Category Label: Six Sigma

Category Title: Applying Six Sigma to meet contractual specifications

Category Descriptions: Using Six Sigma to meet corporate goal to move cement from Mobile, Alabama
area to Tampa, Florida at less than or equal to twelve dollars US per metric ton.

Case Study

In 1999 a cement plant located near Mobile, Alabama decided that the use of two ocean going load-
lined self-discharging cement barges was no longer required as three of the terminals previously
serviced by the plant (New Orleans, Lake Charles, and Houston) were now sourced by an import
terminal located on the Mississippi River north of New Orleans. This left Tampa, Florida as the one
terminal requiring an ocean-going barge. Recognizing this change in the distribution pattern, the plant
sold the displaced ocean barge to a sister company that moved cement on the East Coast between
Providence, Rhode Island and the New York-New Jersey harbors.

The change in the use of equipment to meet the new distribution plan led to a desire to improve the
efficiency of the remaining ocean-going barge known as CB7701. The plant looked at the transportation
of petroleum and chemical products and decided to incorporate some of the practices used since the
movement of cement is very similar. For over twenty years the plant personnel on the loading dock
would load the cement barge, and the terminal personnel would unload the cement barge. The plant
would hire towing companies located in the Gulf of Mexico to make these moves but the crew of these
tugs never engaged in any aspect of the cement barge outside of towing, docking, and undocking. The
liquid movement model engaged the crew of the tug into the operation of the barge, so the plant
decided to adopt this approach on a go forward basis. The plant still participated in the loading of the
barge, but the unloading and maintenance of the barge became the responsibility of the tug crew. To
identify tug companies that would provide this type of service, the plant engaged with its corporate
logistics unit. This corporate unit serviced seventy terminals and fifteen plants throughout the country

The corporate logistic group had three mode managers, road (trucks), rail (trains) and marine (ships and
barges). In addition to the transportation component of this group, the corporate logistics group had
expertise in terminal operations, procurement of product, and distribution planning for the entire
corporate network of plants and terminals. The plant asked the marine transportation manager to
develop an RFP (Request for Proposal) to be sent to marine transportation companies. This RFP outlined
the requirement including the responsibility of the towing company to unload and maintain the CB7701.
Since tugboats employ the services of engineers/mechanics to repair engines, compressors, generators,
and the like, the skill set to maintain the cement barge was available with members of the tug crew.
The tug crew also included able-body seamen as well as ordinary seamen. These individuals could be
trained to perform in the liquid business tankering services or the discharging of product services in
addition to their normal crew responsibilities on the tug.

The RFP was sent out to ten tug companies, and three were selected for final interviews by the Manager
of Transportation (the three mode managers reported to the Manager of Transportation), and the
Senior Vice President of Logistics. A marine transportation company was selected. It had fifty years of
experience working with the majors in the petroleum and chemical business and ten years moving
cement for another cement company. Almost immediately positive results appeared. For example
when the tug reached the protected waters of Tampa Bay, it switched from a towing mode where the
barge was on a cable approximately one thousand feet behind the tug to a pushing mode where the
barge was winched into the tug by a towing machine, and the aft tow cable was replaced by two smaller
cables on two bow winches holding the tug in a pushing mode. This allowed member of the tug crew to
board the cement barge, start up the engines, perform any maintenance tasks, and prepare for the
arrival at the terminal to discharge product.

With the entire process of discharging CB7701 at the terminal in Tampa, Florida being the responsibility
of the tug crew one immediate benefit was recognized. Under the old system, the terminal unloading
crew did not take great efforts in minimizing the cement bottoms in the barge. They would return the
barge with 250 to 500 metric tons. The tug crew having had experience in both petro-chemicals and
cement understood the need to discharge product. In fact, the industry standard was one half of one
percent which in this case would amount to approximately 35 tons. Since the culture of the tug crew
was to achieve the minimization of product left on board, the result of their diligence would result in a
minimum of 8,000 more metric tons delivered over the course of the scheduled 40 trips per year or
slightly more than one barge load of product compared with the previous terminal unloaders.

