Angkasa Raya Aerospace Sdn Bhd (ARA) at Subang, Selangor is one of the well-known multi-national maintenance facility for commercial aircrafts and its associated engines, aero-components, cargo conversion and avionics MRO services.
As a new director, for the next 5 years, do you think that lean supply chain is necessary for ARA in order to achieve higher profit, better hanger utilization, workforce utilization and better aircrafts maintenance turn-around time (TAT)? With reference to the internet based information about lean supply chain in aviation MRO industries, identify the advantages and limitation of lean supply chain for ARA and aviation MRO companies in general.
To answer to this case study questions, you need to do online research of those issues highlighted. Please answer with your own words and citing the references of those materials that you have referred to support your answers.
As a new director, do you think that lean supply chain is necessary for ARA in order to achieve higher profit, better hanger utilization, workforce utilization and better aircrafts maintenance turn-around time (TAT)?
With reference to the internet based information about lean supply chain in aviation MRO industries, identify the advantage and limitation of lean supply chain for ARA and aviation MRO companies in general
With reference to the case study and as a new director in charge of Angkasa Raya Aerospace Sdn Bhd. (ARA). It is imperative to make an effort to assess the various supply chain processes in operation, identify (ARA) strong and weak points before determining the kind of strategy to adopt to enhance productivity. For our purpose, let us understand what it means by lean supply chain.
LEAN SUPPLY CHAIN
In the words of Paul Myerson; “there are many areas in the supply chain where waste can occur, and lean supply chain management can help root out those problem areas”. The term “lean” in supply chain refer to a team-based approach to continue improvement, whose aim is to focus on eliminating non-value added activities or remover of waste on the chain from customer point of view. It is worth noting that implementation of lean has been around in various form in the manufacturing sector. It is only recently that it has been applied to the supply chain & logistics management area.
Figure 1: Aircraft servicing
As noted by Bruce Tompkins; lean thinking is typically applicable anywhere there are processes to improve, including the entire supply chain. A lean supply chain is one that produces just what and how much is needed, when it is needed, and where it is needed.
The underlying theme in lean thinking is to produce more or do more with fewer resources while giving the end customer exactly what he or she wants. This means focusing on each product and its value stream. To do this, organizations must be ready to ask and understand which activities truly create value and which ones are wasteful. The most important thing to remember is that lean is not simply about eliminating waste it is about eliminating waste and enhancing value. In reference to (ARA) case study, as a director in new organization, it is appropriate to undertake a holistic assessment of every process operation in the company before a decision whether to introduce lean model can be ascertain.
From the analysis above, we can understand there are so many benefits to derive from adopting lean supply chain techniques. However, there are critical assessment procedures ARA need to undertake to determine it suitability and implementation. Paul Myerson in his book title: “Lean Supply Chain and Logistics Management” identify the following assessment:
|Visual Systems and Workplace Organization
|Percentage score %|
|1||Management communicates with all levels of the organization on topics regarding organization goals and objectives at least twice per year||The Distribution Center and Office areas are generally clear of unnecessary materials, items or scrap. Isles are clear of obstructions||Operators are given formal training before doing a job on their own. Few defects or productivity related slowdowns are attributable to new or inexperienced operators||1-5%|
|2||Employees are able to accurately describe the organization’s goals and how their job contributes to the achievement of those goals||The Distribution Center floor has lines that distinguish work areas, paths, and material handling isles||Product/Component travel distances have been measured, analyzed and reduced by moving equipment and work stations closed together||1-5%|
|3||Employees receive feedback through a formal process concerning problems found in downstream processes or from the customer||All employees are aware of good housekeeping practices and operators consider daily clean up and put away activities as part of their job||Equipment is “right sized” for the operation/process. They have the ability to change speed to match the TAKT time. No “monuments” are present in the process||1-5%|
|4||Management encourages Supply Chain & Logistics employees to work in groups to address performance, quality, or safety issues||There is a place for everything and is everything in its place. Every needed item, tool, material container, or part rack is labeled and easy to find||Operators are cross trained to perform other job functions and operators work in at least 2 different jobs each day||1-5%|
|5||Employees at the operations level understand and use common performance metrics to monitor and improve the production processes||Display boards containing job training, safety, operation measurable, production data, quality problems and countermeasure information are readily visible at each production line or process and are updated continuously||Processes and equipment are arranged to facilitate continuous flow of work through the Distribution Center||1-5%|
|6||Problems in the Supply Chain & Logistics process are detected and investigated within 10 minutes of the first occurrence||Check sheets describing and tracking the top quality defects are posted and are up to date at each work station||U-shaped cells have been designed and implemented to promote one piece flow where appropriate (e.g., light assembly area).
|7||The concept of Value Stream Mapping is understood and all product families have been mapped and are physically segregated into the like process streams||1-5%|
As director in Angkasa Raya Aerospace Sdn Bhd (ARA), with a mandate to achieve higher profit, better hanger utilization, workforce utilization and better aircrafts maintenance turn-around time, I will make it a priority to critically analyze the above assessment variables, it is a practical diagnostics mechanism to have a full grasp of current management operation, the capacity in place, the competency of the manpower, the corporate governance, the incentives in place to make sure they align with overall corporate objectives. Using a scale of 1-5 in percentage, the Internal Communication, Visual Systems and workplace organisation and the operation flexibility will be subjected to critical examination by a team of experts in various departments.
