Green Belt Project V2

Hydro Cost Model – Turbine Equations Six Sigma Green Belt Project

Project ID – A112502.2Jonathan Shriqui

February 2007

2 Six Sigma Green Belt Project - Hydro Cost ModelJonathan Shriqui

D M A CI

PROBLEM STATEMENTNo set parameters for estimating turbine partsHistorical data fluctuation (FX rates, steel, copper) do not represent future fluctuationsNon standard part composition (make VS buy, SS vs non SS)

PROJECT GOALIdentify and establish set parameters for accurate cost estimation for turbine parts, other then the runner, based on GSC parameters (labor, eng, supply) and economic factors (FX rates, steel index, copper index)

BUSINESS CASESupporting MFG Finance in establishing an automated cost model

DELIVERABLESDefine statistical cost equations for turbine scope, runner excluded.

PROJECT SCOPENew TurbinesBOUNDERIESIN: Turbine scope onlyOUT: PBS 140 – RunnerCONSTRAINTSEach part is custom to a projectSame parts/PBS can have different material composition depending on the projectSome parts/PBS are combined on smaller units

TIMELINEThe goal is to have establish mathematical equations for the main turbine PBS with in a 4 months period.

RESSOURCES

Engineer: Vicent FrancouBlack Belt: Maya El-Rayes & Beverlie TaylorChampion: Serge BélangerSupport: Carl Larochelle

Mario Pelletier

Project Charter


D M A CI

Current Process Map

CustomerITO Cost Estimator

OutputCost of

component

ProcessModification of reference parameters

to meet new project parameters

InputsParameters

from previous projects

SupplierEngineering

High Level Process Map


D M A CI

• Cost estimations are based on reference projects, where the data and technology used at that time may now be outdated• Highly manual process, no standardization• Requires high product knowledge• No standard template for estimators• Limited relevant historical data

“As Is” Process Weakness


D M A I CDefine Performance Standards

What is a defect:Budget variation from Actual cost greater then 5%

What is being measured?Actual cost vs budget

Performance Standard and Specification Limit

•Type of Data: Discrete•Opportunity: All turbine components (runner excluded) •Defect Definition:

Acceptable%5costBudget

costBudget -cost Actual

DEFECT%5costBudget

costBudget -cost Actual


Current Status Actual Cost vs Budget

0

2

4

6

8

10

-10 0 10 20 30 40 50 60 70 80 90

% Deviation from EAC

Freq

uenc

y

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Frequency

Cumulative %

D M A CI

Observed: 593’750 DPMO

Target 90% Defect Reduction

Process Data

USL 5.00%Target 0LSL *Median 10.83%P5 -4.84%P95 69.58%Span (P95-P5) 74.42%Q1 1.49%Q3 25.42%Stability Factor 0.0585

Non Normal Data

Current Status


DELIVERABLEMathematical equation (transfer function) based on measurable parameter(s) delivering an accurate estimation with a 95% confidence level.

Y=F(X) where R2 < 95%

D M A CIDeliverable Definition


Performance Objectives D M A CI

Y=F(X) where R2 > 95%

Target:

To reduce all cost estimation defects, where the variation between actuals & budget would +\- 5%.

Business CTQ: Accuracy

Performance Std: Forecast a cost within 5% of its actual cost


Baseline Z D M A CI

Zone of AverageTechnology

Zone ofTypicalControl

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0 1 2 3 4 5 6

Z.Shift

Z.Bench (Short-Term)

World-ClassPerformance

Report 8B: Product Benchmarks

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10

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1000

10000

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1000000

0 1 2 3 4 5 6


PPMReport 8A: Product Benchmarks

Z(bench) = 1.2 (593’750 DPMO)

* Product Report – Discreet Data


Sources of Variation

Actual > Budget

No automated technical input Manual Data input

Re Work Process Use of Reference project cost

EASY

OTR-ITO feedback loop non completed

Detail PBS level Cost

Data is not maintained

Incomplete Data

Suspect Data

Makes the Data subject to interpretation

No direct data feed from ENG

Multiple products Separate systems depending on product

Current Engineering practices

Need to interpret manual descriptions

Difficult to get all historical costs on time

Historical data not inflated correctly

Excel sheet reports that can be manually modified

No Standard Process

Dependent on Technical knowledge of the CE

Historical estimates don’t contain all the information

Not costs are available

OTR costs are input under incorrect PBS

Historical costs are lump summed

Evolution of technology

EASY

IMPACT

EFFO

RT 1 3

2 4

BIG LITTLE

HA

RD

1

1

1

12

22

2

2

222

3

3

34

4

4

3

3

Historical data doesn’t account for FX Impact 1

D M A CI


Proposed Solutions

Description of Vital X’s Proposed Solution

1 Cost obtained via project parameters

Identification of necessary technical parameters for costing.

