This £15m turnover aerospace business had undergone a difficult period. The poor results for the site included inventory £3.2m, OTIF 10% and EBITDA 4%. The OTIF meant customers saw the site as an unreliable supplier and were putting enormous pressure for improvement.
This also meant that this subsidiary of a multi-national group was under the scrutiny from the main board. The site had a new CEO and a new FD.
The key challenges to improving the profitability were scrap reduction and upgrading the inventory management. In addition, quarterly physical stocktakes were imposed by the group as the stock losses were so significant. The overall solution was to update the production control system.
The new CEO was implementing a logical production flow system for the shopfloor requiring a physical restructure. Most of the walls and doors on the shopfloor were being removed and the layout significantly changed to accommodate three alternative flow lines. This was already favourably affecting the value of WIP as hidden shopfloor stores were being revealed and used up.
One of the most significant issues causing the high level of scrap was the team continually losing the documentation that confirmed what work, and rework, had been completed and that the correctly trained personnel had built the product. In the aerospace industry if this documentation is lost or not completed correctly then the part must be scrapped. The correct versions of drawings were also lost, alas slowing down production.
The project was to remove the ability to lose paperwork during production and to get the documentation completed correctly. The process also needed to complement the production flow improvements. The proposal was to remove as much paperwork, as possible, from the shopfloor.
A review of the ERP system showed that the works order and standard operating procedures could be accessed from outside the system. This meant data could be downloaded and uploaded in real time. This also meant we could design a front end that was easy to use and covered all the areas required with flexibility for change and further improvement.
The development required the involvement of all areas of the business. The system was built in house and was a combination of physical actions including wiring in terminals for the operators to use, department actions including cleansing the data within the system, fulfilling the finance reporting and control requirement, and writing software to allow data input and output. This process required the involvement of all areas of the company.
Key changes included:
- HR uploaded their training records linking operator’s training with the work completed.
- Standard operating procedures were shown in short animations.
- Quality Control developed a process to stop logon to the next operation of any works order if a quality issue was found.
- The Engineering team cleaned-up the parts master with additional fields replacing free-form blocks. This revealed significant information that had been poorly stored.
The practical effects were:
- The logging into the works orders at each stage of the process meant stock was under control and time to complete work was recorded.
- The information from the logging of time spent on works orders gave a strong basis for updating standard times. This has given the team a much clearer understanding when bidding for new work.
- A later addition was a log in for customers who could remotely track their parts based on the sales order reference.
- The strong works order control removed the need for physical stocktakes, saving the loss of four days shut down per year.
The Financial Impact:
The result of the combination of the shopfloor reorganisation and the project were significant and gave sustainable improvements. The stock turns increased from 4 to 7 times. The profitability improved to 20% EBITDA, inventory reduced to £1.9m, and the OTIF increased to 90%.
EFM Expert: Neil Booth