After a few trips were completed under the new contract, the required tonnage per trip carried was not
adequate to support the goal of costing $12 per metric ton or less. Since the model was established to
make 40 moves per year, each move generated a fixed revenue for the tug company. The only expenses
not included were fuel and lube as the price of these items were treated separately. The plant in
essence paid these two expenses as a pass-through so neither party would generate a profit or loss on
these costs, rather they were the actual costs incurred. Once the costs were recognized as higher than
anticipated, the marine mode manager spoke with the road mode manager and was provided with two
books on Six Sigma to read. The marine manager studied the two books and decided to apply the Six
Sigma methodology to achieve the corporate goal of $12 per metric ton or less.

The anachronym of DMAIC is the center of understanding the Six Sigma approach. Define, Measure,
Analyze, Improve and Control are the five key elements in the adoption of the Six Sigma methodology.
The marine manager arranged for a meeting at the plant. The group in attendance included the
President and Vice President of Operations of the tug company or Carrier, the three plant logistics
persons representing the Shipper and the corporate marine manager. The marine manager distributed
an outline which covered the Six Sigma elements. Following the methodology, the group established
the need to hit certain tonnage levels, so the define state was how one could increase the tonnage
carried on the barge. The arithmetic was simple in that each trip had a fixed dollar payment, so this
payment was the numerator, the tonnage carried the denominator. The larger the denominator, the
smaller the quotient. Three measures were established for study.

The first measure was the salinity of the water at the plant’s dock. The river where the plant was
located flowed into Mobile Bay and out into the Gulf of Mexico and was viewed as brackish water. The
plant logistics team agreed to take a reading at the time of each load. The importance of this measure
related to the United States Coast Guard regulations that stipulate that an ocean-going barge with a
load-line cannot load more product than the load-line allows. Theoretically if there is not a heavy
concentration of salt, the barge could be loaded deeper than the markings on the side of the barge with
the anticipation that once the barge entered the Gulf of Mexico it would rise up so that the markings
could be seen. The problem of not having a history relating the markings to the salinity of the brackish
water at the dock is that if the barge were not to rise so that the markings were visible, the Captain of
the tugboat could be either fined or his license could be taken. The group decided that each load out
would be recorded, and a study made to provide the Captain with evidence so that the Captain could
make an enlightened decision. For at least a year, it was determined to load to the Plimsoll mark and
not place the Captain’s license at risk. Once the analysis of the data was complete then the Captain may
or may not allow the vessel to be loaded heavier in anticipation of a friendly buoyancy rise.

The second measure involved the bottoms left in the barge. This was discussed earlier when the
discussion of the tug crew and its sensitivity to bottoms left took place. The improvement over past
practice was duly noted, but further gain appeared to be slim. The take away from this discussion is to
continue what the tug crew has been accomplishing.

The third measure came from Johnny, the dock superintendent responsible for the loading of the
CB7701. Johnny with over 24 years dock experience explained to the three plant logistics persons that a
decade ago there was a lost time accident that led to the loading hatch covers for holds one and two
star-board to be welded shut. The effect of this action made it difficult to trim the barge. Since the tug
company as part of the contract purchased the barge, they were not subject to the insurance
requirement that the plant had to honor as a cure for the incident. Since the remedy at the time was in
response to the failure of a plant person to follow proper loading procedures, this same restriction did
not apply to the new barge owner. This was the winner needed, as the replacement of the two hatch
covers making these holds accessible to participate in the trimming of the barge allowed the needed
tonnage to meet the cost per metric ton goal. At corporate after each load the bar chart was updated
and the cost tracked. For five years the cost per metric ton never exceeded the $12US. During this time
period the salinity data was compiled. Some Captains were comfortable working with it, others not.

Summary of results. When the concept of Six Sigma was proposed at a meeting of the corporate
logistics managers, there was the usual negative response suggesting that the cement business does not
require accuracy to six places to the right of the decimal. Unlike General Electric that manufactures
engines for airplanes and medical equipment where one appreciates the risk to be measured six places
to the right of the decimal to avoid injury or death, the cement industry does not require such precision.
The Manager of Marine Transportation used the opportunity to suggest that Six Sigma provides a
discipline in addressing performance issues, and it is the DMAIC methodology that does have
considerable relevance in the activity of cement products and distribution referring to the case
presented above.