Business Consulting Services

© 2004 IBM Corporation

Exploiting MaintenanceProcess Improvement Opportunities

Lean Transformation of OC – ALC MRO Facilities

DoD Maintenance Symposium26 Oct 04

Dave WittichIBM, Supply Chain Management

2

Business Consulting Services

© Copyright IBM Corporation 2004

Lean Transformation Goals•Establish leadership role in USAF and AFMC transformation •Leverage benchmarking, MA operational analysis, and clear, achievable vision•Leverage depot initiatives currently underway •Establish actions to control OC-ALC destiny •Leverage strong leadership, workforce and Union commitment to transformation•Realize workforce desire to be actively involved, take ownership•Develop OC-ALC governance model•Leverage change management/ process-driven change, organization/ workforce development, and “Enterprise” view •Articulate and defend operational/ business case for change

Improvement Targets•Reduced Cycle Times: + 60%•Impr. Space Utilization: +40%•Higher Svc.Lvl/ Fill Rates: ~99%•Incr.Throughput/Capacity: +25%•Reduced WIP Inventory: +50%

•Improved Quality / Yield: ~ 85 %•Reduced Working Capital: +20%•Reduced COGS: +25%

•Improved Productivity: +20%•Reduced NVA Activity: +40%

Cell Designs

Commodities

OC-ALC has laid the foundation for success

Overarching Transformation Plan Unified Goals and Objectives

Business Unit Plans

Integrated Plans/Schedules

Cell Designs

Aircraft

Cell Designs

Engines

ExperiencedTransform Partner /

Methodology

ExperiencedTransform Partner /

Methodology

OEM Benchmark Involvement

OEM Benchmark Involvement

Extensive (MRO) Lean-6S/Cellular

Experience

Extensive (MRO) Lean-6S/Cellular

Experience

OC-ALC Knowledge & Experience/

Lessons Learned

OC-ALC Knowledge & Experience/

Lessons Learned

Integrate Critical

Transform Initiatives

Integrate Critical

Transform Initiatives

Emphasis on Change /Risk Management

Emphasis on Change /Risk Management

Workforce Involvement, Ownership,

Development

Workforce Involvement, Ownership,

Development

Critical Enabling Success FactorsCritical Enabling Success Factors

Lean Transformation StrategyLean Transformation Strategy

Exploiting Lean – SigmaOC – ALC MA has established aggressive enterprise, business unit and cellular transformation goals

3

Business Consulting Services

© Copyright IBM Corporation 2004

Team with Long Term Business Partner with Deep Transformation Experience“One Mission, One Team, One Transformation”

“Low Risk – High Performance”

Transforming OC-ALC MRO Enterprise view – product, work & info All dimensions of transformation Ability to do initiatives integration Focus on the customer

Experienced Team Leading consultants All 3 OEMs Key A&E firm Key contractors already in place

Combined Methodology Modeling & simulation Operations analytics

Proven Solutions Award-winning Benchmarks Enabling tools & technology

Change Management Workforce ownership All stakeholders

Lean Methodology Hundreds of implementations Integration of Lean, 6 Sigma, TOC, Others 5 steps, 9 tactics

Program Management Deep experience, highly rated True partnership, performance-based Open, honest, ongoingCommunications Enterprise PM approach

Risk Management Comprehensive governance model Detailed/mature RM tools/process

4

Business Consulting Services

© Copyright IBM Corporation 2004

Leveraging Commercial and OEM ExperienceWe understand the difference between commercial manufacturing and MRO process activities

Category Commercial Manufacturing

Government MRO

Forecasted Requirement

Forecast is driven by customer demand

Global contingencies, repair anomalies and changing OPTEMPO are often unknown and drive demand

Spare Parts Availability

Buy what you need to produce the end product

Often times do not know what spare parts are needed until the assemble arrives on the shop floor

Spare Parts Availability

Free to source from any available suppliers

Required to utilize Government processes, procedures for acquisition transport, and services

Physical Infrastructure

Infrastructure is acquired, deleted and designed around customer demands

Infrastructure is fixed and limited – Do the best with what you have

Workforce Flexibility

Workforce is determined by products and services can be accomplished in the most economical and efficient means

Workforce is determined by not only requirements but regulations, policy, geographical and socioeconomic demands Low

High

MRo Vs. mrO

Discrete Mfg.

DepotMaint.

