for Maintenance Operations July 14 2014 prepared by Brian Savoie Vice President HIGH PERFORMANCE CONCEPTS INC 151 Village Parkway Building 6 Marietta GA 30067 Phone 7708590161 Fax 7708590191 wwwhpcinccom ID: 579425
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Slide1
Best Practices in Materials Management
for Maintenance
Operations
July 14, 2014prepared by:Brian SavoieVice President
HIGH PERFORMANCE CONCEPTS, INC.
151 Village Parkway • Building 6 • Marietta, GA 30067
Phone: 770-859-0161 • Fax: 770-859-0191 • www.hpcinc.com
Slide2
Topics
Benefits -- What
’
s Possible? Customers, Challenges and Objectives The Maintenance and Material Management Work Best Practices in Materials Management How to Learn More Slide3
What
’
s Possible?Improvement Goals, Objectives and Targets
BusinessCut management layers in halfIncrease employee-to-manager ratio to 23:1Maintenance Reduce maintenance process costs by 10 - 20%Reduce maintenance process cycle time by 10 - 30%Reduce re-manufacturing operating budgets by 20% Materials Management
Reduce rejected supplier material to 0.1%Reduce inventory carrying costs by 30%Increase inventory turns on aircraft modification kits by 200%Improve service levels on aircraft modification kits to 99.5%Reduce aviation spares locally and system-wide by 30%-- from Lockheed Martin, Delta Air Lines, Boeing, etc.Slide4
Operators, Customers and the Equipment
Utilities
– Southern Company, TVA, Duke Power
For business and consumersTurbines, compressors, pumps, boilers, piping, valves, gauges, etc.Airlines – Delta, Federal Express, UPS, GEFor business and consumersAirframe, avionics, jet engines, fuel systems, landing gear, hydraulicsSpace Shuttle Operations – United Space Alliance
For NASA, customersRocket engines, electronics, airframes, air handling, hydraulics, pneumatics, communicationsRocket and Engine Testing – Sverdrup and ACSFor business and government (GE, P&W, USAF, USN, NASA?)Turbines, compressors, pumps, boilers, piping, valves, gauges, jet engines, fuel systems, air handling, hydraulics, rocket engines, electronics, pneumatics, data collectionSlide5
Market Factors
Impact
Maintenance & Materials Management
Business
Objectives
Schedules
Customers
Products &
Services
Drivers of
Demand
Political,
Regulatory
and Legal
Supply of
Materials
& PersonnelSlide6
The Materials Management Challenge -- External Factors
Leverage strong interdependency among customers, operators and suppliers
Customers, Products and Services
Customer- or market-driven reduction in cost, lead time and cycle time.Parts and service demand fluctuations due to routine peaks and valleys, changing economic conditions, specific market events, and new technologiesInstalled base changes oftenHigh value, sometimes one-of-a-kind equipment Numerous configurability issuesDocumentation requirements and serial number issuesExtreme environments -- temperature, long run times
High cost of unplanned outages or downtimeSuppliers and Supplier ManagementExtremely low volume demand on most items -- suppliers have leverage Many items have high unit costs, long lead times and single sources of supplyHigh government regulation -- security, environmental, business/competition Slide7
The Maintenance Work
Categories
Forecasted
PlannedRoutineUnplannedActivitiesInspect and adjustRemove and replaceTear downRe-manufacture and certifyRe-install, re-assemble
TestPartsRotables RepairablesExpendablesSlide8
Processes for Operations, Maintenance & Material Management
Operations
Deliver
FlyPlanSourceSellMaintenanceMaintain equipmentPlan maintenanceProvide materialProvide personnel
Provide equipmentMaterials ManagementWarehouse and distribute Manage inventoryPurchase parts and manage suppliersForecast and plan
Outsourcing and insourcingSlide9
Support for Maintenance and Production/Test
Suppliers and Sub-Contractors
To provide effective Materials Management, we first must understand the Business Environment and how the Maintenance Operation is positioned within it.
