Partnering the Supply Chain Installation of Central Heating A Case Study Simon J Brown Divisional Di

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Partnering the Supply Chain Installation
of Central Heating A Case Study
Simon J Brown Divisional Director
(Asset Management)
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Liverpool Housing TrustIntroduction

• Organisation formed in 1965
• Now in a Group Structure - Vicinity Group
• LHT
• Cobalt Housing
• Beechwood and Ballentyne
• Atrium City Living
• Jigsaw Solutions
• LHT manage approx 12,000 homes
• Merseyside
• Current budget over 13 million per year

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Background to the Change

• High Installation Costs
• Quality Concerns (high response repair costs
  before lifecycle)
• Pending Legislation Change (condensing boilers-
  sensitivity).
• Failure to address
• Client Control (Supply Chain).
• No Price Certainty
• No Incentives for Supply Chain.
• Limited Scheme Performance Monitoring (Responsive
  Repairs and New Developments).
• Competitive short term tendering.
• No continuous learning process
• No component standardisation within the Trust
• Accelerating Change identified a target of 20
  of all projects to be completed by integrated
  supply chains by 2004

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The Project Team

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Objectives Of The Project

• Improve Service Offered to Liverpool Housing
  Trust Customers through
• Improving Service Delivery
• Improving Quality
• Reducing Installation Costs and Costs in Use
  Through Greater Efficiency.
• Deliver Continuous Improvement
• Create an Innovative Partnering Contract built
  upon real benefits for LHT and Partner
  Organisations - Not Signed in Name only.

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Considerations

• Work with developing organisations
• Prepared to change!.
• Add value to the organisations.
• Focus on Quality
• Introduce effective monitoring systems for
  systematic continuous improvement
• Cost Control
• Process/cost evolution.
• Maximise the skills of the supply chain to
  Increase efficiency.
• Look at process jointly to reduce duplication
• Transparent costs structure
• linked to 15 profit goal.
• Client/ contractor Efficiency Audits
• Greater financial control for planning.
• Risk
• Joint approach to risk (risk register) - Core
  Group Meetings
• Health and Safety Audits
• Compliance with the health and safety Plan.

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Key Outcomes

• Awarded Demonstration Project Status October
  2004 and further submission during 2007.
• Client/Installer QA systems BS EN ISO 9001
  accredited.
• CSCS membership and additional training
  initiatives
• Local contractors forum local employment
• Heating designs checked by manufacturers
  (Myson).
• LHT water quality monitoring (Analysis by
  Sentinel).
• Specification control - supplier monitoring.
• Work time programmes - developed with team
  members.
• Improved planning greater continuity.
• Extended guarantees through reduced risk. (3
  years)
• Extended working hours - late Thursday and
  Saturday Mornings
• Recycling components within day-day repairs.
• Energy efficient disposal of materials.

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Key Outcomes

• Improved Quality at Reduced Cost
• Efficiency and supply activity.
• Maintaining contractor profit 15 (Upper
  Quartile)
• Completing of more heating installations for the
  same cost.
• Upper CBPP National Quartile Performance Achieved
• Over 67 of KPIs measured.
• Improved Service Delivery
• Reduced Contractor Recalls
• Recalls repaired first time.
• Reduction in customer inconvenience.
• Extension to working hours
• Fewer material returns.
• Recycling of Components

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Water Quality Analysis

• Monitoring
• Sentinel System Check Validate the condition of
  the water in the heating system
• Presence of inhibitor Sentinel X400 (Cleaner)
  then X100 (Inhibitor)
• LHT undertake Water Sampling (approx 10-20)
• Issues
• Typical Failures - No presence or low level X100.
  (copper filings traces etc/ flux (Magnetites))
• X400 - Installers purchased Conductivity meter
  detects presence of contaminates / compared to
  tap water then X100 1 litre to approx 70lites
  average system. (previously visual test)
• Impact
• Extend the life of radiators and components of
  boiler (pump and diverter valve etc).
• Can Perforate radiator within 12 months
  (Electrolitic reaction with copper and steel
  (weld on bottom of radiator)
• Inhibitor quietens system.
• Reduction in No. of systems that failed water
  sampling

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Year 1 System Quality Analysis
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Year 3 System Quality Analysis
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Performance Quality

• General
• Inclusion of non-return valves fixed screw
  (tenants cant alter flow rate) less return
  visits to balance system.
• Danfoss Room Stats Red neon (Boiler on ) Less
  callouts
• Radiators
• Calculations of radiators (room sizes)
  undersized rads boiler wont switch off cant
  achieve optimum temperature. Myson check
  calculation sheets prevent under sizing.
• Pipework
• Previously used Micro-bore (8mm) or Mini-bore
  (10mm) changed to 22mm or 15mm.
• Can aerate, prone to blockages, prone to
  mechanical damage, aesthetically pleasing.
  Manifold tend to corrode (no requirement with
  15mm) Quieter and heats up quicker increased
  tenant satisfaction.
• Flow Rate
• Flow rate tests undertaken by installer (Flow
  Cup) Low flow rate can damage boiler (pump
  working overtime)