Leve

l of

Ass

et C

ompl

exity

5

Business Consulting Services

© Copyright IBM Corporation 2004

Extensive Lean – Sigma / Cellular Experience Team IBM’s Past Implementations of Lean/Cellular MRO Transformations have Yielded Significant Results

Lean Transformation Program Readiness and MRO Benefits Realized

IBM Philadelphia Shipyard

Development Corp Conversion

Converted Navy Shipyard to commercial operation with a 20-30% reduction in operating cost

Converted workforce into multi-skilled work team Redesigned facility to virtually eliminate warehousing and

material handling

Boeing Apache Lean Transformation

70% fewer units in work 69% reduction in direct labor 67% reduction in flow days

KBSI US Army T700 Engine Repair

Transformation

Production cycle reduced from 326 days down to 93 days Capacity now exceeds 100% of requirement (previously

only met 45% of requirement)

Deloitte AirTransat MRO

Transformation

17% improvement in Turn Around Time for “A” checks 32% reduction in direct labor 21% reduction in indirect labor 40% reduction in shipping cost

P&W F100 MRO Combustion

Chamber Cell Transformation

Repair cycle reduced from 60 days down to 25 days Condemnation rate dropped from 21% to 4% 42% reduction in direct labor while increasing workload Scrap rate reduced from 5% down to near 0%

* Only a partial listing of representative implementations

6

Business Consulting Services

© Copyright IBM Corporation 2004

5 Step MethodOrganizational • Aging Workforce• Union Involvement• Training• External Relationships• IPTs

Organizational • Aging Workforce• Union Involvement• Training• External Relationships• IPTs

Legacy IT Systems Supply Chain Distribution HR

Legacy IT Systems Supply Chain Distribution HR

Compliance Environmental Tech Data ISO 9000 Safety

Compliance Environmental Tech Data ISO 9000 Safety

Physical Infrastructure• Docks• Floor Space• Functional Islands• Monuments• Tooling & Spt Equip

Physical Infrastructure• Docks• Floor Space• Functional Islands• Monuments• Tooling & Spt Equip

Comprehensive MRO ALC Knowledge and ExperienceA proven Enterprise Transformation Methodology has been modified to address the OC-ALC MRO environment and related initiatives

Monitor andContinuously Improve

Implement

Develop Future Stateand Validate

Understand Current State

Determine implementation sequence

Conduct pilots todemonstraterecommendations

Prepare detailed, multi-layered work designs

Simulate flow of information throughreconfigured processes to demonstrateand validate results

Perform value proposition analysis

Perform activity analysis to determine resource consumption

Utilize value stream mapping to understand processes

Analyze labor costs Identify near-term gains

0137-050

Governance Plan Incentives for accomplishment

of goals Monitoring of Performance

Measurements Constant Process

Improvement

Build a common understanding of goals and Objectives

Develop roles, responsibilities and organizational structure

Partner with OC-ALC MRO Personnel

Team and Scope

Future Direction OSD BMMP eLOG21 DMRT PSCM

Future Direction OSD BMMP eLOG21 DMRT PSCM

Variability Aging Systems Low Volume Over & Above Unplanned Multiple Configurations

Variability Aging Systems Low Volume Over & Above Unplanned Multiple Configurations

7

Business Consulting Services

© Copyright IBM Corporation 2004

Integrated application of Lean / 6 Sigma ToolsLean tools and tactics are focused on the development and delivery of Cellular Business Units

LeanLeanTools &Tools &TacticsTactics

Conceptualize Conceptualize

Educate Educate

Sustain Sustain

Continuously

Improve Continuously

Improve

Value Stream Mapping & Analysis

Work Smoothing / Line Balancing

Set-Up Reduction

Pull Replenishment Buffer System / Point of Use Staging

Cellular Design / Work Grouping (Feeder / Supply Lines)

Work Standardization

Process Improvement Events Break-Through Process Re-Design

Benchmarking (Pulse/Moving Line)

Flow Management / Continuous or One Piece Flow

Visual Management/ Metrics

Critical Chain Project Management

Modeling and Simulation

Change Management/ Training

Transform Transform

8

Business Consulting Services

© Copyright IBM Corporation 2004

Emphasis on Change ManagementDevelopment of an Overarching Lean Transformation Governance process is key to driving a Continuous Improvement Culture

IPT “D”

IPT “C”

Line AnalysisSimulation Re-Plan

Monitor& Guide

Education

IPT “B”

ComprehensiveFramework

IPT “A”

Quick Win

Cross-FunctionalIntegration

5 Step Method5 Step Method

Lean Transformation Governance Model

Infl

uen

ce

Fee

dbac

k

ChangeLeadership

Culture

Behavior

Processes

Data

Solutions

Business

Organizationand People Process

InformationTechnology

Unit Strategy