A REPRINT FROM RELIABLE PLANT MAGAZINE - SEPTEMBER - OCTOBER 2005

"ALCOA ANNOUNCED ON JULY 22, 2005 THAT IT WILL INVEST $330M IN ITS WARRICK,INDIANA OPERATION MENTIONED IN THIS ARTICLE. ALAN CRANSBERG, PRESIDENT,

NORTH AMERICA PRIMARY METALS, STATED THAT BY REDUCING COSTS AND INCREASING EFFICIENCYTHAT THE WARRICK OPERATION HAS EARNED THE RIGHT TO GROW."

COVER STORY

BY PAUL V. ARNOLD

www.reliableplant.com September - October 2005

If you can’t stand the heat, youbetter not seek employment at theAlcoa Primary Metals facility in

southern Indiana.Fire-breathing potlines and molten-

metal-f illed crucibles can push theproduction f loor’s ambient temperaturenear triple digits. Heat visibly radiates offmachinery. Rivulets of sweat trickle downworkers’ cheeks and backs. Frequent breaks

for water and Gatorade are a necessity.It’s a physically demanding

environment, but the real heatreferenced in the first paragraph

relates more to this particularplant’s position in the

aluminum smelting industry.This site, part of Alcoa’s

massive Warrick Operations,was constructed in the

late 1950s and beganproducing raw

aluminum

for the can sheet industry in the early 1960s.It’s an old plant in an age- and technology-sensitive industry. There were 33 Americansmelting plants operating in 1980. Today,there are 13. Just 6 percent of the world’saluminum capacity will be produced this yearat smelters more than 50 years old. The clockis ticking.

To this state, add in that:• 25 percent of the plant’s workforce is

currently eligible for retirement throughage or years of service;

• wages paid by the plant are among thehighest in the industry; and,

• a few years ago, this smelter’s mainte-nance costs per metric ton of aluminumproduced were the second-highest in theglobal Alcoa system.

Can you feel the heat? Every employee atthis plant does. But instead of awaiting ademise that seemed imminent, mainte-nance and operations personnel havestepped forward and taken action.

“We have to hitch it up if we want tomaintain this standard of living and keepthis plant alive,” says smelting AlcoaBusiness System manager Mark Keneipp.

“This is the new reality. You just have todeal with it.”

It starts with a look in the mirror.“Our challenge was and is to be cost-

competitive in spite of our old age,” saysKeneipp. “We are not at the front of theage curve anymore. We must have a 15- to20-year horizon to attract capital withinAlcoa. If it is 25 to 30 years, that would begreat. To do that, we have to continuallyprove ourselves as a lean, cost-competitive,stable and efficient plant.”

This isn’t an environment for the weak.But through hard work and perseverance,there are ample rewards.

CALLING TIME-OUTEfforts to sustain Alcoa Primary Metals’

presence in the southern Indiana manufac-turing community began at the corporatelevel.

In 1997, Alcoa CEO Alain Belda beganbringing Toyota Production System (TPS)principles to his company’s 250 globallocations.

TPS is a lean manufacturing philosophybuilt on “just-in-time” production, wasteelimination and rapid problem-solving.

However, the Indiana smelter made animportant discovery when implementingthe system.

“TPS and f low and lean don’t work ifyou have unstable, unpredictable equip-ment,” says Keneipp.

Efficient, streamlined and cost-effectiveplant maintenance and machinery relia-bility must come first.

To illustrate his point, Keneipp offers adiagram called “the maintenance iceberg.”Above the water are direct maintenancecosts linked to materials, labor, overtime,contract services, and overhead and bene-fits. Under the surface lurk indirect coststied to downtime, setup and startup,

missed schedules, excess inventory, crisismanagement, emergency purchases and anoverall ripple effect on production.

“The indirect components are heldhostage by a plant’s unstable equipmentand processes,” he says.

All of this waste gums up the system anddrives up both operations and mainte-nance costs.

In 2002, this smelting plant had totalmaintenance costs in excess of $35 million.Its “painfully high” ratio of more than $137in maintenance costs for every metric tonof aluminum produced (see “Just the facts”for annual tonnage) placed it second-to-last among Alcoa smelting plantsworldwide. The global average in 2002 was$90 per metric ton.

This Alcoa plant and its leaders had twooptions.

Photos by Photics LLC

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JUST THE FACTSPPllaanntt:: Alcoa’s Warrick Operationsconsisting of Primary Metals (smelting)and Rigid Packaging (fabrication) divi-sions in Newburgh, Ind.EEmmppllooyymmeenntt:: Approximately 2,000(740 PMD, 1,260 RPD).SSqquuaarree ffoooottaaggee:: 120 acres under oneroof, 9,000 acres overall.PPrroodduuccttss:: Aluminum sheet for beverageand foods can ends and tabs, plusother flat-rolled aluminum products.PPrroodduuccttiioonn vvoolluummee:: PMD, 265,000metric tons; RPD, 800 million pounds.FFYYII:: Site became operational in 1960.

