When Henry Kaiser built his cement plant in the limestone-rich hills at the southern end of San Francisco Bay back in 1939, he could not have imagined that the sleepy suburbs surrounding the bay's mud flats would in 80 years become the epicenter of world economy.

Silicon Valley is the heart of high technology and the bastion of overnight millionaires, where tenement buildings and run-down shacks cost half a million dollars. However, for all of the area's cyber-stardom, one fact remains: The world may be run on silicon, but its foundation is still cement.

Background

The Hanson Permanente Cement plant (formerly Kaiser Cement) in Cupertino, Calif., was built in 1939 to supply the 1.1 million tons of portland cement needed for the construction of the Shasta Dam. The Permanente plant was completed in record time: nine months from start to finish, and two months ahead of schedule. By 1941, the Permanente plant was the largest cement plant in the world.

Through the 1950s and 1960s, Hanson continued to expand and grow both in process output and diversity of products. In the early 1970s and 1980s, in response to energy and environmental needs, the plant was modernized and now boasts the largest single preheater kiln in the United States, supplying nearly one-third of all the cement used in Northern California.

The key to Hanson Permanente's success has always been its people. Craftsmen, engineers, and managers have created new applications, new products, new markets, and more efficient work methods. It is the fundamental precept in the Permanente management structure that people are the key to profitability.

The problem

In the late 1980s and early 1990s California's sluggish economy began to recover from a nationwide recession that was compounded in the golden state by massive defense cuts and numerous military base closings. Silicon Valley erupted in growth and high-technology firms controlled the economic landscape. Fueled by the high-tech explosion, land and housing prices soared to astronomically high levels. All available manpower in the area was consumed, driving salaries and wages out of proportion to the rest of the region. Blue-collar trades were driven out of the area due to an inability to economically compete with knowledge-based industries in housing and compensation.

This demographic environment confronted Hanson Permanente in the late 1990s. Already paying 25% more for manpower than cement industry averages, the company found itself 45% below geographic wage levels. With an aging workforce continually shrinking through retirement and economic attrition, those who remained were living farther and farther from the plant in order to survive.

The combination of adverse demographics, the harsh operating environment, and the physical condition of the plant led to spiraling deterioration. Call outs for equipment repair were not being answered, more and more contractors were being used, and an excess of repetitive failures of equipment necessitated increased rework and maintenance follow-up. Machinery uptime and reliability were becoming crucial as more variables and errors were introduced into the process.

“The journey of a thousand steps begins with one.”

In 1998, Hanson Permanente's management, led by Steward Smith, vice president of operations, and Jake Hawkes, maintenance manager, recognized the downward spiral and took steps to halt the deterioration and improve reliability and uptime.

Bringing in an external reliability and maintenance consulting organization, Hanson conducted a benchmark study of their current practices against world-class best practices. Once this baseline was established, the company had a clear picture of where it stood as an organization.

The benchmark focused on a multitude of areas. The external consultant wanted to address all of the areas in a multi-million dollar, multi-year engagement. Hanson's leadership decided to forego the typical engagement and focus on the Hanson's strengths — its leadership and its people. To do this Hanson targeted specific areas that would provide the fastest return on investment and also have the most far-reaching results throughout the organization.

In a cement plant, a steel mill, or any manufacturing facility, the single most influential individual is the front-line supervisor, who converts management's vision into action. Like a pebble tossed into still water, the supervisor's influence spreads outward reaching the entire plant.

Smith and Hawkes hired human performance consultant Richard Lowell to design a targeted, specific consulting engagement plan that called for one week-long, on-site visit per month and focused on people performance as well as work processes and methodologies. This kept costs manageable, provided total focus of resources while the consultant was on-site, and fostered client buy-in by allowing organizational change to be fostered internally via the plant's own managers rather than imposed from the outside.

Key managers were given the responsibility and authority to implement all planned changes during the off-site weeks. Only one consultant was used, allowing for client recognition, acceptance, and one-on-one facilitation and mentoring.

Key to this strategy was the Plan of Action and Milestones (POAM), which was devised based on the benchmark data and integrated human performance enhancement techniques into the mix. Human Performance Technology (HPT) is a set of methods and procedures, used with a strategy for solving problems and realizing opportunities related to the performance of people. It can be applied to individuals, small groups, and large organizations. It is, in reality, a systematic combination of three fundamental processes: performance analysis, cause analysis, and intervention selection. These techniques, combined with classic Organizational Development (OD) strategies, provided powerful tools to assist Hanson Permanente in creating its own future rather than relying on external factors.

The first items addressed by the engagement were:

1. Supervisory training, which included hands-on coaching and mentoring. This initial intervention focused on profiling the different styles and management techniques used by each supervisor followed by a specific and individual course of action. Each of the action items was included in the supervisor's performance evaluation. Incentives were tied to measurable performance and demonstrated enthusiasm and contribution to the reliability effort. Using HPT techniques, a composite portfolio of training, incentives, job aids, and behavioral expectations were created for each supervisor and overseen by his respective manager.

2. Shutdown dynamics, which included planning, logistics management, process control, and test and inspection. This segment was addressed in classic OD fashion. An organizational analysis of the shutdown team was conducted to include organizational climate, system characteristics (both positive and negative), resource utilization, norms and values, intergroup dynamics, critical organizational interfaces, management philosophy, and implementation strategies. Once the analysis was completed, individual assignments and checklists were developed to expedite and measure results.

