Analyse and prioritise

Ian Shirley, designer of the Thriiive toolset that supports manufacturing companies to improve the operations of the business, reduce inventory and release cash, examines the effects of poor data quality and the impact on reducing cost in the aerospace manufacturing sector.

Government figures showed £28.5 billion excessive cost in the UK aerospace industry for the 10 years following the Financial Crisis and the trend continued unabated.

Terrorism, financial crisis then pandemic and the common thread for the industry was the dramatic fall in demand for civil aerospace products. The Financial Crisis had a huge impact on aerospace manufacturers and led to the reorganisation of the industry and, for those that made through, it led to something unexpected.

Efforts went into increasing sales followed by driving as much delivery and invoicing in the month as possible. The UK aerospace market was doubling every 15 years and that market growth pulled companies out of trouble.

After the Crisis the UK Government told us our “productivity” was poor. Manufacturers think of “productivity” as getting the best out of our workforce, teams were working just as hard, so that could not apply to them. “Productivity” in Government terms means that business costs are too high for their turnover.

In the 10 years after the Crisis across the whole industry that amounted to £28.5bn excessive cost in UK aerospace when compared with the previous 10 years (including the period that spanned the 9/11 downturn). Where had all that additional cost come from?

Manufacturing planning

Companies had lost the ability to plan their factories. The drive for sales, delivery and invoicing had dramatically changed the way they ran their businesses, coupled with losing operational skills after the Crisis.

9/11 did not have the same effect because good operational planning and ways of working were valued and retained. These were lost through retirement and redundancy during the Crisis.

After the Crisis many companies started extracting customer demand from their systems onto spreadsheets and planning boards then created further lists to advise key resources what was needed and when. These approaches bypassed systems in a new “hands on” factory management style. Visible action made a good impression but those that depended on a good default plan now required manual direction to do their jobs.

Why are costs so high?

Those with operational experience that bridges the downturn events see premiums being paid for quick turnaround of subcontract. Premiums are being paid for urgent deliveries of materials that managers suddenly realise they don’t have in time to launch work. Unplanned shifts and overtime prevail to complete work that may have been possible in normal working hours if load and capacity was understood properly and they had completed required operations at the right time.

People look very busy but are, in reality, underutilised and by not enforcing operation recording disciplines, managers do not understand true utilisation. If operators had been recording operation and batch outcomes consistently, managers could have analysed the root causes of scrap and rework and dealt with it along the way, but they didn’t.

At a Northwest Aerospace Alliance (NWAA) workshop held before the impact of the current crisis, manufacturers estimated their Overall Equipment Effectiveness at 40% so there is plenty capacity out there but companies are not utilising it well.

The outcome of this? At the end of the financial year inventory count, significant £ value is written off with no way of understanding root cause, but the next month has started and companies start to Push again for the month’s deliveries and invoicing.

Poor planning of material supply and work launch causes companies to push more cash into the business by launching key parts early “just in case” so that they have part finished jobs available that can be finished “just in time” with the end of period Push. Queues of work that are not needed yet build up, and the manual lists or planning board meetings tell the workforce which are most urgent.

When visiting any manufacturer, I now make a point of asking individual operational team members “Why don’t you use the system for that…?” I can almost guarantee the reply will be “Because the system is ****!”

Planning meets data quality

What has all this got to do with data quality in our manufacturing planning/ERP systems?

Poor data is caused by poorly firing business processes and people not doing the right things when they should. Businesses may not realise their teams do not use best processes consistently. Re-establishing good operational effectiveness whilst minimising cost must coincide with a determination to correct the data first. Understanding which data is wrong points us to the business processes that need corrective action to re-establish that operational effectiveness.

Companies that take action during the pandemic have the opportunity to recover the additional costs and turn their excess inventory back into cash. They will be more likely to emerge fit for the recovery if they do.

Thriiive worked with one £7m turnover sheet metalwork and machining manufacturer three years ago. They reduced their WIP and material inventories while increasing finished goods to service customer demand better. The result was better delivery performance and £265k of inventory turned into cash in 18 months. How many companies wish they had access to that kind of cash now?

What needs to be done?

The CEO and operational managers will need to be fully committed to resolve the issues. All managers and workforce need to realise that this change has to, and will, happen. Reorganisation in downsizing should retain those that have the right approach for the future. The best person for each role may not necessarily be as anticipated.

Analysis of system data will point to the changes in business process that are required. Available tools do this quickly and effectively without having to make changes to existing systems. The way people operate needs to be aligned to internationally recognised APICS best practice. Managers must be determined to correct the data in the system and those currently home working can be prioritised to achieve that.

Mentored university graduate resource is available to support managers and solve issues. These subsidised resources will be available to support the recovery and sustains the flow of trained professionals rather than having a gap from which the whole industry will suffer later.

After crafting an effective manufacturing plan that delivers the required period sales, manufacturing must realign to their true task of getting the best from the factory then delivering plan outcomes, not driving current period deliveries.

Encouraging good planning

Some examples of how data quality directly impact effective planning: Correct system to actual inventory enables the system to recommend you make the right parts and quantities and ensure you have the appropriate materials; Completed operations not recorded by operators causes confused priorities at all work centres; Completed jobs booked to stock but not closed down or poorly managed scrap and rework causes the system to act as though you have more parts in WIP than reality prompting subsequent urgent action.

All of this and much more can be prioritised for best cash impact at the earliest.

Companies cannot see the quality of the data in their system unless they do the right analysis and ask the right questions. They have to start by assuming it is poor - and unless you can guarantee and prove it is good - it will be poor.

The evidence you need to unravel business process issues, too much cost and too much cash in the business, is written into the DNA of your data.

Covid-19 is an opportunity for companies to reap the cash already overinvested and sort out excess future cost in the business once and for all.

https://thriiive.uk