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Performance Quality

• Worcester
• In-house training by Worcester LHT and partners
  Diagnostic faults quicker reduce costs for
  servicing and call outs.(2 product training
  sessions per annum product updates and
  installation process)
• Reduced Servicing - Flue Gas Analyser and drop
  test old system need to strip down boiler.
• Guarantee 3 years now looking to extend.
• Installer Provided with Hospital Kits Common
  components i.e. PCB board, Pump head, fan, air
  pressure switch. Installer attends to problems
  (Reduce waiting time for tenant) 12 hour.
  Worcester respond

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Performance
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Financial Saving

• Reduced Installation Costs
• 3,000 (2002)
• 2,384 (2003)
• 2,337 (2004)
• 2,436 (2005)
• Savings
• 2003 450 units X 616 277,200 Saving
• 2004 600 units X 663 397,800 Saving
• 2005 600 units X 564 338,400 Saving
• Total Saving 1,013,400
• Additional Installations 416 installations
• Reduction of 75 Boiler Renewals First Time in 10
  years
• 75 X 1,200 90,000 Saving 37 installations
• Reduction in Costs in Use by 200 Orders per year
• 200 X 56.00 (av. Cost) 112,000 Saving 45
  installations

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LHT Performance Cost
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Contractor Efficiency Audits

• Designed to improve the business efficiency of
  contractors. Clients can benefit if contractors
  business processes are improved.
• Analysis of ?
• Business strategy
• Organisation structure
• Business process
• Management information systems
• Procurement strategy
• Improve your productivity
• Reduce your costs
• Streamline the back office
• Help you get the most from technology
• Change the way you think about your business
• Increase your profit
• Why Automatic Inflationary increase in contractor
  rates?
• What about Efficiency?
• What about incentivies?

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General Context

• Cost Reduction Review
• Core materials
• General office supplies
• IT hardware consumables
• Telecommunications - land lines mobile phones
• Transport costs / vehicle fuel
• Printing
• Work wear
• Insurance
• Business Efficiency Review
• How does the company measure and manage
  performance?
• What are the medium and long-term business goals
  and what KPIs are currently used?
• How does the company schedule work and manage
  staff utilisation and capacity planning?
• What are the causes of disruption to the business
  (e.g. no access, scrap and reworks, customer
  callbacks) and the associated costs?
• Value add vs. cost add, the customer perspective
• Business viability check

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Contractor Efficiency Audit Conclusions

• Contractors in growth and an evaluation of LHTs
  role.
• Poor procurement skills
• Contractors could further improve their buying
  skills to reduce costs.
• Materials/ transport costs/ telecoms
• Inefficient paper based procedures in operation
• The general level of IT skills amongst staff is
  limited
• Office and storage space is a constraint
• Better use of technology will increase office
  based staff productivity and reduce the need to
  increase staff in line with growth.
• Improved work planning and coordination will
  reduce costs.

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Efficiency Savings (Contractor Procurement)
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Efficiency Savings (Process)
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Total Potential Contractor Efficiency Saving

• Year 1 - 105,307
• Year 2 - 133,307
• If the efficiency savings are not implemented why
  should the clients costs automatically increase.

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What the contractors said

• Our Directors were heating engineers first and
  foremost. After the analysis we could see that we
  were being naïve about our business. This has
  been a real learning curve for us and it has
  generated real benefit. It changed the way we
  work. Everything used to be in our heads, which
  worked when we were smaller, but now we have it
  on a server.

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Conclusions

• Clients, especially those with a view to
  delivering to end users are only as strong as
  their supply chain. Traditional partnering
  approaches should provide the basis for open and
  honest communication to discuss and drive real
  change. Without building these initial
  relationships it can be difficult to implement
  these changes.
• Often, when using smaller companies, they are run
  by specialists in delivery. By creating
  opportunities for them to think about how they
  run their business they can think differently
  about how they deliver their services and create
  real changes.
• Where processes are critical for a client and
  being delivered by a number of different service
  providers it is important for the client to
  jointly analyse and determine how these should be
  delivered.

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Maintaining Continuous Improvement

• 16 Key Performance Indicators.
• Competence, quality, cost, time, health and
  safety, satisfaction, respect for people,
  environmental,
• Contractor attends weekly site surgeries.
• Standard quarterly Core Group meetings
  identified linked to improvements (mandatory
  attendance).
• Agreed Profit margins reducing installer risk
  with a constant focus on quality.
• Static Costs v Process Evolution Cost
  Evolution.
• Installer efficiency audits.
• Constant cross cutting
• Market testing

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Summary

• Huge potential benefits if clients take control
  but it requires
• Look at others who are achieving
• Work with the right people
• Re-educate and understand what can be achieved.
• Clients to drive the Process
• The introduction of accountability for all
• Clearly define procedures lean
• Achieve added value from the supply chain
• Introduction incentives wherever possible.
• Transparent monitoring - continuous improvement.
• Develop Trust and build relationships.
• Provide sufficient time to introduce (LHT 6 month
  period).

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The Latest Developments

• Work with contractors to improve efficiency.
• Introduction of another Housing Association
• Seeking to extend to other Merseyside RSLs
• Local consortia

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Other innovations

• Contractors Conference
• Contractors Training DVD
• Health and Safety
• See the case study
• Robust Contractor management procedures
• Performance league table
• ISO 90012000
• Attained 2003 and maintained