At the conclusion of the assessment, it will be obvious to take a holistic and far reaching decision relying on the strength and weaknesses on the variables as stated on the tables. Whether to adopt lean mechanism or not will solely depends on the system on ground and if it can be customize to allow for improvement in the form of lean implementation.
LEAN SUPPLY CHAIN MRO IMPLEMENTATION IN COMPANIES
New strides in the application of lean manufacturing principles are achieving surprising new gains and innovative solutions for maintenance, repair and overhaul operations (MROs). Imagine an aircraft MRO that runs like clockwork. Technicians, inspectors, engineers, support vehicles and material handlers all roll out at preset times to carry out their work. The operations of each work area are synchronized and the flow of work is clear to each employee from start to finish. Systems are in place to alert management at regular intervals if flow breaks down and since stoppage triggers standard responses, a predetermined response occurs to get flow started again. Simultaneously, a team analyzes the problem and implements a solution to prevent it from reoccurring.
Does this image sound like pure fantasy? It shouldn’t because it depicts the implementation of lean manufacturing in MRO that has been utilized by a significant portion of the aviation industry to achieve outstanding results. Lean techniques can achieve sustainable improvement throughout production, repair and business processes leading to continuous growth in market share and profits. One example is the significantly improved turnaround time for airplane engine overhaul and repair recently achieved by Delta TechOps. Lean manufacturing principles also have sparked the development of more sophisticated, software-based, support tools for better managing the aviation parts supply chain. (Gisele Mcauliffe).
One of the great demands of lean production is it make process operation smooth, simple and user friendly. Through the practice of Lean techniques, costs and waste are eliminated. The reduction of waste and cost drastically help to increase quality since there is visibility along the chains and identifying common problems become easy and solution profered.
The best way to eliminate waste in the aviation industry is to achieve the lean principle of continuous flow; that is seamless producing and moving one item at a time through a series of processing steps as continuously as possible. With every stage making just what is required by the next stage. Application of Six Sigma quality management, with lean production will boost quality and reduce waste in every operations process. The objective is to remove non-value adding activities like; unnecessary transportation (or Movement), holding excess inventory, excess motion, waiting time, over production, over processing, defects or errors etc.
To achieve optimum result, there is need to automate various operation processes to enhance less human effort, to become highly responsive to customer demand while producing top quality products in the most efficient and economical manner possible.
The practicability of the entire process is challenging because smooth flow at MROs is hard to conceive when an airplane goes into a hanger and sits while it is getting repaired. The question that comes to mind is, how do you create flow when something doesn’t move? This is a very challenging proposition in an environment of complex products with high variety and lower production volume.
According to Kevin Duggan; a lean expert and consultant opines that “many MROs incorrectly define lean manufacturing strategies as continuous improvement achieved purely by identifying waste and eliminating it. However, Duggan argues that lean techniques should be capable of providing knowledge to MROs for using a structured, step-by-step process to identify and eliminate waste strategically”.
He further emphasize that, the same concept of flow (both material and information flow) between two operators within one cell has to be applied to the entire MRO operation. Flow is created at the cell level by using One Piece Flow techniques, which is a Kaizen manufacturing strategy that means each person or process works on one piece at a time before it is pulled downstream. Flow is continued at the value stream level by connecting processes or cells with first in, first out (FIFO) systems. The objective is to matched value at the rate of customer demand, and flow it in such a way it will be visible enough to be seen when flow stops.
TRENDS IN AEROSPACE INDUSTRY
In an article publication by Aviation Week Network titled: “Supply Chain Research Insights: Aerospace Industry Trends”. Content provided by FedEx, it reveals a strong growth is being experience by major commercial aircraft sales (excluding BGA, Helicopters) grew significantly over the last year. It was reveals the strong growth has impacted rest of the industry (engine, component, Tier1-2 suppliers etc.), resulting in robust growth for the entire Aerospace industry. Loss of military spending has made the Original Equipment Manufacturers (OEMs) focus more on the commercial aerospace segment. With Boeing and Airbus reporting significant backlogs over next decade, Aerospace industry demand across manufacturing segments (aircraft, engine and Tier 1 components) is expected to exceed $5.6T over next 20 years.