Business Environment at Arnold EDC
-- Materials Management for Maintenance
Maintenance
Customers
-- US Navy, USAF, DOD, GE, P&W
Production/TestSlide10
Material Management Best Practices
1. Best Maintenance Practices
2. Integration
3. Forecasting, Planning and Scheduling4. Purchasing and Supplier Management5. Inventory Management6. Warehousing and Distribution7. Outsourcing and Insourcing8. Methodology for Operations Improvement9. Multi-dimensional Approach10. Performance Measurement & ManagementSlide11
Best Practices for Materials Management
1.
Best Maintenance Practices
heavily impact Best Materials Management practices.2. Integration -- The linkages among Customers, Maintenance, Materials Management and Suppliers have a major impact on the effectiveness of the business and Material Management.3. Forecasting, Planning & Scheduling -- Employ sophisticated capabilities OR minimize the need for it through integration with business operations, maintenance and suppliers.4. Purchasing and Supplier Management -- Significant opportunity exists for improvements via process, organizational, information and facilities changes.5. Inventory Management -- Inventory Pooling, Record Accuracy, Daily Supplier Deliveries and Purchasing and Supplier Management practices can have a major impact on objectives.Slide12
Best Practices for Materials Management, continued
6.
Warehousing and Distribution
-- Best practices include value-added services, organizational alignment with Maintenance, a few basic information systems and proper location, layout and methods.7. Outsourcing and Insourcing -- Outsource those activities that require significant resources and add little value. Insource the work that requires little resources and adds great value.8. Methodology to support systematic, comprehensive operations improvement9. Multi-dimensional Approach to management and improvement.10. Performance Measurement and Management for results and processes.Slide13
People
-- Personnel, experience, skills,
-- Availability, organization, etc.
Information -- Key information & information systems -- Needed to execute & measure the process
Facilities-- Supporting tools, equipment and facilities
Process -- Activities, linkages and sequence-- Practices, procedures
Improvement Dimensions
StrategySlide14
# 1 -- Best Practice: Maintenance Best Practices
Process
Total Productive MaintenanceCombine preventative, predictive & proactive Coordinated, shared operating plans & schedulesDocumented proceduresEmphasize safety and environmental compliance
Strategy
Asset Acquisition & Management Maintainability, reliability Support business objectives
Facilities
Right size, location, capability
Information
Accurate data for parts requirements & actual usage
Job BOMs, planning bills
Maintenance Management System (MMS)
MMS linked with ERP & WMS
Product Data Management (PDM) System
For configuration management
People
Facilities Services group, with Customer Team
Working teams aligned with customer & production, coordinated with resource pools
Consistency -- Minimal variation by maintenance personnel in completing routine work
Skills, training, and availability of internal & outside resources, matched to maintenance requirements
Partners, including out- and insourcingSlide15
Maintenance Best Practice: Strategic Linkage
Goals, Objectives, Targets & Measures Linked to Business
Corporate Objectives
Customer ServiceReduce CostImprove Quality
Increase Market ShareImprove ProductivityHigh Performance Work Force
Maintenance Objectives
Equipment availability (Up-time)
New equipment ready as promised
Reduce total maintenance cost/operational hour
Reduce maintenance cost as % of operations costs
Reduce quality problems due to equipment
N/A
Reduce unscheduled downtime
Training plan and execution
Safety incident rate
HousekeepingSlide16
People
Process
Information
Facilities
PLAN
DELIVER
FLY
SOURCE
SELL
• Skills
• Roles
• Organization
• Staffing
• Activities
• Sequence
• Linkages
• Needs
• Security
• Access
• Integration
Accuracy
• Equipment
• Offices
• Labs
• Plants
• Warehouses
Service
for
Customers
Safety
Quality
On-time
Cost
Operations Business Infrastructure
Performance Measures & Rewards
Processes
Business Strategy, Goals & Objectives
R
E
S
U
L
T
SSlide17
People
Process
Information
Facilities
PROVIDE MATERIAL
PLAN MAINTENANCE
PROVIDE PERSONNEL
PROVIDE
