Case Study: Operational Excellence in Aerospace & Defense
A new final assembly line of a major aerospace and defense company was not performing to expectations; while the product was being delivered on-time, costs were way above budget. Customers were happy but the company was losing money on each MSN – an unsustainable position. Additionally, there were suspicions of irregularities with documentation covering customization and options on the product.
The site was a new installation, essentially a replica of an existing final assembly line for a similar product. Engineers and managers of the existing line had been brought in to set-up the new facility and its processes, and some of these people were now in line-management positions. An division between corporate and line management had developed: corporate finance was unhappy with the financial performance and blaming line-management for failing to improve operations sufficiently, while the operational managers believed the company was selling the products too cheaply. An argument used by line management was that their practices were the same as the existing line which had been in operation for many years, and therefore no improvements were possible. Their concern was that a ‘cost-saving’ initiative would simply slash inventories, result in stock-outs and ultimately delivery delays. The sales team countered operations’ underselling accusations by demonstrating competitors’ pricing and providing evidence of similar contracts at comparable pricing levels.
Mobilisation and Awareness
A series of workshops were held with corporate and line-management to define the objectives and scope of the project. It was quickly agreed that while the primary objective was to reduce costs, any solutions must not adversely impact either quality or on-time delivery. With the scope agreed, tensions between the battling groups reduced.
Investigation and analysis
Investigations focused on three streams: Operational Waste, Compliance Management and Comparable Pricing.
By far the largest stream was the investigation into operational waste. A variety of analyses were performed including Time-Based-Analysis (a form of value stream mapping showing inventory utilization and value-adding rates); operator effectiveness measures; space utilization; assembly methods analysis and supplier competitiveness. A decision was taken early to define ‘significant component design changes’ as out-of-scope so DFX analyses were avoided.
A series of presentations of the results was followed by workshops to agree the baseline metrics that would define the success or failure of subsequent improvements.
The investigations revealed that there were some minor issues with compliance management and that prices being charged for the product by the company were marginally higher than competitors’ prices. A range of metrics on operational waste revealed results including:
- 40% of technicians time was spent on non-value-adding activities such as searching for parts and
tools, waiting for answers to questions or waiting for support services.
- Stock-outs on engineered sub-assemblies averaged 20% which caused significant amount of non-
value-adding work to re-allocate parts between MSNs.
- Stock turns on a large proportion of standard consumables were under 2 per year – meaning that
items were purchased an average of 6 months before they were actually required for installation.
Planning and skills training
Specific projects were defined from the results of phase 1, each was expected to be of three months duration though some, due to their complexity were five or six months. A project definition document was created for each project by the team that was to implement that project. Each project definition defined the objective and scope of the project along with at least 3 metrics, each base-lined and each with a target value to be achieved by completion. Each project had an executive sponsor who participated in the planning and definition workshops.
Projects with interfaces to others had common team members to minimise duplication of effort and to avoid double-counting of benefits. A range of training sessions were delivered to provide the knowledge and skills to members of the teams that would develop and implement solutions. The content of each training was adjusted to cover the most likely tools that each team would use during their project. For these types of projects tools that were most useful came from the Lean and Industrial Engineering domains.
Projects were grouped into stand-alones (those that could be started immediately) and those that required other projects to be at least part completed before they could start. Each project followed a gated project plan (similar to DMAIC) and reported progress against the plan to a two-weekly steering group meeting. The few projects that stalled or were otherwise obstructed were not required to produce additional reports, they were given additional resources.
Completion and Sustainability
On completion each project presented summary findings, actions, results and sustainability actions to the steering group. Metrics were institutionalized and became part of the line’s weekly management reporting. Additional training was given for supervisors and managers who had not been part of each team to ensure understanding and correct interpretation of the metrics.
- 89% of the projects completed within the six month assignment
- 62% over-achieved against their original objectives
- Stock inventory holding reduced by €4m (Kanban, vendor managed inventory)
- WIP reduced by 43% (line balancing, facility layout)
- Throughput time reduced by 31% (line balancing)
- Labour time per MSN reduced by 22% (Value analysis, re-organisation of tooling, consumables and
job kitting, improvements to jigs and fixtures)
- Stock outs of engineered components reduced by 90% (supplier development)
- Line profitability now in the company’s top quartile
Critical Success Factors
A post-assignment review conducted with most of the teams’ members agreed that the critical elements that helped to ensure success of the project were:
- Initially defining that the initiative must not badly affect either quality or on-time delivery – reduced resistance from antagonistic managers.
- Project definitions each with baseline and specific objectives – gave clear focus to each project.
- Involvement of executive sponsor in project definition – obtained buy-in and helped to ensure appropriate actions taken by sponsor for those projects that encountered unforeseen issues.
- Each team included representation from the internal supplier and internal customer of the scoped part of the process – provided a broader perspective and prevented sub-optimization.
- Training was specific to each project’s likely need – didn’t produce ‘tool-heads’ but people with appropriate skills for the tasks at hand.
- Solutions were developed by the teams – groups of people who were responsible for those day-to-day activities – not an external consultant mandating ineffective changes.