The Aerospace Industry has applied learning from the Automotive Supply Chain story. Aerospace OEMs are employing LEAN principles such as Just-in-Time deliveries to their assembly lines, the Kanban system for managing inventory, and point-of-use delivery for kits. Aerospace OEMs are sourcing sub-systems rather than piece parts and thus, reducing the number of suppliers in order to improve their supply chain efficiency. Although currently 80% – 90% of raw material inventory is pulled by OEMs, the trend is growing towards Vendor Managed Inventory (VMI), where suppliers own the inventory and are responsible for moves to the OEM – fundamentally changing the supply chain equation.
Figure 2: Traffic and Fleet Growth
According to the article, as a result of focus on cost-reduction (across the supply chain) by Aircraft OEMs, Engine OEMs and Tier-1 suppliers are hard pressed to look for other profitable sources of income and viability. MRO business has traditionally been more profitable than OE business for engine OEMs and Tier-1s. To improve profitability and to gain market share from independent MROs, OEMs are aggressively offering maintenance services charged by flight-hours such as Power by the Hour (PBH), and Minute by the Hour (MBH) rather than Time & Material (T&M) contracts. In PBH, the OEM/MRO takes care of transportation involved in the maintenance/repair process, while the same is handled by operators in T&M contracts. Aircraft OEMs have been taking more control in supply of inventory with major industry players. Major Tier-1s coming together to provide nose-to-tail service (primarily for components and structurals) to compete with large independent MROs. Some OEMs are offering nose-to-tail services.
FACTORS (ARA) SHOULD CONSIDER BEFORE ADOPTING LEAN SUPPLY CHAIN IN MRO INDUSTRIES
- Whatever system to be selected by (ARA), it should be extremely user friendly for those on the front line as well as those in the supporting areas.
- In the case of (ARA), whatever policy change in adopting a lean system it is important to ensure that, the selected product could grow with the company over time and putting budget into consideration.
- As companies deploy lean strategies in MRO environment, the following points should be considered as an expansion of the scope of the project.
- In transitioning of the production environment to support a customer driven demand model, (ARA) must also extend this strategy through the supply chain
- Lean practices can in some cases be implemented throughout the supply chain simultaneously, albeit cautiously
- Improvements in supply chain communication and collaboration are a prerequisite to complete production efficiencies
- Understanding the impact and integration requirements of lean with networked partners is a key variable to achieving real results
BENEFITS OF IMPLEMENTING LEAN TEACHNIQUES BY (ARA)
- Real time supply chain communication and coordination
- Real time supply chain scheduling
- Inventory reduction through demand-based replenishment
- Reduction of non-value added work internally and externally
- Improved demand signal management across the supply chain network
- Focus on material flow across the entire supply chain
- Increase market share
- The real return on investment: Extending lean concepts through the supply chain, comes from the improved execution activities of the entire business, not just the manufacturing operations functions. Research studies have estimated that the benefits of extending the lean methodologies and techniques throughout an interdependent supply chain network could be multiplicative.
In the course of given a satisfactory answers to the question in focus, which is based on (ARA) case study, it is important to examine the inherent limitation that is faced by MRO business operation.
LIMITATION TO THE ADOPTION OF LEAN BUSINESS MODEL IN (ARA) OPERATION
I will delve on research work by Charlotte Adams to discuss the possible limitation to (ARA) successful implementation of a lean business model.
When we talk about lean we talk of technology driven system and usually for a company like (ARA) whose operation is traditional, it requires enormous change in policies and it attendant injection of capital. This is so because it is capital intensive project to undertake. Training and retraining of manpower and setting up R& D department require substantial investment.
The conclusions or recommendations of Lean IT initiatives are likely to demand organizational, operational, and/or behavioral changes that may meet with resistance from workers, managers, and even senior executives and stakeholders. Whether driven by a fear of job losses, a belief that existing work practices are superior, or some other concern, such changes may encounter resistance. For example, a Lean IT recommendation to introduce flexible staffing whereby application development and maintenance managers share personnel is often met with resistance by individual managers who may have relied on certain people for many years. Also, existing incentives and metrics may not align with the proposed staff sharing.
In time of economic downturn like what the global business is facing due to fall in global price of oil and gas, various supply chain links are in tension as they struggle to maximize profit. This is a challenge because when the cloud lifts, what shape will the system be in? It all depends on if (ARA) is able to adjust to its immediate business environment to align with corporate objectives.
The commercial aviation supply chain is under pressure from vigorous airline cost-cutting and low traffic demand. The various links in the chain are trying to cut costs yet expand their reach and this is a major challenge. Although not always in ways that are best for the overall system. Aggressive outsourcing bids have reduced maintenance, repair and overhaul (MRO) margins, especially on the airframe side. Visibility into lower-tier suppliers is less than clear. And the top suppliers on new aircraft programs are flexing their muscles to the detriment, of airlines and their MRO suppliers according to industrial analyst.