3. Preferred provider alliances to improve contractor integration, quality, and performance. This stage was the result of the shutdown analysis and was conducted simultaneously with shutdown improvement. Applying the concepts found in Lean Manufacturing, Total Quality Management (TQM), and Total Productive Maintenance (TPM), vendors were voluntarily analyzed for commitment to quality, safety, flexibility, timeliness, and work practices. Hanson Permanente established standards for interoperability and those vendors who met the criteria were invited to participate. Key to success was contractor and Hanson's willingness to share information in an open environment of mutual success.

Over the course of two years, additional skill and knowledge sets were built into the POAM as depicted by the diagram on page 29.

Results

Over the two years the Hanson Permanente reliability enhancement program was in effect, results were categorized into two areas: improved efficiencies and decreased costs (see chart below).

Improvements

Improved uptime. Uptime is that element of active time during which a piece of equipment or process is in condition to perform its required functions. It is a composite measure of operational availability and dependability, expressed as a ratio by dividing uptime by uptime plus downtime. Hanson moved from an uptime of 86% in 1998 to 93% in 2000.

Improved shutdown efficiency. The first indicator of improved shutdown efficiency was the smooth way the shutdown progressed. There were no serious conflicts between plant people and contractors, and everyone seemed to enjoy the spirit of cooperation that dominated the atmosphere. Further indication of success was the flawless start up. It is almost magical to an operator when he pushes the start button on a piece of equipment that has been down for several weeks, and it jumps to life and runs just like it did when it was new. Equally important was the fact that the shutdown was on budget and on time.

Improved reliability. Reliability can be defined as the probability that equipment, machinery, or systems will perform their required functions satisfactorily under specific conditions within a certain time period. This is measured by mean time between failure (MTBF). Hanson's MTBF for finish mills increased by 8%, clinker cooler by 15%, and raw mills by 12% from 1998 to 2000.

Increased “wrench time.” The industry average for maintenance personnel time on tools or actually performing work is 15%. Hanson increased this to 37% over two years.

Improved communication between departments. This was calculated by the number of interdepartmental “saves” (equipment causalities avoided by notification between departments), decrease in interdepartmental grievances, and management's perception of the relationship between departments.

Improved failure analysis. Hanson conducted Root Cause Failure Analysis on only 50% of equipment failures in 1998. By 2000, that number had increased to 85%.

Increased capacity 10% by increasing reliability and equipment efficiency.

Decreases

Decreased insurance costs through prospective insurer 10%, or about $250,000 through the application of reliability initiatives.

Decreased emergency maintenance 11% through improved Preventive and Predictive Maintenance efforts.

Decreased spare parts inventory about 7% through improved planning and scheduling, inventory management, and procurement procedures.

Next steps

Hanson Permanente's reliability enhancement project has entered its third year. Future plans include consolidation of gains already achieved and implementation of a new Computerized Maintenance Management System (CMMS) by J.D. Edwards. In addition, Hanson plans to move forward in establishing:

Visual control systems. Visual controls are directions, instructions, or identifiers placed directly on the equipment indicating operating conditions, rotation direction, and other pertinent information. Such controls have proven useful in the military and TPM organizations. Hanson started a pilot program in the raw mill area. Some examples they are using:

• Mark each item of equipment with its name and number;

• Indicate acceptable ranges on instruments such as pressure gauges, vacuum gauges, thermometers, and ammeters to facilitate correct operation;

• Label cover of devices, such as chains and coupling, with their rotation direction and specifications; and

• Label pipes with their flow direction and contents to improve maintainability, operability, and safety.

Autonomous maintenance and improved operator training. This will increase the production departments role in reliability and seek to decrease the human errors that creep into the process. Production's mission is to produce cement as cheaply and quickly as possible. One of the department's primary goals is detecting and dealing with equipment malfunction and off-spec product or process; all of these problems have a maintenance component. Autonomous maintenance is any activity performed by operators, having a maintenance function and is intended to keep the plant operating to meet production goals.

Increased vendor partnering through increased communication and interaction to maintain low costs and improve the application of external services.

The future

Hanson Permanente charted its future with the knowledge that people are the one enduring asset without which no technology or equipment will insure success.

To paraphrase the 2,000-year-old philosophy of Sun Tzu in The Art of War:

• They have chosen their battles and challenges. By developing a mission, a set of goals, and realistic objectives, Hanson focused their attention on the requirements for success.

• They recognized and used their human resources and other assets wisely. Randomly throwing money or people at a problem may produce activity but not success.

• They aligned their goals and objectives at all levels. Saying something is a goal is not sufficient. All levels must believe in the goal to truly support it.

• Hanson empowered others within their organization to succeed. Bureaucracies and procedures can hinder the best business manager. Hanson freed them to move quickly and gain success where they found it.

The most interesting part about this improvement in maintenance and manufacturing standards is that it was done in such a way that the improvements will last and can be used as a building block for future improvements. All too often, millions of dollars are spent for marginal improvements that do not last more than a few months after the consultants leave.

In addition, the cost of this program was very reasonable, proving that significant progress can be made without a huge investment. This effort also helps to point out the remaining areas that need to be improved. When some major plant functions are holding themselves to world-class standards, the parts that are holding them back soon become apparent.

Richard Lowell is a general manager in FMSC Group Inc., a member of the F.L. Smidth Group Companies, (+1) 281-361-4489, or (+1) 610-264-6129. Jake Hawkes is the maintenance manager for Hanson Permanente Cement, and a 20-year veteran of the cement industry. He can be reached at (+1) 408-996-4262.