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Lean optimization saves 25 percent of operating costs at a wastewater plant

Frontline staff help redesign their working practices to deliver rapid and sustainable impact.

Challenge

What would it take to make our water and wastewater treatment plants world class? What changes can we make to improve our operations? And how do we set up a program to implement and sustain a transformation?

These were the questions facing the chief operating officer of a major water utility. Having recently worked on improving customer satisfaction, the utility now wanted to tackle operations, the next pain point identified by the regulator. So it asked McKinsey to help it explore how it could improve its plants and design a transformation program to roll out across the whole organization.

Discovery

We worked with the client to develop a three-step approach that involved benchmarking pilot plants for wastewater treatment and water production, conducting an onsite diagnostic to identify improvement levers, and launching a customized transformation program to support continuous improvement.

For the benchmarking we used a purpose-built tool developed and tested in partnership with 16 leading water operators. The tool covers more than 160 water and wastewater assets, compares the metrics that drive value, and adjusts for scale and other structural differences between utilities. This first step revealed that energy consumption and chemicals usage were the areas offering the greatest scope for improvement. For example, potential energy savings at the water production plant amounted to more than $1.5 million per year.

For the onsite diagnostic we worked closely with site management teams to analyze the processes used in the pilot plants and identify improvement levers. One important lever was employee engagement, so we helped set up structures for employees to explore the root causes of performance problems, debate solutions, and agree on courses of action. On one occasion, discussions revealed that leaving a valve open at the water production plant had caused between 5 and 10 percent of the clean water produced to be fed back into the processing system.

To support continuous improvement we helped the client adopt promising new ideas, create an internal best-practice guide, and encourage middle managers to embrace change. This involved developing capabilities on the job, building motivation and commitment throughout the organization, and introducing performance management processes at the sites. For example, the visual performance management tools introduced in the screen room at the pilot wastewater plant not only improved its efficiency but also made it into a showcase for the whole program.

To ensure that the effort was sustainable and promote buy-in from employees at all levels, we helped the utility run workshops in which teams of frontline workers and site managers generated and discussed practical ideas for improving working methods and processes.

Impact

Within three months, the pilot wastewater treatment plant was on track to achieve savings of $1.9 million a year, or 25 percent of its operating costs, thanks to lean initiatives aimed at improving preventive maintenance, spare-part inventory management, and energy consumption and recovery from sludge. At the same time, tighter controls and better effluent quality increased the plant's reliability.

This success story was used to motivate employees and drive roll-out at the other wastewater treatment plants, and later across the whole utility. But it was the shift in mindsets that had the greatest impact. As managers at other sites adopted lean methods and launched their own continuous improvement programs, operators were closely involved in designing the changes, and were proud to demonstrate them to visitors.

After four years, the utility had increased its operating profit by 19 percent per year, leading to annual savings of $178 million. It had also improved its regulatory performance score by 7 percent a year, reduced leakage by 30 percent, and seen customer complaints decline by almost a third.

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