2 Structured database for historical information

Creation of historical database

3 Budget obtained via project parameters

Creation of equation to forecast cost based on technical parameters.

D M A CI


Identification of necessary technical parameters for costing.

•Weekly brainstorming with engineers•Review of all reference projects•Agreement on technical parameters•Efficient use of PEGASUS

# Parameter Description PBS UOM1 HT-Spir_Case_press_max_mom Maximum momentary spiral casing pressure High level characteristics MPA2 HT_Runner_Throat_Dia Runner Throat Diameter High level characteristics mm3 HT_GV_circle_Dia Guide Vane Circle Diameter High level characteristics mm4 HYDT_GV_qty Guide Vanes number of vanes High level characteristics5 HYDT_Dist_height Distributor Height High level characteristics mm6 HYDT_DT_found_anch_weight Draft Tube Foundation Anchors Weight 8110 - Foundation Parts Kg7 HYDT_SC_found_anch_weight Spiral Case Foundation Anchors Weight 8110 - Foundation Parts Kg8 HYDT_PN_weight_DT Pier nose weight for draft tube 8110 - Foundation Parts Kg9 HYDT_DTCL_weight_MS Draft Tube Cone Liner Weight (Mild Steel) 8120 - Draft Tube Kg10 HYDT_DTEL_wt_MS Draft Tube Elbow Liner Weight (Mild Steel) 8120 - Draft Tube Kg11 HYDT_DT_ext_Weight Draft Tube Elbow Liner extention Weight (Mild Steel) 8120 - Draft Tube Kg12 HYDT_DTCL_weight_SS Draft Tube Cone Liner Weight (Stainless Steel) 8120 - Draft Tube Kg13 HYDT_DR_MS_weight Discharge Ring mild steel Weight 8130 - Discharge Ring Kg14 HYDT_DR_sS_weight Discharge Ring stainless steel Weight 8130 - Discharge Ring Kg15 HYDT_SC_weight Spiral Case Weight 8140 - Spiral Casing Kg16 HYDT_SR_weight Stay Ring Total Weight 8140 - Spiral Casing Kg17 HYDT_Pit_Liner_weight Pit Liner Weight 8150 - Liners Kg18 HYDT_LowPit_liner_weight Lower Pit Liner Weight 8150 - Liners Kg19 HYDT_BR_Weight_rad Bottom Ring Total Weight 8210 - Covers and Ring Gate Kg

D M A CI


Creation of historical database• Gather all cost & technical data

• Apply Inflation, escalation & FX

• Review Outliers

ProjectName ContractNumber 2006 Cost (USD)

2007 Cost (USD/Kg)

EngineeringNumber

of section

Weight (Kg)

# of WG WGCD (mm)

Design Pressure

(Mpa)

H distributor

(mm)PD3 Supplier Year

ERTAN 0222961205 1,089,628$ 7.07 0 4 154100 20 6993 2.31 1462.5 790.0 n/a 1995SANXIA 0222962201 3,235,358$ 8.47 2234 6 382000 23 11139 1.373 2832 1897.6 n/a 1999-2001SEVEN MILE 0222061501 469,074$ 5.83 1160.3 4 80430 19 7500 0.9 2013 379.7 Groupe LAR 2002SM3 0222062101 870,207$ 12.89 914.5 2 67500 19 5000 4.1 639 512.5 Québec 1998TOULNUSTOUC 0222078701 215,895$ 6.05 1327.9 1 35670 19 4882 2.22 871.875 258.3 Fabspec 2002VATNSFELL 0222972301 47,552$ 3.99 79 2 11922 20 3650 0.9 762.5 43.8 China 1999BRISAY 0226008501 2,193,951$ 9.66 1112.3 4 227000 23 10320 0.785 3010 862.8 n/a 1991

D M A CI


Creation of equation to forecast cost based on technical parameters.