On the brighter side, MROs still have room to grow and opportunities to cut costs and improve performance. But closer alignment of (ARA) corporate objectives with the airlines is necessary for its survival. Since (ARA) is not isolated in today’s global trends, top suppliers may need to change their tack. Viewed as a new class of monopolists, the big component original equipment manufacturers (OEMs) are driving up the cost of repair and overhaul even in the depths of global economic slowdown, according to some MROs. As opines by Gunther Kruse, “Because it’s a monopoly market; you have to purchase spare parts from the same guy, and also repairs”.
Bearing in mind some competitive companies have a cash stream for over 15 years that’s almost predictable for them. Even in a situation like the present, when “the passenger isn’t there anymore, it is mandatory to pay. This is mainly a question of the component manufacturers’ price structure.
The current crisis is putting pressure on lean business models without the requisite competent manpower to drive the operation. Adopting lean technique is one thing and making it to be viable through process improvement is another challenge in itself. But it’s also an opportunity to get things right, business consultants say.
According to experts, knocking 10 to 15 percent out of your cost base vs. 2 to 3 percent should be what will be required. Because simple cost reductions should not be the sole part of one’s strategy, there should be other incentives that will enhance customer’s satisfaction, to serve as the “pink slip atmosphere” produces an openness to change that should be used to implement Lean or other efficiency initiatives.
Although lean principles are generally well established and have broad applicability, their extension from manufacturing to IT is only just emerging. Indeed, Lean IT poses significant challenges for practitioners while raising the promise of no less significant benefits. And whereas Lean IT initiatives can be limited in scope and deliver results quickly, implementing Lean IT is a continuing and long-term process that may take years before lean principles become intrinsic to an organization’s culture.
IT is the new leading edge development in aircraft Maintenance Repair and Overhaul (MRO). New and updated IT solutions regularly appear in the market and every one of them is designed to assist airlines, operators and MROs in making better use of resources and assets through lower costs, increased efficiency, more operations friendly scheduling of maintenance and repairs, and compliance with regulations.
It all adds up to a better customer experience and a stronger bottom line. As the director in (ARA), the decision whether to adopt lean techniques or not will only makes sense after diligent consultations with stakeholders. There are varieties of strategies that can be combine with lean which is ultimately aim for optimum productiveity.Choosing IT software for instance is not a simple matter; nor could it be to address the matrix of needs, priorities and solutions into which this sophisticated market has grown. Aircraft IT MRO is an invaluable one-stop reference resource where IT users and decision makers in airlines, MROs and aircraft operators worldwide can review all the major systems available. Aircraft IT (2011)
As the director, I will embark on comparative analysis to determine the best model that will yield better results, learn from current users’ experiences and consider how different systems might perform in their own operations. IT systems are business critical resources for those involved with aircraft maintenance; the right solutions correctly implemented can make that huge difference between an ordinary performance and game changing excellence performance. Aircraft IT MRO is designed to supply IT buyers with the vital information they need when negotiating the maze of different solutions available, and to support informed decisions considering market situation.
- Aircraft IT MRO Maintenance Operation. MRO IT Magazine. Issue 1 April/May 2011.Retrieved from: http://www.aircraftit.com
- Charlotte Adams 🙁 June 1, 2009) Supply Chain: Problems and Solutions. Contributing Editor. Aviation Today Network. Retrieved from: aviationtoday.com
- Gisele Mcauliffe (June 1, 2007) Aftermarket: The Ascendency of Lean in. Aviation Today Network. Retrieved from: aviationtoday.com
- Lean IT. From Wikipedia, the free encyclopedia. Retrieved from: https://en.wikipedia.org
- Michael Bittner 🙁 Sept. 13 2005) Moving Beyond Lean Manufacturing to a Lean Supply Chain. Retrieved technologyevaluation.com
- Paul Myerson (Nov 27 2012) Lean Supply Chain Management: What Is It and Why Should You Care? in The Lean Supply Chain. Retrieved from blog; industryweek.com
- Paul Myerson: (2012) Lean Supply Chain and Logistics Management. McGraw Hill Publishing: 978-0-07-66265/ 0-07-176626-X.Retrieved from: mhprofessional.com
- Ayeni, T. Baines, H. Lightfoot, P. Ball: (2011) State-of-the-art of ‘Lean’ in the aviation maintenance, repair, and overhaul industry. vol. 225, no. 11, pp2108-2123. Retrieved from: www.pib.sagepub.com
- Supply Chain Research Insights 🙁 Dec 23, 2015) Aerospace Industry Trends. Aviation Week Network. Retrieved from: http://aviationweek.com