EQUIPMENT
MAINTAIN
EQUIPMENT
• Skills
• Roles
• Organization
• Staffing
• Activities
• Sequence
• Linkages
• Needs
• Security
• Access
• Integration
Accuracy
• Equipment
• Offices
• Labs
• Plants
• Warehouses
Operational
Equipment
Complete
On-time
Cost
Quality
Maintenance Infrastructure
Performance Measures & Rewards
Processes
Business Strategy, Goals & Objectives
R
E
S
U
L
T
SSlide18
People
Process
Information
Facilities
MANAGE INVENTORY
WAREHOUSE & DISTRIBUTE
PURCHASE, MANAGE SUPPLIER
FORECAST & PLAN
• Skills
• Roles
• Organization
• Staffing
• Activities
• Sequence
• Linkages
• Needs
• Security
• Access
• Integration
Accuracy
• Equipment
• Offices
• Labs
• Plants
• Warehouses
Parts For
Maintenance
Right Parts
Quantity
Place
Time
Materials Management Infrastructure
Performance Measures & Rewards
Processes
Business Strategy, Goals & Objectives
R
E
S
U
L
T
S
OUTSOURCING & INSOURCINGSlide19
Parts For
Maintenance
Right PartsQuantity
PlaceTime# 2 -- Best Practice: Integrated Suppliers Materials, Maintenance & Operations for the Customer
Operational
Equipment
Complete
On-time
Cost
Quality
Service for
Customers
Safety
Quality
On-time
Cost
Materials
Maintenance
Operations
Integration of:
Processes
People
Information
Facilities
Measurement
CUSTOMER
SUPPLIERSlide20
Integrated Operating Plan
A common language to integrate operational planning and execution.
A document that establishes and communicates the mission in each main operating area and the resources required to accomplish the mission:
Performance measures and targets (e.g., service levels), agreed upon by Materials Management, Maintenance and Operations.Skilled peopleFacilitiesEquipmentMaterialsWork plans and schedules
Operating procedures A tool to predict, measure and control operating costs and resultsSlide21
Operating Plan Development
MX Personnel
Schedule
Unscheduled Work Requirements
Maintenance Operating Plan
Equipment, Tool and Part Requirements
Customer
Labor
Contracts
Scheduled Work Requirements
Facility
Requirements
Production
or Test Schedule
Servicing
Requirements
Measure, Analyze & Modify Plan
Materials Management & Suppliers
Methods
& Work
Measures
-- Courtesy of John Hodgson, UPSSlide22
People
Procurement services and
planners/expediters aligned with Maintenance operations, organization and schedules
One organization does planning and scheduling, at least for maintenance and materials managementand maintenance schedulers aligned with material planners & expediters.Information Accurate inventory records and material transactions
Accurate material mastersLinkage of maintenance schedules to: Job material requirements (Planning BOM) Job labor requirements Periodic review of MX category assignments, events and actual material usage to update PBOMs Algorithms & software to predict lumpy, intermittent demand
Maintenance System link to ERP & WMS systemsForecasting & Demand Management softwareAdvanced Planning & SchedulingEnterprise Service Management softwareInternet monitoring of equipment status
Facilities
Local supplier facilities to minimize the need for forecasting and planning of less expensive components & supplies
Point of use storage & issuing of frequently-used expendables
Process
Clear definition of maintenance needs
Demand planning for engines (done now?) & rotables
Coordinated inventory planning -- engine, rotable & expendable levels
Categories of maintenance defined
Overhaul, Event-driven, Daily, Unplanned
CPFR (or Schedule Sharing) from Ops. - Suppliers
Monthly plan & weekly schedule w/capacity for engines & rotables
Flight schedule changes trigger engine, rotable, and expendable inventory level review
Rapid replenishment in place of expend. forecasting
# 3 -- Best Practice: Forecasting, Planning & Scheduling
Strategy
Sophisticated Capabilities or Minimize the Need
Slide23
What is Required for Forecasting and Planning
Timing: Event and cause-based forecasting
Discrete models of each different type of demand, independent and summarized
Activity: Cycles, hours, stressEquipment: Quantity, workload, location, size, routingEnvironment: Temperature, conditionsPlanning BOMs based on work orders (Job BOMs)Slide24
Demand, Receipts and Inventory
Forecasting based on history is like
“
driving while looking in the rear view mirror.”Slide25
Distribution of Parts Demand
20% of the parts account for 80% of the issues.
