Mailing Addresses
Y X 1 X 2)= f (
(Process operational in Address Mgt. – for codes NSS, NSN, OTH, IA, & ODL) )
Y
Account is >60 Days Past Due
Account is >60 Days Past Due
Account is <60 Days Past Due
Account is <60 Days Past Due
X 1 X 2)= f (
(Normal Collection Process will resolve address exception upon customer contact)
Customer Phone # - No Mailing Address
Customer Phone # - No Mailing Address
X 5
Project Focus Area
Process to resolve valid mailing address issues (14 remaining codes)
Process to resolve valid mailing address issues (14 remaining codes)
Real Successes
28
•DTE’s ability to restore power quickly to our customers drives both higher customer satisfaction and savings for our shareholders. Through detailed analysis of our restoration process, the average time to restore a customer has dropped by 35% during the past year and has resulted in over $2 MM in savings YTD.
Electrical System Restoration
Real Successes
29
Step 1: Project Identification
• Historical CAIDI (Customer Average Interruption Duration Index) Performance:
Customer Average Interruption Duration
233
256276
263
216
244
206
243235
150175200225250275300
1996 1997 1998 1999 2000 2001 2002 2003 2004
Min
utes
4th quartile
30
Step 3: Current State Analysis – Restoration Time
193.3
4.5
386.0
25.0
75.6
43.131.4
13.1
All Events 1000 + 501 - 1000 201 - 500 101 - 200 26 - 100 2 - 25 1
17,884 447 407 475 590 1,953 3,166 10,814
1,643,514 938,755 318,198 153,398 84,377 100,993 36,979 10,814
Event Count
Customers Affected
233 206 237 281 296 311 355 419Restoration Time
Event Size (customers)
• 80% of the Customer-Minutes are caused by 7% of the events
• Improving these events by 10% would reduce the overall restoration time by 19 minutes
Customer Minutes
(Millions)
• 60% of the events are 1 customer outs.
• Reducing time for these 10,814 events to 180 min, would drop overall time by only 1 minute
31
Step 3: Current State Analysis
The Trouble Dispatch project was broken into two projects: Large Outage Management project, and Data Integrity – Audit Process
Restore Customers in 3 Hours or less
Time to Repair
Y = f ( X1 , X 2 , X 3 )
Y = f ( X4 , X5 , X6 , X7 )
Time to Dispatch
Resource Availability
ORC / Dispatcher
skill set
Y = f ( X8 , X9 , X10 , X11 )
Large Outage Mgmt
152 CAIDI = 233 66 15= + +
Resource Availability
Crew Allocation
Crew Alignment
Crew Utilization
Project Focus
15 min Restoration
Improvement Target
Visual Management
Time to Dispatch
Data Accuracy
Large Outage Mgmt
32
Step 4: Define Ideal State
200 - 1000 1000 +l Send Supervisor l Send Supervisorl LS l LS
A l B l Bl If indication of Station
Lockout, send Operator
l If indication of Station Lockout, send Operator
l B (and SS if available) l B (and SS if available)
B l l Call in LSl Call in Supervisor
l LS (and SS if available) l LS (and SS if available)
B l Call in B l Call in Bl l Call in Supervisor
l If B crew on-call, bring in B l
l
Cl l Call in Supervisor
Bring in On-Call and additional crew to make a B and LS
Crews / Personnel on site (typical M-F Day, or shift with multiple crews on site)
B Crew on Shift (no LS on site)
Notify Supervisor (supervisor discretion to come in)
No Crews on site
Notify Supervisor (supervisor discretion to come in)
If LS on-call, bring in LS and also call in a BNotify Supervisor (supervisor discretion to come in)
LS on Shift (no B crew on site)
• Developed Large Outage Dispatch Guidelines
– The guidelines focus on getting the right personnel to the event at the start, rather than waiting to see which resources may be needed.
– Driving accountability and performance by getting field supervisors out to the events from the beginning.