• Apply statistical tools

• Obtaining cost predicting equations

• Validate with commodity leaders

D M A CI

Equation 1 ($) COST = -37656+4.0132W+1.6434PD³

Projects Projects Cost Weight Pressure Throat D PD³ERTAN ERTAN Average 1,819,935.00 279,000 2.31 5,850 462,466SEVEN MILE SEVEN MILE Average 1,437,152.86 259,100 0.90 6,250 219,727SM3 SM3 Average 871,301.72 125,000 4.10 3,600 191,290TOULNUSTOUC TOULNUSTOUC Average 586,158.76 104,650 2.22 3,875 129,172VATNSFELL VATNSFELL Average 90,248.40 27,895 0.90 3,050 25,535BRISAY BRISAY Average 2,763,443.57 503,000 0.79 8,600 499,304GRANITE CANAL GRANITE CANAL Average 171,532.61 53,000 0.56 4,200 41,786


Equation Back-UpBest Subsets Regression Response is Cost P Adj. T D Vars R-Sq R-Sq C-p s W P D ³ 1 98.0 97.6 24.2 149560 X 1 92.2 90.6 103.4 295938 X 2 99.6 99.4 4.3 74155 X X 2 99.4 99.0 7.7 94766 X X Regression Analysis The regression equation isCost = - 37656 + 4.01 W + 1.64 PD³ Predictor Coef StDev T PConstant -37656 45794 -0.82 0.457W 4.0132 0.4615 8.70 0.001PD³ 1.6434 0.4066 4.04 0.016 S = 74155 R-Sq = 99.6% R-Sq(adj) = 99.4% Analysis of Variance Source DF SS MS F PRegression 2 5.57479E+12 2.78739E+12 506.89 0.000Residual Error 4 21996100073 5499025018Total 6 5.59678E+12 Source DF Seq SSW 1 5.48494E+12PD³ 1 89845101929

D M A CI

Ho: Variable is not a significant predictor of the modelHa: Variable is a significant predictor of the model


BeforeCustomerITO Cost Estimator

OutputCost of

component

ProcessModification of reference parameters

to meet new project parameters

InputsParameters

from previous projects

SupplierEngineering

D M A CI

AfterCustomerITO Cost Estimator

OutputCost of

component

ProcessFed the technical

parameters (Inputs) into

the equation

InputsTechnical

parameters of project

SupplierEngineering

High Level Process Map


Improved Z

Zone of AverageTechnology

Zone ofTypicalControl

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0 1 2 3 4 5 6

Z.Shift


World-ClassPerformance

Report 8B: Product Benchmarks

1

10

100

1000

10000

100000

1000000

0 1 2 3 4 5 6


PPMReport 8A: Product Benchmarks

New Z(bench) = 2.1 (285’714 DPMO)

D M A CI

* Product Report – Discreet Data

Old Z(bench) = 1.2 (593’750 DPMO)


Prove the Improve D M A CI

• Plot ITO data with equations• Moods Median Test • Prove that there is no statistical difference between the Calculated cost and the ITO estimations

Chi-Square = 3.20 DF = 1 P = 0.074 Individual 95.0% CIsmethod N<= N> Median Q3-Q1 -+---------+---------+---------+-----Equation 3 7 933121 534832 (-----------------------+--)ITO 7 3 742813 601846 (----------------+-------------) -+---------+---------+---------+----- 400000 600000 800000 1000000Overall median = 784147A 95.0% CI for median(Equation) - median(ITO): (-478780,577841)

P > 0.05

Spiral CaseEquation Cost VS Actual Cost

GRANITE CANAL

BRISAY

VATNSFELL

TOULNUSTOUC

SM3

SEVEN MILE

ERTAN

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

0 1 2 3 4 5 6 7 8

Cos

t (US

) $

Total Equation Cost Actual Cost


Control Process• Kept track of all results electronically in a centralized database• Trained the cost estimators on the database and equations• Insured hand-off knowledge to a dedicated cost modeler

D M A CI

Microsoft Word Document

Green Belt Project V2

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