Issues
% of Parts
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%Slide26
Expendable Forecasting System
Forecast Creation Process
-8 statistical models
-User entered forecast
Part 123
Month
Usage
1 2 3 4 5 6 7 8 9 10 11 12
Part 123
Month
Forecast
1 2 3 4 5 6 7 8 9 10 11 12
In many cases, forecasting models are designed to generate a flat forecast. This increases the error which drives safety stock up and can dramatically misrepresent demand.
Part ABC
Month
1 2 3 4 5 6 7 8 9 10 11 12
Usage
Part ABC
Month
Forecast
1 2 3 4 5 6 7 8 9 10 11 12
Forecasting Techniques Are Hard To Apply To Service PartsSlide27
People
Strategic & Operational Purchasing
Preferred or certified suppliers
JIT II -- Supplier rep. on siteOrganizational alignment with MaintenanceAnalysts, Buyers, CoordinatorsInformation E-procurement via Internet
Electronic Data Interchange (EDI)Commodity and Supplier ManagementTrading Exchanges & Marketplaces Commerce One, Ariba Marketplace MRO Link, Grainger, TPN Marketplace2-way schedule sharing with vendors
Facilities
Vendor Supermarket
Space for vendor consignment material
Vendor warehouse on-site or nearby
Process
One-day replenishment: Internet & express
JIT II -- Supplier Category Management (Vendor Managed Procurement)
Daily deliveries
Consignment
Supplier Management
Buying agreements & national accounts
Service level agreements
Performance measures
# 4 -- Best Practice: Purchasing & Supplier Management
Strategy
Partnerships OR Arm
’
s Length RelationshipsSlide28
Example Consignment Opportunities
% # of Annual
Affected Improvement Expendable Company
Accountable Accountable Over Part #’s Savings @Scenario Inventory Turns Baseline Consigned 14.4% C. Cost Baseline $0 1.76 na na 0Top 3 Suppliers $26,831,000 2.29 30% 36,000 $3,864,000Top 10 Suppliers $44,396,000 2.85 63% 53,000 $6,393,000
All A Items $36,731,000 2.58 47% 5,000 $5,289,000All A & B Items $62,342,000 3.82 118% 17,000 $8,977,000Note: All improvement calculations are based on an inventory of $108 million and 100k items.Slide29
People
JIT II -- Supplier rep. on site
Organizational alignment with Maintenance
Analysts, Buyers, CoordinatorsInformation Inventory Record Accuracy @ 95%+Share inventory information with suppliers & pool partners2-way schedule sharing with vendors
Warehouse Management SystemSupply Chain Execution Management
FacilitiesSupply Chain Inventory NetworkVendor Supermarket -- Bose, Delta, GESpace for vendor consignment materialVendor warehouse on-site or nearby
Process
Supply Chain or Network View
Pooling -- loans/borrows for
rotable
parts
Daily delivery -- of expendables
Cycle counting programs for accuracy
Special techniques for low usage, hard-to- forecast items
# 5 -- Best Practice: Inventory Management
Strategy
Have a lot, own a lot OR
Have a lot, vendors own OR
Have & own what
’
s neededSlide30
The Case for Pooling
OEM
’s Hold All the Cards -- Aviation Example
80% of spend on parts goes to fewer than 10 vendors.80% of parts are used less than 20 times per year.Traditionally the suppliers have had all the leverageIt is estimated that 30 - 70% of aviation spares could be redundant.Pooling as done today is part of the solution, but it is labor-intensive, exception-based.Potential exists to make more strategic, proactive inventory sharing decisions.Trading exchanges and supporting information systems are key to this concept.-- Courtesy of Ed Wodarski, Xelus Inc.Slide31
Steps to Develop a
“
Proactive Digital Parts Pool”
1. Consolidate needs and availability of parts across multiple groups.2. Share needs and availability across partner enterprises “reactively.”3. Leverage down the total inventory value by developing a proactive pool of parts.-- Courtesy of Ed Wodarski, Xelus Inc.Slide32
Trading Community
Business
Unit B
Business
Unit A
Business
Unit C
Company #1
Supplier 1
Supplier 2
Supplier 3
Business
Unit Y
Business
Unit X
Business
Unit Z
Company #2
Supplier 4
Supplier 5
Supplier 6
Supplier 4
Supplier 5
Supplier 6
Trading
Community
Supplier 1
Supplier 2
Supplier 3
Supplier 7Slide33
People
Alignment of Warehouse personnel to meet Maintenance needs
Coverage -- 24 * 7 * 365
Service types & levels -- delivery, speed Location of storage areasInformation Automatic ID and Data CollectionScanners and tracking systems
Point of Issue SystemsWarehouse Management SystemIntegration with key systems: Maintenance ERP: Purchasing, Inventory, Scheduling
FacilitiesProper location & assignment of warehouses -- advance supply points, shop supply, electronic supply cabinets
Effective layouts, delivery routes
Proper material handling & storage methods
Mix of conventional & automated equipment
Process
Value Added Services - kitting, labeling, etc.