Number of Customers Out
33
Step 5: Identify Gaps & Countermeasures
Process Step
Key Process
Input
Potential Failure Mode
Potential Failure Effects
SEV
Potential CausesOCC
Current Controls
DET
RPN
Actions Recommended
Event Dispatching
Field Crew Availability
Lack of crews to dispatch event to
Increased dispatch time & outage duration
5No crews scheduled to work in field
9 Shift schedules 7 315
ST - dispatch guidelines, LT - Analyze trouble resource allocation
Field restorationField crews, field supervision
Crews not working optimally
Increased outage duration, higher expense
7Lack of field supervision presence, especially on off shifts
7Feedback through OT monitoring, ROC monitoring
6 294Increase field supervisor presence, utilize Lg outage disp guidelines
Event Dispatching
Outage data, ORC/RSS
ROC personnel (ORC, RSS) not aware of large outage event
Increased dispatch time & outage duration
5Periods of high workload, multiple priorities, lack of a centralized notification process
5Individual InService installations
6 150
ROC Visual mgmt project - install central displays to notify/track large otuage events
Event Dispatching
Field Crew Availability
Not utilizing ST crews in adjacent service territories
Increased outage duration, higher expense
5Poor communication between ORC's
3 None 6 90Include in the Lg Outage Disp guideline SWI's
Field restoration Field CrewsOptimal restore before repair opportunities not captured
Increased outage duration
5
Field crews making decisions on less than complete information. Poor communication between ROC and field crew
3Large Outage / Long restoration AAR's
6 90Send field supervisor to as many large outage events as possible
Trouble Analysis InService dataEvent rolls-up to the wrong point
More customers reported out than actual
1Customers not assigned to the correct device
7 CARS, audit process 5 35
Data EntryPartial Restorations
Partial restorations not captured properly in InService
Increase to reported outage duration
1 Data entry errors 7 Audit process 3 21
Inservice data accuracy report project (J Koenders), Data Audit Project (S Putrycus)
Utilized an FMEA (Failure Modes Effects Analysis) to identify gaps to ideal state and ensure that countermeasures were developed to address them.
34
Step 7: Test, Refine, & Implement
• Conducted After Action Reviews with North ROC and South ROC (trouble dispatching and operating centers)
• Focus was on reviewing of specific events where the guidelines were and were not used as designed.
• Developed a report outline for dispatch guideline compliance and effectiveness
35
Step 7: Test, Refine, & Implement
Expect year end restoration time to be under the year end target of 195 min
CAIDI YTD 2004 vs 2005
100120140160180200220240260
Jan Feb Mar Apr May Jun
CA
IDI
(min
)
2004 2005
79 min
36
t-Test: Two-Sample Assuming Equal VariancesRestoration time for large outages
2004 2005Mean 235.3 159.7Variance 61,758.6 22,524.6 Observations 457 310Pooled Variance 45911.1Hypothesized Mean Difference 0df 765t Stat 4.80P(T<=t) one-tail 9.721E-07t Critical one-tail 1.647E+00P(T<=t) two-tail 1.944E-06t Critical two-tail 1.963E+00
2005 large outage CAIDI performance is statistically different than 2004. . . About a 1 in 1,000,000 chance that the change is due to random variation
Step 8: Measure, Verify, and Control
37
Step 9: Celebrate the Success
• Restoration performance this year has significantly improved and should finish the year well below Distribution Operation’s target of 195 minutes.
Customer Average Interruption Duration
235 243
206
244216
263 276256
233
170 YTD June
150175200225250275300
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Min
utes
38
Real Possibilities - Combining the Power or Lean and Six Sigma
Shareholder&
Customer Value
Lean • Eliminating Waste• Focus on Process
Activities, Connections & Flows
• Results in Speed of Processes and Time Reduction
Six Sigma• Driving Consistency• Eliminating Process
Errors and Variation• Results in Capability
& Reliability
$ $
$200 M / Year
39
End of Presentation
Questions ?