Facility Consolidation Proposal IEM 5121 July 21, 2003 Robert Volk

PROPOSAL DESCRIPTION Describes the problem statement, measures of the problem, project objectives and deliverables, as well as the project approach and schedule. Listing of MSETM knowledge and tools that will be applied in the course of executing the proposed project.

AGENDA Proposal Goals Proposal Problem Statement Measures Objectives Deliverables Alternatives Project Approach Project Plan MSETM Tools

PROPOSAL GOALS To give a clear understanding of the project and the opportunity that exists. Green light to proceed with project.

PROPOSAL To consolidate the Trane Macon Commercial Self Contained (CSC) and Compressor Products (CP) buildings into one building. This consolidated facility would house all product assembly lines (currently one in CSC and one in CP), all sub-assembly lines, and the material warehouse space that is currently being occupied in both buildings.

PROBLEM STATEMENT Products are being manufactured in two separate buildinigs using similar processes and equipment. Two separate materials warehouses 2x the space Higher annual operating cost per sq. ft in the CSC building –CSC = $8.33 / sq. ft –CP = $3.52 / sq. ft

MEASURES Successful implementation of this project will result in the following improvements: 11% reduction in production area for the business Productivity Improvement in the hours per unit for each product line. –CSC = 147 hours per unit baseline –CP = 110 hours per unit baseline

MEASURES Benefits –Elimination of CSC Building Annual Lease = $220,500 –Elimination of CSC Building Taxes and Insurance = $49,500 –Elimination of CSC Building Variable Costs = $80,000 –Elimination of Inter-Building Trucking = $123,000 –Production Technician Reduction (15) = $525,000 –Material Warehouse Technician Reduction (4) = $140,000 –Production Leader Reduction (1) = $50,000 –Manufacturing Engineer Reduction (1) = $75,000 –Maintenance Technician Reduction (2) = $70,000 –Total Benefits = $1,333,000 Costs –Production Line Move = $175,000 –Facility Upgrades = $598,000 –New Equipment = $205,000 –Total Manpower Resource = $150,000 –Total Costs = $ 1,128,000 Benefit/Cost Ratio = $1,333,000/$1,128,000 = 1.18 > 1.0, Project is attractive

OBJECTIVES  Consolidate the CP and CSC Buildings into one building  Maximize the utilization of floor space.  Standardize similar processes and promote best practices.  Determine the most cost effective manner of handling the Lease Agreement of the CSC building. (Note: A need for warehousing space has been identified in the American Standard organization. In addition, a current vendor has shown interest in occupying the space. The confidence level is extremely high that one or both of these scenarios will occur. The lease will be removed or offset in the Trane Macon financials)  Reduction of Manpower and Support requirements for the Production, Materials, and Operations departments.  20% Production Technicians  20% Materials Technicians  33% Operations Management  25% Manufacturing Engineering  33% Maintenance Technicians  Create the Building Strategy of the CP.

DELIVERABLES  Building Strategy.  Improvement results of the consolidation.  Financial Analysis justification.  Marketing Plan that will convey the benefits of this project to our customers and how we will be better positioned to meet their requirements.  Control Plan for maintaining the integrity of the changes from the project after the initial implementation.

ALTERNATIVES No Production or Materials Warehouse Redesign - Lift and Place current CSC line and materials warehouse into CP Materials Warehouse Consolidation Only - Production line design to remain the same Production Line and Materials Warehouse Consolidation and Redesign

PROJECT APPROACH  Project Champions  Plant Manager  Six Sigma Methodology  DMAIC  Alternative Selection through the use of a ranking matrix using the following criteria for selection:  Compliance to customer requirements.  Reduction in resources.  Benefit-Cost Ratio.  Resources required for implementation.

PROJECT PLAN  Milestones –Proposal/Define Phase – July 22, 2003 –Measure Phase, Facility Upgrades to start– July 25, 2003 –Analyze Phase to start – September 2, 2003 –Improvement Phase to start – September 22, 2003 –Control Phase to start – October 20, 2003 –Project Completion – November 14, 2003 –Capstone Project Completed– December 5, 2003

PROJECT RISKS Red Light - Team Resources Red Light - Lack of available $$$ for Project Costs

SUMMARY Drivers  Productivity  Elimination of unused floor space  Cost Reduction  Consistent use of MSETM tools throughout the course of the project Objectives  Manpower Reduction  Maximized space utilization  Building Strategy  Six Sigma  Meeting Customer Needs Results  $1,333,000 annualized Cost Savings  Consolidated building housing both product lines, sub-assy’s and materials warehouses  Productivity - Hours per unit reduced  Process excellence through the standardizing of best practices Schedule  Start Project: July 2003  Complete Project: November 2003

MSETM TOOLS  Finance and Advanced Capital Investment Analysis  Marketing Management  Management of Technology and Innovation  Performance Management  Planning and Managing Technology Implementation

QUESTIONS ?