JIT parts delivery
JIT kits -- Boeing Apache Helicopter
Reman
Custom Kits -- Quick change, verify parts
Outsourcing -- 3PL and 4PL
Good methods for high productivity
Receive, Inspect, Put Away
Pick, Pack & Ship
# 6 -- Best Practice: Warehousing and Distribution
Strategy
Manual, traditional OR
Highly automated OR
Highly integrated OR
HybridSlide34
SupplyPro Electronic Supply Cabinet ExampleSlide35
People
Clarify roles and responsibilities in detail
Managers for outsourced work
Account manager for insourced workDevelop personnel to support insourced workMaintain some skills in house to allow for re-absorption of outsourced workInformation
Integrate purchasing, inventory, scheduling systems: with outsourcing suppliers with insourcing customers
FacilitiesFacilities for outsourcing providersFacilities and equipment for insourcing
Process
Have a process for insourcing & outsourcing
Have a clear, multi-year, written agreement
Take small steps, and have GO-NO GO points
Define processes & procedures for daily operations, such as for warranty shipping, insourced part storage, etc.
# 7 -- Best Practice: Insourcing & Outsourcing
Strategy
Do All Your Work & Only Your Work
OR Do What You Do BestSlide36
# 8 -- Best Practice: Methodology
for Operations Improvement
The MAXIT
sm FrameworkI
ORIENTATION
Scope & Objectives
Assessment
“
The Opportunities
”
Reengineering
Fast-Tracks
Infrastructure
II
CONCEPTUAL DESIGN & PLAN
III
DETAILED DESIGNS
IV
IMPLEMENTATION
MAXiT
®
is a registered service mark of High Performance Concepts, Inc.
Analysis & Synthesis
Sub-Process Design
Solutions in Detail
Ready for Implementation
“
The Projects
”
Analysis & Synthesis
High-Level Design
Solutions in Principal
Plans, Costs, Benefits
“
The Program
”
Cost & Benefit
Timeline
Development
Installation
Results
“
Long-Term Gains
”Slide37
Elements of a Systematic, Comprehensive Approach
Clearly-defined phases, from planning to implementation
Repeatable, documented procedures
Standard conventions and notationVision and strategic directionIssues and opportunitiesTwin-track: immediate and long-term benefitsMulti-dimensional improvement context: Processes/StrategyPeople/OrganizationsInformation and SystemsFacilities/TechnologySlide38
Benchmarking Survey -- Other Facts and Findings
Methods or Techniques
ABC types of categories and classifications
Focusing on processes critical to inventory management and turns Making effective use of supplier inventory and services Using automated processing and data management capabilitiesSkills, Experience & Training
Analytical skills Business knowledge, experience and training Training and understanding of company-specific concepts, practices and processes Information systems trainingManagement Practices & Organizational Structure Performance measures, goals and reward systems Supply Chain Management concepts, practices and organization
Team-based performanceSupply Chain & Supplier Management Practices 55% of participants have started or completed Consignment Inventory projects 43% of participants have started or completed “Supplier Direct Ship”
efforts
57% have started Category Management by Suppliers
77% rated forecasting methods and systems
“
Useful for many parts
”
or
“
Very useful for most parts
”
Slide39
Materials Management Opportunity Profile
Importance:
A = Absolutely Important, E = Especially Important, I = Important; O = Ordinary, U = UnimportantCapability & Capacity Issue Ratings: A = Major/critical; E = Especially significant; I = Important/moderate; O = Ordinary; U = Unimportant