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“The plant manager, Royce Haws, saidwe were going to reduce our costs. It wasnot an option to stay where we were. It wasgoing to happen,” says Keneipp. “We couldeither do it the smart way or the short-sighted way. When you go shortsighted,those are scary days. It’s tough to attractcapital into the plant to go after the thingsthat need to be done when you just defermaintenance. Nobody feels good aboutthat approach. That’s motivation for folksto seek something better.”

CATCHING THE WAVESIf you haven’t guessed by now, the Alcoa

plant chose the smart approach to drivedown maintenance costs. Maintenanceleaders teamed up with consultants fromLife Cycle Engineering (LCE) and the RonMoore Group in early 2003 to create anapproach called the Reliability ExcellenceProcess, which was deployed in three“waves.” The process is based on the beliefthat a formalized, well-defined partnership isimperative between maintenance and opera-tions. In this partnership, operations ownsthe equipment and has a primary stake inreliability. Maintenance is an equal partnerdedicated to provide timely and effectivemethods, skills, expertise and support.

“That’s a big change,” says reliabilityengineering superintendent Joseph Motz.“It used to be a silo environment withplenty of f inger-pointing.”

Some examples:An operator noticed a potential problem.

No f ix was scheduled or made. Themachine broke down. Who was to blame?

Or, maintenance showed up for a two-hour preventive maintenance job. While inthe machine, it found additional issues andfinished the PM job eight hours later, thusimpacting output. Who was to blame?

The answer in these cases was bothmaintenance and operations.

“We had to realize we’re all on the sameteam,” says Motz. “We’re all here to makealuminum. If we go in different directionsand don’t work together, the processdoesn’t work.”

Wave 1 in the three-wave approachbegan in June 2003.

“Wave 1 was Ron Moore,” saysKeneipp. “We brought him in to speakwith key plant leaders. He challenged the age-old paradigms. ‘You need to takemore of an asset-owner philosophy.’‘You’re wasting money.’ He shakes thingsup and opens eyes.”

Wave 2 arrived in August with a fullReliability Excellence assessment by LCE.Over a two-week period, the f irmconducted lengthy interviews with 90 oper-ations and maintenance employees (hourlyand salary), as well as the plant controller.

The information led to:

1) a f inancial analysis detailing the esti-mated value in closing the gaps toexcellence in reliability compared to theimplementation cost (presented as areturn-on-investment calculation);

2) a preliminary master plan that outlinedthe processes and methodologies requiredto close the gaps.

“We wanted to look at our currentcondition and identify a target condition,”says Keneipp. “The gap between those twois your pain or gain. Is it worth the effort tobridge the gap? We had to prove thatworth to senior management. We had toprove there were merits in putting moneyinto the old plant.

“Faced with all the facts, it was prudentto get money approved as soon as possibleto proceed.”

Wave 3 began in September. Operationsand maintenance leaders:• implemented the master plan

• educated all employees on their new rolesand responsibilities related to increasingequipment reliability

• conducted workshops on proper relia-bility-enhancement techniques

• established defined processes and effec-tive measures of progress

“This isn’t easy. None of this stuff is,”says potroom production manager RodneyCunningham. “But if you have manage-ment commitment and a partnershipbetween maintenance and operations,your chances of success increase. Withoutthose things, you aren’t going to make it.”

RAISING THE BAREstablishing def initions in a variety of

areas have helped trigger improvements. Aprimary focus was to def ine “what ispossible?” and “what is progress?”

An answer came in accepting overallequipment effectiveness (OEE) as a keyplant-wide metric. OEE tracks sources ofoperating loss, including equipment avail-ability, performance and quality, and isexpressed as a percentage of optimumperformance.

“It’s basically def ined by some past best performance,” electrode productionmanager Tom Svoboda. “You saw ithappen. It wasn’t f ictional or hypothetical.Whether the equipment was runningextraordinarily that month or you werereally on top of the process, it happened.The question is, if you did it during thatone period of time, why can’t you do it all the time?”

Using a sports analogy to illustrate theimportance of 100 percent OEE, if a highjumper normally jumps 6 feet 6 inches butestablishes a personal best of 7 feet, whatspecif ically led to this peak 100 percentperformance. Did he train differently? Didhe change his diet prior to the meet? Did hewear different shoes? He literally raised thebar. What can be learned and what can bedone to achieve that mark time and again?