Improve for Better Performance
Continuously Improvefor Increased Added Valueor Reduced Cost
Process Capability & Capacity Issues
Process Importance
INVENTORY
TRACKING &
CONTROL
ALLOCATION
EXPEDITING &
NON-STOCK
PROCUREMENT
LINE STATION
ORDERING
PLAN &
FORECAST
BASE STORES
ORDERING
MEASURE
& MANAGE
SUPPLY CHAIN
INVENTORY
MANAGEMENT
Major
Minor
L
O
W
H
I
G
H
A
E
I
O
U
A E I O U
MATERIAL
REQUIREMENTS
PLANNING
Improve to Meet Critical
Business Objectives
Priority =
High Importance
and
Significant IssuesSlide40
People
-- Personnel, experience, skills,
-- Availability, organization, etc.
Information -- Key information & information systems -- Needed to execute & measure the process
Facilities-- Supporting tools, equipment and facilities
Process -- Activities, linkages and sequence-- Practices, procedures
Strategy
# 9 -- Best Practice: Multi-dimensional Approach to Management and Operations ImprovementSlide41
Multi-dimension Approach to Management & Improvement
Strategic
view
-- of how maintenance and materials management can support business objectives. Process Management -- processes, inputs, outputs defined; metrics and roles assigned Organizational Alignment -- Materials Management aligned with the Maintenance and Operations. Information Systems -- Capable foundation systems, integrated with business systems
Facilities and Equipment -- Right size, location, capabilitySlide42
Results
Service Level -- % of the time that maintenance needs were met (right part, place and time)
Cost -- total operating cost, maintenance costs, maintenance cost per productive hour
ProcessesForecasting and Planning -- Actual Demand vs. Forecasted Demand, Order Fill Rate Purchasing & Supplier Management -- Investment per Equipment Asset $Inventory Management -- Inventory Turns, Inventory Value per Equipment Asset $, Availability (Service Level), Obsolescence, Order Fill Rate Warehousing and Distribution -- Inventory Accuracy, # Picks per hour, # Putaways per hour, Cycle time to fill and orderOutsourcing -- % work outsourced, profits gained or costs reducedInsourcing -- % work insourced, profits gained
# 10 -- Best Practice:
Performance Measurement and ManagementSlide43
Improvement Objectives & Weights
_________________________________________________________________
Improvement Objective Priority Weight 5 Year GoalImprove Inventory Turns 25% 4 turnsService Levels – for End Customer 25% 95% where measures existService Levels – for Replenishment 10% 95% (97% stretch) where we can measure -- Kit Issues 97% (99% stretch)Cost/Productivity 20% Reduce by 20%Inventory Accuracy 15% “
Item” goal is 95%Order Accuracy 5% TBD_________________________________________________________________Slide44
Material Management Best Practices
1. Best Maintenance Practices
2. Integration
(among Customers, Maintenance, Materials Management and Suppliers)3. Forecasting and Planning 4. Purchasing and Supplier Management5. Inventory Management6. Warehousing and distribution7. Outsourcing and Insourcing8. Methodology for Operations Improvement9. Multi-dimensional Approach10. Performance Measurement & ManagementSlide45
How to Learn More
Professional Organizations: APICS, AFSMI, CLM, NAPM
Benchmarking
-- within other operations in your companyResearch and Reading: Aviation Week, etc.Get data about your own operationConferences and Trade ShowsContact me: Brian Savoie Vice President High Performance Concepts, Inc.
Cell: 404.909.9286bsavoie@hpcinc.comwww.hpcinc.com