Maintenance and operations workedtogether to def ine peak performance forplant functions (for example, anodeassembly), processes (ore unloading),outcomes (scrap) and individual pieces ofequipment (ring furnace). In compiling thisinformation, it was determined that $8.3million in annual cost savings were possibleas the result of achieving OEE goals.

With the background information,current states were def ined and targetconditions established. Activities – workprojects utilizing lean manufacturing tools such as kaizen and ContinuousImprovement – took place. Progress wasmeasured and analyzed. And, tangiblebenefits were calculated.

In 2004, $2.4 million in improvementswere linked to OEE gains.

Looking deeper and taking actions alsoled to decreased maintenance expenses inthe smelting plant. In the f irst year afterbeginning the reliability initiative, expensesdropped $1.9 million, from a baselinefigure of $32 million to $30.1 million. In

2004, the f igure fell another $700,000.The ratio of maintenance expenses permetric ton produced also dropped to $109in 2004.

THE PLAN ON ‘PLANNED’A major effort also was made to better

define elements of maintenance. Specifically,in this operator-led reliability system, “howdoes work get planned?” and “how doeswork get done?”

“Looking back, we were foolingourselves into thinking that we werehealthy,” says maintenance managerDanny Reyes. “Many of our old metricswere out of touch. We thought our‘percent planned and scheduled work’ wasat 85 percent and our ‘percent PM comple-tion’ was at 90 percent.”

LCE informed the plant that it was usingthe wrong definitions.

“The ‘percent planned and scheduledwork’ was really just ‘percent scheduled.’Planning was very limited,” Reyes says. “Itwas schedule compliance. Probably 10percent of those jobs were planned.”

A 35-to-1 ratio of crafts personnel (140)to planners (four) was the crux of theproblem.

“It did not work very well,” says maintenance planner Larry McCubbins.“There was very little time to plan. Youbecame a scheduler, and not a very goodone at that.”

A reactive environment thrives in thissetting. “We were doing the ‘home mainte-nance approach,’” says Keneipp. “That’sthe way you and I tackle projects on aSaturday morning. It’s really unplannedand inefficient.”

The plant has since added three plannersfor a total of seven, providing a moremanageable ratio of 20-to-1.

“That makes it possible for these guys toset up, organize work, plan it, schedule itout with production centers, make sure allthe parts are there, make sure the equip-ment is down and the time is allotted,” sayssmelting maintenance superintendentScott Deon.

Other keys to better planning:

1)A formal document now outlines thecomponents of a planned job.

“The poor four planners we had trying todo everything didn’t do things the sameway,” says Deon. “This new format nowstandardizes how to perform the work.”

2) A formal, secure area is now used by theplanners for job kitting. In the past,needed parts and materials weredispatched piecemeal to a job site. Thepile might sit for weeks until all itemsarrived. During the waiting time, it wasnot uncommon for parts or tools to bemoved, lost or used for another job.

“As the planner plans the job, he ordersall the materials and has them deliveredhere,” says McCubbins. “When everythingfor the job is here, we gather it on a palletor two. The crafts then come and take itout to the job site and perform the work.”

3) Effective communication.

“I used to think that I knew what peoplewanted. This process taught me that Ididn’t,” says McCubbins. “I didn’t knowwhat they wanted and what was right forthem. In the past, I planned the job anddidn’t ask questions.”

Adds Deon: “With the shared responsi-bility with production, we now know whichjob comes first. The person who owns the

WHAT ARE THE CHARACTERISTICS OFA PLANNED JOB?

1) There is an accurate time estimate forthe job such that the supervisor wouldhave a reasonable expectation onwhen he or she could assign the task.

2) There is an accurate estimate ofneeded resources in terms of craftspersonnel, repair/replacement parts,tools, support equipment, etc.

3) All necessary information (blue-prints, permits, safety-related, etc.)is obtained.

4) Job step sequence, procedures andinstructions to accomplish the workare established.

5) All needed parts and materials arekitted.

6) As a built-in check to assure a qualityplanned job, periodically discuss thenature of the job with a supervisorand/or the craftsperson assigned tocomplete the job. Assure there is afull understanding of the scope ofwork and that the kitted job packageis complete.

equipment should know what the mostcritical thing is. Before, I don’t think wewere guessing. But were we 100 percent?Probably not.”

4) Focused, effective weekly meetings.

“Asset owners chair the meetings andarea maintenance planner/schedulers arefacilitators,” says Keneipp. “If it’s a plan-ning meeting, we discuss how we’re goingto do this. If it’s a scheduling meeting, weestablish the schedule.”

Also in regard to how work gets done, theplant took steps to document equipmenthistory and to standardize maintenancetask instructions.

“In the early days, you could get records,but then the documentation stopped,”says rectif ier station power engineer DanDecastra. “So, we created a location on theserver and began documenting. For thisstation, we created a ‘bad boy’ list. Wepicked out the big issues and started there.Now, you can go back to 2001 and see ahistory on the air switches, contacts, trans-formers and the skids.”

Adds reliability engineer JonathanFulton: “Maybe one-third of our mainte-nance workforce could retire tomorrow ifthey wanted. That’s a huge potentialliability for us. And, it’s hard to get a qualitycraftsperson from the outside. To addressthis, we are standardizing work processesand developing equipment history. Bydoing this, we can get people with technicalexpertise up to speed in a hurry.”

CRIB NOTESA final improvement example is how the

plant better def ined who buys mainte-nance products and how money is spentfor tools and consumable-type materials.

In the past, assorted maintenancepersonnel in the smelting plant bought thehand tools, power tools, safety products,cleaners, material handling products and ahundred other needed items. Purchasedproducts were housed at decentralized toolcribs around the facility and in a host ofnon-official holding spots (lockers, chestsand cubby holes).

“As the plant kept expanding, areas wereadded. They had a little group and some-body did the ordering and they’d pool theirsupplies here and there,” says generalmechanic Dick Day. “We were spending alarge amount of money trying to feed these

satellite cribs. They weren’t managed. Peoplebought stuff, but it wasn’t really accessible.”

If a mechanic needed a particular tool,he’d hunt for it. It was around somewhere.If he couldn’t f ind it, he’d order one. Thatpurchased tool might disappear before itgot to him. It led to wasteful and redun-dant spending.

To address this, a centralized crib wasconstructed and all satellite crib and cubbyhole items were brought into this secure,gated area.

In came the worthless.“We realized we had a lot of obsolete

stuff – something for a piece of equipmentwe may have taken out 10 years ago,”Keneipp says.

And, in came the valuable.“It was amazing all that came out of the

woodwork. Someone brought a cabinetover with more than $38,000 of pumpsand jacks in it,” says Day, who became thecentral crib’s main attendant. “We started

using what we had. For some materials, wedidn’t have to order anything for a year.”

Today, Day is responsible for buyingthese maintenance-related products. Hereceives the purchases, stores the items anddispenses them as needed.

“We know what we have and where it islocated,” he says.

Day also has created a minimum/maximum system for a variety of productsand embarked on efforts to standardizebrands of power tools and welding supplies.

“With power tools, we have standardizedmostly on DeWalt, and we are gettingheavily into their cordless tools,” he says.“For welding supplies, we have standardizedour wire feed guns and the replacementparts for those guns.”

He does his homework and finds innova-tive ways to cut costs.

A few examples are:GGlloovveess:: “We used to buy a brand of

gloves that had a little tab on it for $12 a

Molten metal is poured from a crucible in the Ingot Department of the Alcoa plant.

pair. That’s what everybody ‘had to have,’”he says. “You could buy the same gloveswith a little elastic in it for $2.67 per pair.People liked them.”

HHyyddrraauulliicc ooiill:: “We bought it by thegallon at $8 a pop. Buying it in bulk, wenow save $3 per gallon. I pour the oil intoreusable jugs that cost 57 cents apiece.”

AAcceettyylleennee hhoossee:: “We used to buy itprepackaged in a spool. Now, we buy it ona 500-foot roll and cut off what the personneeds. We save 25 percent.”

Day says it’s all common sense.“I look at it as my money,” he says. “If

this is my business, this is how I’d run it.”

MAKING THEM SWEATThrough hard work, partnership, owner-

ship and innovative thinking, this Alcoasmelting plant has become more stable,lean, predictable, reliable and cost-compet-itive.

OEE cost benefits are $4.4 million annu-alized for 2005 year-to-date compared tothe 2003 baseline figure.

2005 year-to-date maintenance expensesare $27.1 million annualized and reflect a$4.9 million decrease from the 2003 base-line number.

Maintenance costs for the secondquarter of 2005 were $96 per metric tonproduced and sights are set for achieving$87 in the near future.

An LCE follow-up assessment put theplant in the “proactive conditions” cate-gory and work is under way to elevate intothe “excellence” category.

There is optimism and momentum.“When I was hired 15 years ago, we said,

‘We’re old technology. We can’t competewith some of the more modern facilities,’”says Fulton. “For me, the reward is seeingus compete and have higher efficiency. Weare producing better with our 40- or 50-year-old technology than at sites built 10 or20 years ago.”

While the heat won’t ever completely goaway for this plant, it is doing what it canto make the competition sweat.

Call 880000..555566..99558899 or visit wwwwww..LLCCEE..ccoomm